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Online retailers shed inventory in favour of marketplace model

NEW DELHI: Online retailers who aggregate products from vendors are turning to startups for support at the backend, as they shed inventory in favour of the marketplace model. This is creating a wave of opportunity for young ventures offering services ranging from warehousing and inventory management to logistics and data analytics for e-commerce portals. 

"We are a one-stop shop for anyone looking to have an online presence," said Sahil Barua, 28, cofounder of Delhivery, a two year-old startup that counts SnapDeal, Flipkart and Rediff among its clientele. The Gurgaon-based company has over 80,000 square feet of warehousing, 
spread across the four major metros and 85 distribution points spread across 60 cities. 

Founded in 2011 by a group of IIM and IIT alumni, Delhivery manages procurement and warehousing, packaging and last mile deliveries for a number of online retailers. "The complexity of the logistics is vastly different. You have 4,000 vendors across the country, and even more buyers," said Barua, who estimates that his company will earn a revenue of Rs 17 crore in fiscal 2014. 

The change to a marketplace model by ecommerce portals has mostly come about after the government clarified last year that it would not allow 
foreign direct investment in any consumer facing retail businesses transacted over the internet. Further, risk capital investors were also disallowed from investing directly in e-commerce companies. 

"There is a clear demand for our services, and we feel we can step in and fill the gap that's been created," said Ankit Pruthi, co-founder and chief executive of Unicommerce. New Delhi-based Unicommerce, which was founded by three IIT Delhi alumni in 2012, has created its own software Uniware, a web-based solution, to manage complete order fulfillment lifecycle and inventory. 

"We wanted to be India's number one marketplace, not its number one logistics company. A Delhivery or Unicommerce allows us to do exactly that," said Kunal Bahl, chief executive of SnapDeal, which works with both startups. Unicommerce, which has about 50 clients, including Jabong, SnapDeal and Bluestone, is "now looking for overseas partners," said Pruthi, 30, a former 
Goldman Sachs employee, who estimates that his company will earn revenues of Rs 5 crore for fiscal ended 2014. 

Typically, backend service providers must offer both quality and price advantages to online portals that operate on thin margins. Till date, Flipkart remains the only retailer to build its own supply chain and logistics infrastructure, following global retailing behemoth Amazon's strategy. "E-commerce needs to engage with customers, and not worry about what algorithm or ERP they're using at their backend," said Pavan Sondur, 27, cofounder of Unbxd. 

Bangalore-based Unbxd, founded in 2011, has developed a product discovery engine, which uses big data analytics to personalise the right product mix for users. The proprietary platform has been integrated into the websites of a number of e-commerce ventures, such as Zansaar and Kumar Mangalam Birla-owned TrenIn. com, the online website of Madura Garments Fashion and Lifestyle. 

Venture capital, which has already invested over $850 million (Rs 5,231.8 crore) in the Indian e-commerce space since 2007, is also backing this new crop of startups ventures. Both Unicommerce and Delhivery have received funding, estimated at between $1 million (Rs 6.2 crore) and $2 million (Rs 12.3 crore) for Unicommerce and $5 million (Rs 30.8 crore) for Delhivery, from Nexus Venture Partners. 

"This is the next wave of evolution for e-commerce in India," said Anup Gupta, partner at Nexus Venture Partners. "As the sector grows, the companies can focus on building their brand, while partnering with startups such as Unicommerce, which have built cross-platform technologies."