Away from this high-profile fight for the ordinary Indian’s wallet, a different contest is shaping up for control of what goes on shop shelves4 min read . Updated: 02 Mar 2021, 09:12 AM ISTBloomberg
A tech startup is revolutionizing the back-end for millions of small shops. The founders are doing it their way.
A bruising battle for supremacy between two of the world’s richest men is hogging the limelight, but the silent changes in India’s retail landscape deserve equal attention.
The ongoing digital transformation of the corner kirana stores, tens of millions of shops catering to 1.3 billion consumers, will matter for everyone from Unilever NV and Procter & Gamble Co. to State Bank of India, the country’s largest lender. It will also be important to Amazon.com Inc. boss Jeff Bezos and Reliance Industries Ltd. Chairman Mukesh Ambani.
The two billionaires are circling each other over an Indian retailer in crisis. The founder of Future Group took Bezos’s money, but sold his debt-laden business to Ambani when the pressure from the pandemic became too much. Amazon is in India’s courts to scuttle the $3.4 billion sale, which could end up making Reliance’s dominance over the consumer economy unshakeable.
Away from this high-profile fight for the ordinary Indian’s wallet, a different contest is shaping up for control of what goes on shop shelves. Reaching small stores in a country of more than 660,000 villages and 8,000 cities and towns has traditionally been an uphill struggle for brands. Even Unilever, which has been in India for almost a century, can barely tap 15% of all retailers directly. It needs wholesalers to boost that reach to 80%-plus, according to investment research and asset management company Sanford C. Bernstein & Co.
The wholesalers rely on their knowledge of (and trust in) retailers in their vicinity. But these relationship-oriented networks are small and expensive. Throwing them wide open with digitization is the big opportunity. Leading the charge is Udaan, a startup that in five years has taken 80% of the business-to-business e-commerce market, delivering goods it stocks in 200 warehouses nationwide to more than 1.7 million retail stores in 900 cities every day.
Suppliers receive their cash on time after Udaan takes their products. Retailers get credit they would have otherwise obtained at high interest rates from wholesalers. Everything happens on a smartphone app, which helps small shopkeepers build a history of reliability in payments. Banks and financiers gain the confidence to lend the required working capital, and brands get less convoluted access. From manufacturers and millers to farmers, pharmacists, hotels, restaurants and grocers, the platform has 3 million registered buyers and sellers.
As Vaibhav Gupta, one of Udaan’s three co-founders, says, “We’ve solved the problem of trust on the internet." The firm is backed, among others, by Lightspeed Venture Partners, an early investor in Snap Inc., and Yuri Milner’s DST Global. It’s one of India’s fastest-growing unicorns, as startups valued at $1 billion or more are known.
Sujeet Kumar, another co-founder, credits some of the success to the 2017 goods-and-services tax. With multiple rates and high compliance costs, GST is a cumbersome consumption tax, but it’s uniform across India. Warehousing decisions that used to be driven by a confusing smorgasbord of local levies are now guided by efficiency.
https://www.livemint.com/companies/...y-fight-in-india-s-retail-11614641938159.html
