Udaan was once seen as the big breakthrough moment for Indian B2B ecommerce.
Started in 2016 by three former Flipkart executives — Vaibhav Gupta, Amod Malviya and Sujeet Kumar — Udaan entered the market with a bold promise: digitise India’s wholesale trade, connect retailers directly with suppliers, reduce dependency on middlemen, build logistics, offer credit, and make buying easier for small retailers across India. Udaan itself describes its platform as serving small business owners across categories such as kiranas, chemists, hotels and offices. (udaan.com)
For a few years, the story looked very powerful.
Udaan’s revenue touched around ₹9,900 crore in FY22. Its valuation reached unicorn-plus status. But soon, the stress became visible. Revenue fell sharply to ₹5,609.3 crore in FY23 and remained almost flat at around ₹5,706.6 crore in FY24. In FY25, Udaan reportedly cut its net loss by 37%, but its operating revenue also fell 20% to ₹4,561 crore. In 2025, it raised fresh capital at a reported valuation of around $1.8 billion. (ETRetail.com)
So, what went wrong?
The easy answer is: Indian wholesale trade is broken.
But that answer is too simple. In fact, it is probably wrong.
India’s retail market is huge. Deloitte estimated India’s retail sector at US$1.06 trillion in 2024 and projected it to reach US$1.93 trillion by 2030. This market is powered not only by malls, supermarkets and ecommerce platforms, but by millions of kirana stores, neighbourhood retailers, distributors, wholesalers, stockists, super-stockists, agents and transporters. (Deloitte)
To an outsider, this system looks messy.
To a tech founder, it looks inefficient.
To an investor, it looks like a massive “disruption opportunity.”
But to someone who understands Indian trade from the ground, this system is not broken. It is highly evolved.
That is the first big misunderstanding.
India’s Wholesale System Is Not Weak. It Is Informal, Local and Relationship-Driven.
India’s wholesale and retail network has survived for generations without venture capital, formal dashboards, algorithmic credit scoring or sophisticated ERP systems.
It runs on something far more powerful: trust.
A local distributor knows which retailer pays on time, which shopkeeper delays payment during the lean season, which retailer needs credit before a festival, which family is expanding its business, and which customer should not be given additional stock.
This knowledge is not captured fully in spreadsheets.
It is not available instantly through app data.
It sits in the distributor’s lived experience.
This is why the Indian distributor is not just a “middleman.” He is often a credit assessor, collection agent, demand forecaster, relationship manager, brand educator, local logistics coordinator and informal risk manager.
When online B2B marketplaces entered the market, many of them saw only one thing: margin leakage.
They thought: remove the middleman and the system becomes cheaper.
But they missed the hidden work being done inside that margin.
The distributor was not merely adding cost. In many cases, he was absorbing uncertainty.
That uncertainty included delayed payments, local disputes, returns, damaged goods, wrong demand estimates, unpredictable retailer behaviour and sudden credit needs.
Once platforms tried to replace this network, they inherited these risks directly.
And risk is expensive.
Udaan Was Not the First to Misread the Market
Udaan’s story did not happen in isolation.
Before Udaan, several B2B ecommerce ventures had already struggled with similar assumptions.
Just Buy Live, an e-distributor that connected shopkeepers with consumer brands, suspended operations in 2018. IndiaMART’s Tolexo shut down its retail B2B wing in 2017 due to underperformance. Shotang, another B2B ecommerce platform, scaled down operations in 2018. Even Amazon shut down its B2B unit, Amazon Distribution, in India in 2022. (Techcircle)
Each of these companies had a slightly different model. But many of them were built on a similar broad belief: Indian B2B trade is fragmented, inefficient and waiting to be reorganised by technology.
The problem is that fragmentation is not always inefficiency.
India is fragmented because India itself is fragmented.
Consumption changes by region, language, income group, caste networks, community relationships, local festivals, credit behaviour, transport access and product category.
A kirana store in Meerut does not behave like one in Kolkata.
A garments wholesaler in Burrabazar does not operate like an electrical goods dealer in Bhagirath Palace.
A retailer in a small town in Bihar may make buying decisions very differently from a supermarket buyer in Bengaluru.
This is why standardised national models often struggle in Indian B2B trade.
The market is not one market.
It is thousands of micro-markets stitched together.
The Big Mistake: Trying to Replace the Ecosystem
Udaan’s biggest mistake was not that it served retailers.
That was a good idea.
Its biggest mistake was that the model tried to replace too much of the existing ecosystem too quickly.
Udaan wanted to control supply, logistics and credit.
On paper, that sounds powerful.
In practice, it created a capital-intensive triangle.
The company was not only running a marketplace. It was also building logistics, financing transactions, managing working capital, acquiring retailers, onboarding suppliers, handling returns and pushing scale.
This is very different from simply “connecting buyers and sellers.”
Wholesale trade is a low-margin business. In many categories, margins are thin, competition is intense, and retailers are extremely price-sensitive. If a platform adds logistics cost, credit cost, sales cost, technology cost and discounting cost on top of already thin margins, the business becomes very difficult to sustain.
This is where many B2B marketplaces fell into what I call the capital trap.
The formula looked like this:
Marketplace + Logistics + Credit = Growth
But in reality, it often became:
Marketplace + Logistics + Credit = Burn
Because when margins are thin, every mistake becomes expensive.
A wrong credit decision hurts.
A delayed payment hurts.
A returned shipment hurts.
An underutilised warehouse hurts.
A discount given for growth hurts.
A logistics route without enough density hurts.
And when all of this happens together, scale does not automatically solve the problem. It can actually make the problem bigger.
