From B2B To Quick Commerce: SoftBank-Backed ElasticRun’s Plan To Take On Udaan, Jumbotail

The B2B ecommerce space in India has seen a shake-up perhaps like no other sector in the recent past.

Be it Jumbotail acquiring Solv India for strengthening its vertical play, or Udaan raising funds at 50% valuation drop, or Dealshare running into a rough patch, or more recently ElasticRun focussing squarely on improving margins even at the cost of a slump in GMV sales, the business segment has been bustling with activities.  

ElasticRun, for instance, took a 49% decline in operating revenue to INR 2,434.8 Cr in FY24, but it brought along a 42% reduction in its net loss to INR 359.6 Cr. “Margin is where we have invested all our attention as we aim for the top slot in the market,” said the startup’s founder Sandeep Deshmukh. 

ElasticRun, which claims to connect brands to rural consumers through over 10 Mn stores, represents the evolving dynamics of India’s $60 Bn business-to-business ecommerce space that comes after deployment of huge capital over the years to bridge the digital gap in a largely unorganised retail market, dominated by humble kirana stores. The funds helped the B2B startups resolve supply chain issues and docked the ubiquitous mom-and-pop stores to the digital landscape. 

The B2B ecommerce companies initially tried to restrict themselves to pure tech play around 2010-11, connecting retailers to wholesalers and brands through marketplaces, but later on expanded their operations to logistics and warehouses. This too called for huge investments. 

However, with profitability nowhere on the horizon, a slowdown in funding hit the industry around 2023, forcing B2B ecommerce startups to limit both their verticals and geographies, instead of keeping up the expansion overdrive. 

ElasticRun, too, was saddled deep into the red around mid-2024. HSBC nearly halved its valuation estimate for the company to $800 Mn after the SoftBank-backed unicorn saw its FY23 net loss zooming 72% to INR 618 Cr. Over the years, ElasticRun has raised $426 Mn across multiple funding rounds from investors like SoftBank, Prosus, and Goldman Sachs Investment Partners.

As the funding winter left most startups in cold feet in 2023-24, ElasticRun stepped on the gas to reinforce its rural play.  

Since its launch in 2016, the brainchild of Deshmukh, Saurabh Nigam and Shitiz Bansal, has used its tech platform as an extension of the direct distribution networks of FMCG brands in the hinterland. “The rural-urban divide is huge in the business mosaic between the two Indias,” Deshmukh told Inc42 while stressing on the company’s strategy to fight out the crisis rattling the B2B space.

Beating The B2B Blues: A Two-Pronged Blueprint 

While quick commerce platforms like Zepto, Blinkit, and Swiggy Instamart needed the kirana stores to change their models and adopt the quicker delivery format, this has not been the case with ElasticRun because it operated largely in the rural markets, where the challenges are grossly different. 

ElasticRun had to factor in hurdles like broken infrastructure, inconsistent supplies of goods, fragmented logistics, and extreme price sensitivities. The company has devised a business model with quick commerce partnerships for urban centres. 

The two-way strategy involves changing its brands mix to focus on high-margin local brands to be supplied to the retailers or kirana stores in rural markets, and jumping on the quick commerce bandwagon in the urban market for D2C brands through the dark store models. 

While the first approach will create a more supportive market in terms of margins, the second approach will help it speed up deliveries and resolve supply chain snags. But how will the company implement the strategy when the funds tap has run dry? CEO Deskhmukh said the company has enough capital in its coffers to execute expansion while not experimenting drastically. 

Making The Course Correction: Using FY24 As A Reset Year  

In FY24, ElasticRun’s revenues nearly halved from INR 4,738.0 Cr a year back, but its losses narrowed down substantially from INR 619.0 Cr in FY23. ElasticRun wasn’t alone to bear the impact of drying funds flow and an increasingly cost-intensive business segment. Udaan’s FY24 revenues stayed flat at INR 5,707 Cr in FY24, while its net loss shrank more than 50% to INR 1,674 Cr. 

While Jumbotail is yet to file its financials for FY24, its net loss more than doubled to INR 264.16 Cr in FY23 from INR 124.74 Cr in the previous fiscal, though revenue from operations jumped 117% to INR 819 Cr from INR 377.36 Cr in FY22.

Deshmukh mentioned that the dent in the overall gross merchandise value (GMV) or sales has not been a major cause for concern since the company has been able to derive better margins or profits from local brands that helped contain the losses.

“What we are aiming at is a 50:50 mix of local and national FMCG brands in our portfolio that supply to the kirana stores in the rural areas. That is the change in the business model we undertook. It happened because we realised that for national brands to penetrate into rural markets, it is a cost-intensive exercise and would require a different pricing model,” the ElasticRun CEO said.

