Case Study: Udaan’s Business Model
By: Kapil Khanwani
Tags: Technology, Market, Startup, Ecommerce, B2B

Udaan.com

Wherever there is synergy, we work together

Udaan is a Bangalore based B2C marketplace which is owned and operated by Hiveloop. It was founded by former Flipkart employees Amod Malviya, Sujeet Kumar, and Vaibhav Gupta. Udaan connects the manufacturers and wholesalers with the retailers online. According to reports, the marketplace has been the fastest Indian start-up to reach in merely 26 months to reach a valuation of 1 billion dollars. As of now, the categories that are available in the marketplace are fashion and electronics.

Vaibhav Gupta

Vaibhav Gupta graduated from IIT Delhi and has also attended the Darden School of Business. He was the SVP(Senior Vice President) of business finance and Analytics at Flipkart. Before jumping into Flipkart, he has worked as an Engagement Manager in McKinsey and Company and as a Senior Consultant in Trilogy E-Business & Co.

The SVP is responsible for helping a company to achieve financial goals and objectives and increase operating performance. He/She prepares budgets, creates businesses plans, and solves internal issues as they arise.

He knew that if Udaan wants to connect with 50 million small businesses across the country, it will only be possible through the technology of smartphones. He also coined the name ‘Udaan’ which refers to India, meaning ‘The rise’. As long as the right product is built, the adoption rate of it will also be bigger like that of the case of Whatsapp.

Sujeet Kumar

Sujeet Kumar has also graduated from IIT Delhi. The charming and calm founder is originally from Kaimur, Bihar, India. He became the President of Operations in Flipkart and worked on it for almost four years. His talent and work showed his dedication and made him a successful co-founder of Udaan. It was 8 years of his hard work before he entered Udaan and gave it a Unicorn status in just 26 months. When he was assigned the role of President of Operations in Flipkart, he noticed that Flipkart provides logistics to 500+ cities but his small hometown was not one of them. This gave him the spark to start a platform which was accessible by everyone whether it was a customer or retailer

All events and things that occur in life have some reason behind them. The viewer’s perspective on it decides whether he can carefully observe it and execute it or just fail to ignore the importance of it.

At the 9th edition of Techsparks event, Sujeet was questioned about the reason he entered the startup business though he had his best role in Flipkart which he had quit. Sujeet said :

It is not about money, it is about wanting to make more money.

Amod Malviya

Amod Malviya is the person who built the backbone of Flipkart by working as the CTO till July 2015 and making Udaan the fastest-growing trade network. He and his co-founders’ are worth 1000 crore each. He has given chance to more than 200 employees to be a part of Udaan. He feels that the similarity between B2B and B2C systems is just 40 to 50 percent.

A chief technology officer (CTO) is the executive in charge of an organization's technological needs as well as its research and development (R&D). He or she develops policies and procedures and uses technology to enhance products and services that focus on external customers. The CTO also develops strategies to increase revenue and performs a cost-benefit analysis and return-on-investment analysis.

He completed his education at IIT Kharagpur. He feels that technology and the birth of smartphones have completely changed the way we interact with people. His team impressed other investors to invest in Udaan, even before its launch.

Tech is a tool, not a master — Amod Malviya

What is its goal

The goal of Udaan is to cut the middlemen between the customer and the factory product so that the customer gets the product at the best prices. Usually, most of the firms have to go through two to three layers like exclusive wholesalers and distributors.

Udaan wants to solve credit underwriting problem, B2B logistics, payment and sales and marketing.The ultimate goal will be to benefit the both customer and the retailer.

A milestone

One of the major milestones that Udaan achieved was when it entered the unicorn club.

A unicorn is a privately-held start-up valued at $1 billion or more.

Udaan was the fastest company to achieve this milestone and mark its victory in just 26 months. Similar, companies such as Swiggy, Hike, InMobi took four years to become one of the unicorns.

Udaan showed its individuality by becoming a unicorn with the capital infusion of around $225 million from its existing investors — DST Global and Lightspeed Venture Partners.