Credit Was Not the Problem. Blind Credit Was.
Many people say B2B marketplaces failed because they gave credit.
That is not entirely correct.
Credit is central to Indian wholesale trade.
Traditional distributors also give credit. In fact, much of India’s retail engine runs on credit.
The difference is that traditional credit is relationship-based.
A distributor gives credit after years of observation. He knows the retailer’s shop, family, repayment history, seasonal pattern, local reputation and business capacity.
In traditional wholesale, credit is not just a financial product.
It is a relationship.
This is where digital B2B platforms made a serious mistake. They tried to convert relationship-based credit into scalable app-based credit.
That can work only if the platform has very deep risk intelligence.
But if credit grows faster than recovery capacity, the model becomes dangerous.
A distributor may know that a retailer deserves ₹50,000 credit but not ₹2 lakh.
An algorithm may not understand that difference early enough.
A local wholesaler may know that a shopkeeper is delaying payments because of a temporary family problem, or because his business is genuinely collapsing.
A centralised credit model may treat both as the same kind of overdue account.
This is the hidden intelligence of the traditional system.
It is not perfect. It is not always fair. It is not always transparent.
But it is deeply contextual.
And in Indian B2B trade, context is everything.
Why the Alibaba Comparison Does Not Fully Work
Many investors and founders looked at China and asked: if Alibaba and DHgate could become global giants, why not build something similar in India?
But this comparison has limits.
Alibaba grew in a very different environment. Its commerce ecosystem was built around China’s manufacturing strength, supplier clusters, export competitiveness and global buyer demand. Alibaba’s international commerce platforms help connect merchants, manufacturers and buyers across markets. (The Ken)
Udaan-style Indian B2B marketplaces were solving a different problem.
They were not simply helping global buyers discover manufacturers.
They were trying to reorganise India’s domestic wholesale-retail distribution system.
That is much harder.
China’s B2B export model is built around manufacturing discovery and global sourcing.
India’s domestic B2B model has to deal with local retailers, informal credit, regional demand differences, transport complexity, low margins, fragmented supply and deeply relationship-driven trade.
So the question was never: “Can India build an Alibaba?”
The real question was: “What kind of B2B platform makes sense for Indian trade?”
And the answer is likely not a copy-paste Alibaba model.
What B2B Platforms Should Have Done Differently
The smarter path was never to destroy the distributor.
The smarter path was to strengthen the distributor.
Instead of bypassing the existing trade network, B2B platforms could have embedded themselves into it.
They could have helped distributors digitise ordering.
They could have improved inventory visibility.
They could have helped brands identify the right channel partners.
They could have created better retailer-level demand data.
They could have supported collections and payments.
They could have offered working-capital tools in partnership with existing trade relationships.
They could have helped retailers discover new products without breaking old trust networks.
In simple words, technology should have sat on top of trust networks, not in place of them.
That is the core lesson.
Indian wholesale trade does not reject technology.
Retailers use WhatsApp. Distributors use digital payments. Shopkeepers use smartphones. Orders are increasingly placed through apps and messages. GST, UPI and digital ledgers have changed many parts of trade.
But technology is accepted when it reduces friction.
It is resisted when it threatens control, trust or working capital.
A retailer does not buy only because an app gives a lower price.
He buys because supply is reliable, delivery is predictable, returns are manageable, credit is flexible and someone will pick up the phone when things go wrong.
That “someone” matters.
B2B is not B2C.
A consumer may switch apps for a ₹50 discount.
A retailer cannot run his business on that kind of uncertainty.
The Future of Indian B2B Is Still Very Strong
None of this means B2B ecommerce has no future in India.
In fact, the opportunity remains massive.
But the winning models will be more disciplined.
They will be category-specific.
They will understand unit economics.
They will not chase growth blindly.
They will build credit slowly.
They will respect existing trade relationships.
They will know that a grocery retailer, a pharma retailer, a garments wholesaler and an industrial buyer are not the same customer.
We are already seeing that some B2B models built around industrial procurement or more controlled supply chains are performing differently. For example, Moglix reported FY24 revenue of ₹4,964 crore while reducing losses, and OfBusiness reported FY24 operating revenue of ₹19,296 crore with profit, showing that B2B can work when the model is built around category depth, procurement discipline and stronger risk control. (Entrackr)
The lesson is not that B2B is a bad market.
The lesson is that B2B is not a simple marketplace market.
It is a trust market.
It is a credit market.
It is a logistics market.
It is a relationship market.
It is a local intelligence market.
Anyone entering this space must understand that.
Conclusion: India’s Wholesale System Was Not Waiting to Be Destroyed
Udaan did not struggle because Indian wholesale trade is backward.
It struggled because Indian wholesale trade is more sophisticated than it appears from the outside.
The system may look informal, but it has its own logic.
It may look fragmented, but it is locally efficient.
It may look relationship-driven, but those relationships are risk-management tools.
It may look old-fashioned, but it moves enormous volumes of goods every single day.
This is the mistake many online B2B marketplaces made.
They entered a living ecosystem and treated it like a broken machine.
But India’s wholesale system was not waiting to be destroyed.
It was waiting to be upgraded.
And there is a big difference between the two.
The future belongs to B2B companies that understand this difference.
Not those who say, “Let us remove the middleman.”
But those who ask, “What work is the middleman actually doing, and how can technology make that work faster, cheaper, more transparent and more profitable for everyone?”
That is where the real opportunity lies.
The next great Indian B2B company will not be the one that fights the trade ecosystem.
It will be the one that earns its trust.
See Also
Why India Needs Its Own Alibaba: Case For Digital Business Distribution Channels
