Ula, Udaan’s struggles cast shadow on B2B ecommerce’s future

Jeff Bezos-backed Ula made a surprising move in October, announcing additional staff layoffs and exiting its inventory-led FMCG distribution business. This decision came despite the Indonesian company’s revenue growing 6x year on year to top US$121 million in 2022.

“The scale and complexity of an inventory-led distribution model requires a level of investment that has proven challenging especially amid a sluggish digital economy,” Ula stated at the time.

A neighborhood store in Kolkata, India/ Photo credit: Shutterstock

This move is understood to have heavily affected Sobat Ula, its B2B ecommerce marketplace, which facilitated inventory ordering for small retailers – or warungs in Indonesia – through a mobile app delivery service.

Meanwhile, B2B ecommerce unicorn Udaan also laid off between 100 and 120 employees earlier this month, citing the need to remain “customer-centric and agile.” The job cuts happened just days after the Indian firm secured US$340 million in funding.

Do these recent moves point to a gloomy outlook for B2B ecommerce in both India and Indonesia?

Neither Udaan nor Ula responded to Tech in Asia’s inquiries for this story.

Troubles after pandemic boom

FMCG-focused B2B ecommerce players aim to digitize the value chain and expand access to stock-keeping units for end-retailers.

Such a model thrived during the pandemic, as traditional retail chains faltered under lockdown restrictions. Players like Udaan, Jumbotail, and ElasticRun in India as well as Ula and GudangAda in Indonesia secured significant capital between 2020 and 2021.

However, “once their discounted offerings were removed and the Covid-induced constraints for end-retailers were absent, these retailers defaulted to their usual way of carrying on their business,” says Roshan Raj, partner at Redseer Strategy Consultants.

Despite raising large amounts of funding, both Ula and Udaan faced post-pandemic challenges.

Ula’s losses in 2022 more than doubled year on year due to a 428% surge in cost of sales, according to data from Alternatives.pe, a platform that tracks regulatory filings in Southeast Asia and Australia.

Meanwhile, prior to raising its US$340 million series E round, Udaan had a projected runway of just six months, according to our previous analysis.

In the financial year ended March 2023, the company narrowed its losses by 33% despite a 43% decline in revenue. Its financial statements show a 44% reduction in purchases of traded goods, which refers to the cost of sourcing products from brands and manufacturers for resale to kirana or mom and pop stores.

Pivoting or diversifying?

What does the future hold?