How is it different from the rest of the websites

Small and medium-sized sellers could use the platform to build their own brands, something which is difficult when done on consumer-based portals such as Amazon and Flipkart.

Udaan not only acts as a market place for the sellers and buyers but also takes care of the logistics and payments. These two factors are crucial and should be taken care of if the business trade has to be successful between the two vendors.

Challenges faced on initial stages

Several things must be taken care of when B2B e-commerce is being started from scratch. The firms need to take care of integrating technology, put in place complex logistics fulfilment processes and convince businesses on the go online.

They had to design the supply chain systems and processes. Also, the execution of the operations will always be a challenge for Udaan which is to be dealt as it grows bigger.

The complexity of executing certain things increases as the firm grows. And if it fails to handle the complexity carefully, the company will face the worst scenario. The sooner they realize their mistake, the faster their recovery will be.

Why is it successful

Amod in a discussion with the media stated that the company was successful because they eliminated the tech productivity killers and allowed the engineers to thrive in their creativity. For more than a year and a half, Udaan did logistics on subsidized rate and it helped them to gain significant exposure within the community.

Another secret sauce for the success of Udaan was the strong founders' team. They were best at what they did in Flipkart and were appreciated for it. When other Flipkart employees got to know about the birth of the startup, they also quit their jobs and extended their support with the founders’ trio. So on Day 1 the work productivity, was at its best which most of the companies lack due to experience in the field. But they already knew the execution, the only thing to be done was the workflow of executing it in smaller towns.

The important thing is that you’ve got a strong foundation before you start to try to save the world or help other people.

The story Udaan solves is of the small retailer who belongs to a small town usually going to the bigger cities and purchasing and selling goods in bulk even though there are bigger competitors than him. And ultimately he risks his capital, business and ends up shutting down in most of the cases. Udaan solves this huge problem of the common retailer who belongs to the core part of India’s public i.e the middle class.

Future Plans of Udaan

Udaan always welcomes the idea of merging with the partners and startups who are interested to collaborate with it as they don’t build everything in-house and even investing in them.

Understanding its business model

Udaan funds the capital for its buyers and charges interest on it. In simple words, the customer can buy directly from the marketplace, and further sell it in their local stores or have it for personal use.

Key Partners

Key partners are the relationships that you have with other business, governmental, or non-consumer entities that help your business model work. These can be the relationships that your company has with your suppliers, your manufacturers, business partners, etc. In the case of Udaan, manufacturers and the customers are the key partners.

Key Activities

Key activities consist of the activities that lead the company towards their goal with ease. The key activities include the building of a proper supply chain and operations. ‘Predictability’ is also necessary as it is a crucial factor in a B2B business.

Key Resources

Key Resources act as a building block describing the most important assets needed to make a business model work. The experience of the founders of Udaan who were ex-employees at Flipkart, helped Udaan to grow at a rapid scale.

Value Propositions

Value Propositions are the services or features or their innovations that make their product look attractive to the customers. The value propositions of Udaan are taking care of the logistics, payment between the supplier and the retailer/customer. Udaan also gives credit to the suppliers/retailers ranging from 10000 INR to 200000 INR.

Customer Relationships

Customer Relationships describe the ways that a company will engage with its customers to improve the customer experience. Udaan has a strong customer support which creates the difference among the marketplace and its competitors.

Customer Segments

The customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways. Customers, retailers fall under the customer segments of Udaan’s Business Model.

Channels

Channels are through which the company provides its service to the customers. The internet, mobile application, website are Udaan’s channels.

Cost Structure

Cost structure refers to the types and relative proportions of fixed and variable costs that a business incurs. The cost structure of Udaan includes fixed and variable costs, technical development costs, fundraising costs.

Revenue Streams

A revenue stream is a source of revenue of a company or organization. In business, a revenue stream is generally made up of either recurring revenue, transaction-based revenue, project revenue, or service revenue. Udaan’s revenue works on the 15% — 18% commission that it charges from the buyers for funding their purchase.

Catch the whole experience of the trio on Udaan below with an interview with YourStory: