India trades around $300 billion of retail products every year. While people talk about companies owning distribution chains, more than 70-80% of retail goes via the wholesale route. In addition, we are home to more than 12 million retailers and 1 million sellers.
Due to fragmentation on both ends and multiple layers of distribution, middlemen end up taking 30-50% margin in the value chain.
These margins exist since these middlemen help develop trust, breaking of bulk and financing to next intermediary in the chain or to the retailer.
"Higher price, limited discovery, lack of trust are critical painpoints in the wholesale business—making way for technology to be a disrupter in the sector"
Let's not forget, the current channels for trade have multiple pain points for both buyers and sellers.
On the buyer side, the intermediary system leads to higher price and limited discovery. On the other side, the sellers are hostage to these middlemen due to lack of access to end customers and financing risks.
In this scenario, I believe there is a big disruption opportunity through the use of technology.
With this thesis, in January, Stellaris wrote its first cheque for Wydr, an online marketplace targeting the $175B wholesale trading market in India.
There were five particular things about Wydr which I love:
Devesh and I were batchmates at IIM Kolkata. He was the more popular guy on campus, for obviously all the wrong reasons :) After several years of not being in touch, we got reconnected when I invested in Shopclues 5 years back.
Devesh was a founding team member and led the critical merchant side business at that time. I remember being impressed with his first principle thinking and vision to scale the business.
And over the years, I saw Devesh execute this vision, hustle, and grow the seller base at Shopclues from zero to more to than 250,000 merchants.
My belief in Devesh as an entrepreneur is supreme, and I was therefore very excited about the opportunity to partner again with Devesh to address a problem unique to India.
From his ShopClues experience, Devesh realized that the same set of merchants who were selling on the horizontal commerce platforms (Shopclues, Flipkart etc) had significant pain points as both buyers (for their supply) and as sellers (for their inventory) which were not immediately being addressed by consumer retail marketplaces.
Keeping this in mind, Wydr designed its platform to cater to the unique buying and selling needs of India’s wholesale segment, solving for fundamental pain points of discovery, transparency, and trust.
The company from day one focussed on a full stack approach with a wide selection of merchandise, safe payment via escrow, buyer-seller connects via chat and end-to-end logistics support.
I liked the laser sharp focus of the team in building a product which solved these fundamental pain points first (and right) without getting distracted.
Mobile first approach:
One of the big challenges of selling to SMB retailer/manufacturers has been the lack of digital penetration. A few years back, any company in this space would first have to sell a machine to the retailer and then get him/ her to hire a data entry person.
Today, mobile technology is revolutionizing the smaller towns and cities and all the SME owners carry a smartphone.
Wydr is one of the few marketplaces that has from the start taken a mobile first approach and built an app based platform to connect retailers to wholesalers/distributors/brand owners/importers. Wydr’s app, therefore, gives its customers a seamless and personalized experience.
Wydr currently earns revenue as a percentage of commission on a sale. Depending on categories, these margins can go to double digits with scale. Going forward, I also see other revenue streams kicking in including lead generation, virtual exhibitions, sponsored listings, credit financing etc.
Also, given that it takes time to establish trust and sourcing products is a core part of a retailer business, SMEs on the platform are more likely to stick around if they see the value.
The most critical check we do at Stellaris before we write a cheque is speaking to customers to hear their experience firsthand. My team and I spent a couple of weeks talking to both buyers and sellers on the Wydr platform, and more than 90% said they would pick doing business and recommend the platform to others because it made a significant positive impact on their business.
While I am excited about the growth at Wydr, just given the size of the market, I think one can create multiple large companies in the B2B space. These could be in retail non-structured space, dry grocery, fresh fruits & vegetables, meat & fish, commodity trading, MRO, capital equipment and so on.
The opportunity is large and the Stellaris team looks forward to meeting more entrepreneurs in the space.