Welcome to 2023—the year Indian businesses hope is not as choppy as the one before. The past decade has transformed online shopping in India, helped in no small measure by the tailwinds from the pandemic. And brick-and-mortar retailers, while in no mood to throw in the towel, know that they have to adapt to the new reality. And who would understand this better than the five Flipkart alums who built two major business-to-business e-commerce startups: Udaan and Arzooo? On business topics, we have written extensively on Udaan—a startup valued at ~$3.1 billion—today’s story is about the smaller and younger Arzooo, founded by Khushnud Khan and Rishi Raj Rathore. Khan built Flipkart’s large-appliances category from the time the e-commerce giant ventured into the segment, in 2014. Rathore is said to have streamlined last-mile delivery for Flipkart’s grocery vertical. With that experience, both Khan and Rathore quit in 2017 and set out to build Arzooo. Its aim has been simple: help small electronics dealers put up a fight against large retail chains, such as Croma and Reliance Digital, and the likes of Amazon and Flipkart. Arzooo has wedged itself into the supply chain between electronics manufacturers and small retailers, aggregating demand to get the latter products at prices they wouldn't have been able to otherwise. And things have been working well for Arzooo. In the year ended March 2022, the company's revenue grew over 4X to Rs 1,117 crore (~$135 million), with a loss margin of just 5%. Udaan, in the same period, posted a loss margin of 30% on revenue of Rs 10,000 crore ($1.2 billion). The biggest reason behind Arzooo not burning too much cash is keeping the cost of acquiring new customers low. Its ad spending is <0.5% of its revenues, and it has very few on-ground salespersons. But its newly launched business-to-consumer vertical will soon start incurring customer-acquisition and marketing costs. Will Arzooo’s operational capabilities keep pace with its scaling dreams? It has to. After all, Reliance’s flagship e-commerce venture, JioMart, has already started to offer similar services. To start the year with a mix of optimism and pessimism, we have an engrossing articles that explains the dynamics of the consumer-electronics sector through the lens of 5-year-old Arzoo.
Yusuf Bhandarkar"s ki Arzoo