Tag: e-commerce

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Editorial

Will ONDC Disrupt E-Commerce in India?

Suppose there’s a small bakery in Bengaluru that sells delicious cookies. The owner wants to take his business online, but he feels it will be extremely difficult. He’ll need to make a sizeable investment for creating an online store, inventory management, and order fulfillment. Even after all this, it’s an exhausting process to get customers online. The owner will have to spend a hefty amount for ads and believes it’s not worth the time and effort.

Sure, he could list his products on large platforms like Amazon.com and Walmart-owned Flipkart. However, these global corporations control over 60% of the e-commerce market and give preferential treatment to top sellers.

So how can the bakery owner sell his products online?

Well, he could look into the Open Network for Digital Commerce (ONDC)! And no, it’s not a separate e-commerce platform or app. In this article, let’s understand what ONDC is all about!

What is ONDC?

ONDC is a non-profit company established by our govt’s Department for Promotion of Industry & Internal Trade (DPIIT). It is a network that will allow any seller to display their products and services in search results across all apps registered in it. ONDC will have open protocols and rules for the entire chain of activities involved in the exchange of goods and services (similar to the Unified Payments Interface or UPI for payments in India). Thus, buyers and sellers can trade goods and services irrespective of the applications they use.

For instance, small and medium-sized businesses can now set up a simple website with the help of ONDC’s technology partners and list their products and services on it. And once they integrate with ONDC, their products will be easily visible to consumers on different apps and platforms! ONDC would standardise operations like time-based pricing, inventory & order management, delivery, and digital cataloging for small retailers.

On a wider scale, ONDC network is designed to facilitate any digital transaction between a buyer and seller for goods or services, including wholesale, mobility, food delivery, logistics, and travel services. It will also cover business-to-business (B2B) transactions.

We’ve all seen UPI revolutionising payment systems in India. Similarly, ONDC aims to democratise e-commerce and give small merchants or family-owned stores access to the systems and technology used by giant e-tailers like Amazon & Flipkart. ONDC is expected to increase competition in the e-commerce industry and boost startup innovation.

How Does it Work?

  • ONDC lies in the middle of the interfaces hosting the buyers and the sellers.
  • Sellers will have apps to place their products for sale and accept orders.
  • As consumers, we can use any app registered on the ONDC network to browse and buy products. 
  • The ONDC network will also have apps that broadcast the search request received from buyer-side apps to seller-side apps listed on the ONDC registry.
  • The network will be supported by logistics firms (to facilitate deliveries) and e-commerce store hosting service providers. 

For example, when you’re searching for a laptop on Paytm → The app will connect to the ONDC network → ONDC will connect it to seller-side apps that list all firms from where you can buy the item.

You will be able to download any ONDC app of your choice (similar to UPI) and use it to buy products & services from sellers that offer them.

Major Challenges

  • ONDC is a complex ecosystem to implement. E-commerce has a lot of variables involved, including the quality of the product, payments, returns, customer complaints, etc.
  • Brands that make misleading or inferior products and offer poor after-sales support may get undeserved exposure through the network. Users would find it difficult to trust new brands or platforms that integrate with ONDC.
  • It will require a massive, well-funded adoption campaign to bring in lakhs of existing Kirana stores to the ONDC network.

The Way Ahead

Since 2020, the Competition Commission of India (CCI) has been investigating the alleged anti-competitive practices of Amazon and Flipkart. As per reports, both firms promote specific sellers based on exclusive arrangements and offer them deep discounts. E-commerce giants also allegedly use data derived from users’ buying patterns to help their seller “partners” launch products.

Rather than concentrating power among a few players, ONDC will allow consumers and sellers to choose which apps they want to use to access a single network. With the ONDC network, these big online e-commerce platforms will have to compete with smaller stores, websites, and brands! ONDC expects to increase e-commerce penetration in India from 8% to 25% in the next two years. It also plans to sign up 90 crore buyers and 12 lakh sellers to the network within five years! 

ONDC has commenced trials with select buyers and sellers across major cities in India. We’ve seen numerous companies integrating with ONDC over the past few months. Microsoft, Paytm, Snapdeal, Dunzo, eSamudaay, PhonePe, SBI, HDFC Bank, ITC Store, and India Post have shown interest in joining ONDC. Even Flipkart, Reliance Retail, and Amazon are reportedly in talks to join the network! We’ll have to wait and see how well it is implemented.

What are your thoughts on ONDC? Let us know in the comments section of the marketfeed app.

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Editorial

The Rise of B2B E-Commerce Startup Udaan

E-commerce marketplaces in India are witnessing a transformational boom after the pandemic. The digital transition from offline to online or e-commerce marketplaces has been a real game-changer. While business-to-consumer (B2C) firms like Amazon and Flipkart have flourished, business-to-business (B2B) e-commerce takes the lead in revenue generation due to its large order size and sheer volume.

According to a report by IndianRetailer.com, the B2B sector is witnessing a doubling of valuations every 3-4 months. It brings in an investment of more than $100 million and is expected to reach over $1 trillion by 2024! 

The unprecedented growth of B2B marketplaces can be credited to several startups that leveraged critical technology. These e-commerce players created a ready-to-go ecosystem to help the B2B sector grow and develop to where it is today. In today’s article, we analyse one such B2B marketplace— Udaan, and how they envisioned changing trading functions in India by merging with new-age technology.

Udaan’s Origin 

Ex-Flipkart executives Sujeet Kumar, Amod Malviya, and Vaibhav Gupta established Udaan in 2016 with a unique vision to transform merchandise trading in India. They initially registered the firm as Hiveloop Technology. 

The Bengaluru-based startup gathers and unites all producers, traders, wholesalers, and retailers under a common network. This streamlines the whole B2B procedures in the nation and allows manufacturers to display their items through the online platform. Prospective traders have the liberty to choose and purchase a variety of items. Likewise, wholesalers and retailers hold the same flexibility to promote and purchase an item. Udaan’s platform features a variety of categories, including electronics, home & kitchen supplies, stationery, toys, fruits, vegetables, and other household items. 

Udaan has a network of over 30 lakh registered users and 25,000-30,000 sellers across 900+ cities in India. It covers more than 12,000 pin codes. The platform has over 17 lakh retailers, chemists, Kirana shops, farmers, etc, that conduct over 4.5 million transactions per month. This makes Udaan one of the leading players in the B2B e-commerce segment. 

Funding and Investors 

In October 2022, Udaan raised $120 million in convertible notes and debt from shareholders and bondholders. This is despite a general decline in startup funding.

According to an internal corporate document, Udaan intends to launch an IPO in the next 12-18 months. It has raised $350 million over the last four quarters, making it one of the largest structured instrument fundraisers in the nation.

Udaan’s valuation stood at $3.1 billion in a previous funding round of $280 million in January 2021. According to industry sources, they will estimate the company’s latest valuation at the time of the IPO or during the pre-IPO funding rounds.

The startup’s existing investors include Microsoft, Lightspeed Venture Partners, M&G Prudential, Kaiser Permanente, and Nomura.

Recent Developments 

  • Udaan is booming. There are many people associated with Udaan, including traders, farmers, retailers, proprietors, restaurants, pharmacies, and street sellers. To fulfill more than half of the orders placed on its platform, it has a sizable supply chain network spread all over India. Udaan’s platform presently claims to have more than 5 lakh products.
  • Over the last year, Udaan claimed it has significantly improved its unit economics by a total of over 1000 basis points (bps) with strong improvements in both gross margins and operating costs.
  • The company has reportedly laid off 300-350 on-roll employees and a significant chunk of its contract workforce for a total layoff count of over 1,000 people. This is the second round of layoffs after it dismissed 180–200 employees (5% of its workforce) in June. With these layoffs, the startup aims to improve its efficiency and achieve profitability.
  • UdaanCapital (which helps businesses manage their accounting and get credit) enabled credit of ₹2,200 crore to over one lakh retailers.
  • The company has started delivering stocks to pharmacies four times a day across six cities. It plans to scale up the service to other places after 6-8 months. 
  • Udaan said that the gross margin percentage has gone up almost three-fold year-on-year (YoY) in FY22. The company’s revenue is now at about ₹10,000 crore for FY22, a 1.6X increase compared to FY21.

Udaan’s Key Challenges

  • Udaan’s main struggle was to find the right product and market mix. Though the company has already carved its own niche in the B2B marketplace, it is difficult to stand in its current market position.
  • The businesses listed on Udaan must focus on integrating technology and setting up intricate logistical fulfilment procedures. Convincing retailers and wholesalers to go online with their business is another challenge.
  • The execution of operations will always be a challenge, which the company has to deal with as it grows bigger.
  • Establishing a proper supply chain network is a hassle for B2B e-commerce firms like Udaan.
  • Even as well-funded firms like Flipkart Wholesale, Amazon Business, and Jiomart Partners continue to retain a presence in the sector, Elastic Run and Shop Kirana are emerging as rivals.

Udaan’s Mission

According to US-based research powerhouse  Bernstein, B2B e-commerce players like Udaan are likely to disrupt the $1 trillion consumer retail market in India.

Udaan continues to be a trusted partner to small businesses by equipping them with technology, financial inclusion, and supply chain capabilities to compete and prevail in an increasingly tech-driven world. The company will focus on using fresh capital to expand its supply chain network in India. It also aims to grow the marketplace in both new and existing categories. The founder trio believes that they are creating a better platform for small enterprises in India. They are also aiming towards generating more revenue and cutting down on their losses. [Net loss was reported to be around ₹2,482.3 crore in FY21.]

Udaan has served as a model for several other startup companies seeking to succeed in the e-commerce sector. It is one of the few companies that has occupied a dominant position in the sector in a relatively short time, making its success story rather interesting.

As Udaan’s tagline reads ‘Khole Munafe Ka Shutter’ (open the profit shutter), it will be exciting to witness how competently they achieve and stand by it. What are your views on this startup? Share your thoughts in the comments section of the marketfeed app!

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Editorial

Why Did Reliance Shelve its E-Commerce Marketplace Plans?

