The eB2B sector has, in recent years, undergone dynamic shifts influenced by evolving capital flows and business paradigms. Termed the ‘Goldilocks Years,’ the period from 2019 to 2021 witnessed unprecedented growth driven by increased private capital investment and disruptions in supply chains due to the Covid-19 pandemic. However, recent trends indicate a pivot towards sustainable growth strategies, emphasizing profitability over rapid expansion.
A joint study conducted by Redseer in collaboration with udaan provides insights into this evolving landscape, highlighting the eB2B sector’s transition towards sustainable growth strategies with a strong focus on achieving profitability.
But this has also resulted in a decline in buyer penetration. “Post-2021, the focus shifted to sustainable growth as private investments receded, prompting eB2B platforms to prioritize profitability. This change led to major eB2B firms either scaling back in unprofitable pin codes or ceasing operations altogether, resulting in a drop in buyer penetration from about 25% in CY2021 to 12-15% in CY2023,” points out the Redseer study.
Yet, the market remains ripe with opportunities, especially with a renewed focus on core customer value proposition and operational efficiency. “eB2B firms are now adopting scalable yet sustainable playbooks centred on metrics like consistent customer value proposition (CVP), delivery, and operating density to build profitable growth. Looking forward, with the implementation of this strategy and playbook, buyer penetration can potentially triple from 12-15% currently to 35-45% by CY2030,” says the study.
Insights from udaan’s Bangalore Micro-Market Initiatives
Through a comprehensive analysis of udaan’s micro-market initiatives across various regions of Bangalore, the Redseer study demonstrates a notable enhancement in udaan’s performance across critical retailing metrics. These findings suggest that similar strategies could yield positive outcomes for other eB2B retailers.
udaan’s implementation of the micro-market strategy in Bangalore underscores a focused initiative aimed at bolstering customer value proposition, delivery efficiency, and operational density.
Through this strategy, udaan seeks to gain deeper insights into local market dynamics, thereby enhancing service quality. By augmenting buyer density and understanding localized needs, udaan aims to achieve sustainable growth while concurrently optimizing supply chain expenses.
Through on-ground interviews, Redseer assessed the impact of udaan’s strategy across various buyer categories in Bangalore. The execution of the strategy has led to a significant increase in buyer penetration and wallet share for udaan, driven by improvements in service excellence, credit accessibility, pricing, and product availability.
Across buyer types in micro-markets where udaan has fully deployed its strategy, the study noted a >2x increase in penetration and ~1.4x increase in udaan’s eB2B wallet share. Further, udaan’s penetration among buyers more than doubled, from ~35% in July 2023 (before the strategy was implanted) to ~75% in January 2024.
Similarly, reflecting its growth in buyer penetration, udaan’s micro-market focus has unlocked significant growth in wallet share with a 1.4x increase amongst eB2B platforms over the past six months, translating into a ~13% share in overall trade for udaan and a 16-18% share in overall trade for eB2B players.
udaan has observed a notable increase in its eB2B wallet share among Kiranas and Pharmacies, ranging from 30-35%. This growth is primarily attributed to the enhancement of Kirana C&D (Convenience & Departmental) stores, which experienced a remarkable eB2B wallet share surge of over 40%. The implementation of the micro-market playbook played a pivotal role in facilitating this growth, underscoring the heightened support and service requirements essential for these buyer segments.
Redseer research indicated that in the markets where udaan has implemented the micro-market strategy, the retailer has seen significant improvements in customer value proposition parameters. udaan’s micro-market strategy has directly impacted delivery speed, credit accessibility, and pricing. Additionally, assortment and product availability have seen improvements across the board.
As a result of improvements in customer value proposition parameters, udaan has experienced a significant increase in its Net Promoter Score (NPS), a key metric used to gauge customer satisfaction. udaan has achieved an NPS score of 42 in the micro-markets Redseer studied, outperforming all other platforms. Thanks to its high NPS, almost 50% of buyers are looking to increase procurement from the platform.
The robust NPS score of udaan demonstrates a positive association with the platform’s future wallet share outlook. Notably, 49% of buyers are inclined to increase their wallet share on the platform, while merely 3% have intentions to decrease it. In comparison, buyers who procure from offline channels, such as distributors and mandis, exhibit lower proportions seeking to increase their wallet share, at 10% and 16%, respectively. Conversely, a higher percentage of buyers, 14% and 38% respectively, express intentions to decrease their wallet share when using offline channels.
To conclude, udaan’s success with the micro-market strategy suggests a scalable playbook for sustainable growth in eB2B retailing. The strategy holds promise for replication across diverse micro-markets, facilitating significant market expansion and heightened opportunities within the eB2B sector.