He added that the platform as part of its business strategy is now enabling state-level brands first to supply to the local retailers in those regions and then help them go national. “This in turn is helping us to squeeze better margins and at the same time minimise supply chain costs.” 

This transition took place last year, when the company saw a revenue drop, but it doesn’t see that as a bad thing since its take rates from newer brands onboarded improved. 

Deshmukh described FY25 as the best financial year yet for the company in terms of becoming operationally profitable. He added that while the company did see higher GMV in the past few years, the margins were lower. This has now transformed to higher margins from local brands which will possibly drive ElasticRun to profitability. “Yet, we won’t become EBITDA profitable very soon, because we are still focussed on growth,” he mentioned.

Building A Quick Commerce Playbook

Supply chain challenges have been arguably a major limiting factor for B2B ecommerce, especially for supplying to retailers in rural India.

ElasticRun is now banking on the single-city dark store model to overcome the challenge. “Supply chains are being rewritten and moving from multi-city to single-city networks for operational efficiency and cost-effectiveness,” Deshmukh said. 

He pointed out that large B2B ecommerce companies would set fulfilment centres across multiple major cities earlier, but intra-city logistics is now pivoting to a dark store model where all the inventories are held within a city for faster supply. 

ElasticRun operates 800-850 such dark stores across major cities to cater to retailers in neighbouring rural areas as well as help D2C brands with quick delivery options.

“While we have our dark stores in the cities, they supply to rural markets as well. The only difference in our business model is that while we were earlier supplying only to rural markets, now we are fulfilling same day, 30 Min or even 10 Min delivery for D2C brands in urban markets as well. This has led to the deployment of more workforce in these dark stores as timelines changed drastically,” he added.

Even as the quick commerce industry has boomed over the last couple of years with the platforms and marketplaces strengthening their logistics and fulfillment services, the D2C brands are still figuring out ways to compete with the marketplaces for quick delivery fulfillment on their own. 

“We have partnered with 25 D2C brands for their quick commerce deliveries and this number is increasing substantially on a month-on-month basis,’ he added.

The CEO added that the company’s focus will also be on enabling white label fulfillment networks for quick commerce. White labelling will allow the D2C brands to source  logistics, warehousing, and delivery aspects of their ecommerce operations – much in sync with ElasticRun’s objective of emerging as an end-to-end fulfillment solutions provider to D2C brands.

ElasticRun’s IPO Vision

Deshmukh refused to share any likely timing for a public issue, but highlighted that the company is looking to become operationally profitable. “We have substantial cash on the books, so we don’t have any rush going for an IPO just yet. I think all pieces are aligned and as and when we make the decision, we can go for the IPO. But yeah, today, I don’t have any timeline on when we will go.” 

India’s tech-enabled online B2B segment has seen a spate of consolidation in the recent past. Delhivery’s $165 Mn acquisition of Ecom Express has been the biggest instance of the trend. 

Deshmukh, however, maintained that acquisition of vertical players was not high on priority for the company, although in the B2B ecommerce space, there is an increasing interest among big companies in acquiring smaller firms. He said that unlike in the B2C space, in the B2B ecommerce and logistics market, the dynamics of the market don’t change abruptly even when a wave of consolidation sweeps through.

The ripples of consolidation reached the core B2B ecommerce space when Jumbotail acquired Solv India with claims of the merged entity valued at $1 Bn and to focus on supplying goods beyond FMCG products to retailers. ElasticRun’s closest competitor Udaan, which had also tried rapid expansion in the B2B ecommerce space early on, had to cut back as the company’s cash balances declined.

An FMCG research analyst with a Bengaluru-based consulting firm said that two big players – Udaan and JioMart – had first focussed on expanding their reach across the country and later on improving cost-efficiencies that did not work. 

“Similarly, Jumbotail has so far limited its focus only on urban markets in South India and some cities of North, with its on-field sales workforce as well as marketplace orders that again has had a limited success,” he said. 

Despite the sweeping changes in the market dynamics, the industry analyst thinks that the competition remains largely unaltered. “I don’t see any new uptick in the competition that is coming in, because in this space, essentially your execution quality, your technical competence and your control on cost are the determining factors.” 

The views resonate in the opinion of the ElasticRun founder. Deshmukh believes that when a company reaches a certain size and scale, with established business partnerships, and isn’t catering directly to a consumer, any new entrant will not be able to cause a disruption. 

In today’s cautious investment climate and the unpredictable path to profitability in the B2B ecommerce space, building asset-heavy platforms in logistics or supply chain may seem counter-intuitive, but will eventually deliver if done right, Deshmukh said.

As India’s B2B ecommerce space grows to create a $200 Bn market opportunity by 2030, it will be interesting to see how ElasticRun’s blueprint plays out to take it to the top slot.  

[Edited By Kumar Chatterjee]