Reliance Industries Ltd (RIL) is reportedly postponing its plans to launch a standalone e-commerce platform for third-party sellers and compete with Amazon and Flipkart. The company aimed to create a mega online platform for users to buy groceries, clothes, electronics, home, appliances, and more. Meanwhile, thousands of independent sellers have been integrated into its existing platform (JioMart) already. 

In this article, we explain why the Mumbai-based multinational conglomerate decided to halt its plans to develop its e-commerce platform.

Reliance’s Entry Into the E-Commerce Space:

India’s biggest retailer, Reliance Retail Ventures Ltd, has more than 12,000 stores across India. The company expanded its e-commerce operations in recent years with ventures including Ajio, JioMart, and the webstore of Reliance Digital. Ajio, launched in 2016, is Reliance’s fashion e-commerce venture. JioMart (launched in 2019) is the umbrella marketplace for grocery, value fashion, electronics, and a few other categories. The electronics retail chain, Reliance Digital, operates its own app and webstore. 

Despite the bleak conditions of the pandemic, JioMart, Ajio, and Reliance Digital’s webstore performed well when consumers heavily relied on online channels to make purchases. Reliance Retail also hired more than 65,000 people during the pandemic, out of which more than 53,000 were freshers. Reliance attained e-commerce sales of around ₹3,496 crore in 2021, yet it still lags market leaders (and key rivals) Amazon and Flipkart.

RIL’s Further Expansion in E-Commerce 

In order to compete with industry giants Amazon and Flipkart, the Mukesh Ambani-led business is now developing JioMart as a full-fledged marketplace with a strong presence across all categories. According to reports that surfaced in August 2022, RIL was building a separate online marketplace called JioMarket and onboarding third-party sellers to the platform. This would have allowed Reliance to comply with the Indian government’s draft e-commerce policy. Let’s learn what this policy entails:

The policy proposes to ban marketplace operators from having related parties or associated enterprises as sellers on their platforms. The companies or brands associated with e-market organisations will not be listed in their marketplaces. Only third-party sales are to be permitted. The government is promoting “algorithm fairness,” which forbids e-marketplaces from giving certain sellers preferential consideration. Such a policy would ensure that independent sellers receive fair treatment. E-market organisations are also frequently accused of sharing consumer data and purchasing habits with some preferred sellers. Thus, strict laws will be pushed to safeguard consumer rights.

Now, the government has put the proposed e-commerce policy on hold. So Reliance Industries has abandoned its plan to create a separate e-commerce marketplace for third-party sellers. Instead, it has integrated thousands of independent sellers into its prevailing platform, JioMart. 

JioMarket was designed to adhere to the suggested e-commerce policy standards. RIL intends to establish a single platform, JioMart, which it will construct to the scale of Amazon and Flipkart to compete against them. Now that the policy is taking a backseat, it would have been challenging to grow two platforms to fight against these formidable competitors.

The Way Ahead

JioMart has already onboarded more than 15,000 third-party independent sellers and direct-to-consumer (D2C) brands that Reliance Retail had roped in over the last 3-4 months for JioMarket. The total collection on the platform has gone up 80 times as compared to last year’s Diwali. It has also begun a month-long festive sale with discounts comparable to those offered by Amazon and Flipkart, with some undertaken by third-party sellers and D2C brands.  

E-commerce has revolutionised how businesses operate in India. As per an IBEF report, the Indian e-commerce market is predicted to grow by 21.5% to reach $74.8 billion by the end of 2022! Amazon is hailed as the  #1 e-commerce company in India, while Flipkart is neck-to-neck in competition for supremacy. 

Will JioMart face an uphill task to compete with Amazon and Flipkart, or will it give a tough fight to e-commerce giants like Amazon and Flipkart? Let us know your views in the comments section of the marketfeed app!

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Walmart prepares for $10 Billion Flipkart IPO

Walmart is reportedly getting ready to float a $10 billion (~ Rs 73,000 crores) Flipkart IPO in the US. Walmart has hired Goldman Sachs to carry out the works for the IPO, which could value Flipkart at $40 billion (~Rs 2,92,000 crores). This would make it the largest IPO by any Indian company on an overseas exchange. 

Walmart plans to sell a stake of 25% in Flipkart. They now own an 82.3% stake in Flipkart, with US-based hedge fund Tiger Management, China’s Tencent, Accel Partners, and Microsoft Corp, among the other key investors. 

Earlier in July this year, Flipkart had raised $1.2 billion (~Rs 125 crores) in a fresh round of funding, valuing the company at $24.9 billion (~Rs 1,82,500 crores). Flipkart has also made investments in Virat Kohli’s Wrogn, Aditya Birla Fashion Retail, and Arvind Fashions. 

Walmart’s plan to take Flipkart public could have been helped by the recent surge in e-commerce sales during COVID-19 lockdowns. Flipkart witnessed a ten-fold increase in its shipments during its festival sale this year.

Flipkart has also increased its availability in new pin codes and improved the supply chain logistics to boost up the sales. They are also offering many payment discounts through PhonePe which is a subsidiary of Flipkart.