How e-commerce moguls are mastering the art of growth and profitability

IT WAS NOT SO long ago when questions were being raised about the viability of e-commerce companies. “Even in 2018, investors were trying to figure out if e-commerce will be just about Amazon and Flipkart or anything else beyond it,” recalls Rahul Garg, founder and CEO of B2B e-commerce company Moglix.

Look around in 2025, and there are multiple layers of e-commerce businesses in India — from marketplaces and direct-to-consumer (D2C) platforms to B2B e-commerce and more recently the quick commerce phenomenon, making e-commerce an unmissable part of a consumer goods company’s go-to-market strategy. “Even food delivery was a fairly questionable category because of the unit economics then. And then Covid-19 happened and gave impetus to e-commerce startups in all shapes and forms,” adds Garg.

With multibillion-dollar funding, e-commerce has emerged as the segment with the highest number of startups. E-commerce startups raised as much as $46.7 billion in funding in India from 2019 till date in 4,825 rounds of funding, according to data from startup intelligence firm Tracxn. The largest funding during the period went to B2C e-commerce at $30.9 billion, followed by marketplaces at $27.3 billion and B2B e-commerce at $6.7 billion.

“We have seen a big shift where e-commerce has become a way of life as compared to 15 years ago when there was a big question of whether people will buy things online,” says Kapil Makhija, MD & CEO of Unicommerce eSolutions, an e-commerce tech solutions firm.

However, the segment (barring quick commerce) has recently experienced a decline in funding, reflecting a broader trend of cautious investment during this funding winter, driven by economic uncertainty. According to data from Tracxn, e-commerce startups received approximately $17 billion in funding in 2021. However, this amount dropped to $3.9 billion in 2023 and was $5 billion in 2024.

“We have very expensive valuations today. New investors are not happy to continue on those valuations, because the performance of the business is not up to the mark,” says Angshuman Bhattacharya, partner and national leader-Consumer Products and Retail at professional services firm EY India.

According to Bhattacharya, this has led to a valuation gap and failed processes of fundraising.

As a result, many startups are adjusting their strategies to prioritise profitability. Leading companies in the sector, such as Moglix, ElasticRun, and CityMall are exploring various avenues for revenue generation and taking measures to cut costs. A case in point is the B2B e-commerce segment, where private labels and regional brands have become a key component of the strategy, as companies strive to balance growth and profitability.

The year 2022 marked the rise of B2B e-commerce in the startup ecosystem. While the segment received its largest-ever funding to date at $2.8 billion during the year, according to Tracxn data, it also made its presence felt in the FMCG industry.

Such was the threat posed by platforms such as ElasticRun, Jumbotail and Udaan that the traditional distributors’ association threatened FMCG companies like HUL and Colgate-Palmolive with a ban on some of its brands. The issue at hand was margin parity and the All India Consumer Products Distributors Federation believed that FMCG companies were shelling out higher margins for these new platforms.

However, the euphoria was short-lived, as B2B online distributor companies soon encountered yet another significant challenge. The companies recognised that, while their customers — the kirana stores — appreciated their innovative approach, they were hesitant to pay a premium for their services.

“They want the best quality and at the lowest price possible. Now, that triangulation does not work,” says Sandeep Deshmukh, co-founder and CEO, ElasticRun. The company, hence, solved this challenge and shifted its focus to regional brands as well as private labels. Distributing private and regional brands enables significantly higher margins than most national brands and therefore make sense for B2B platforms. “About 12-15 months ago, we changed our assortment mix and included private labels and regional brands. Our focus is on getting the unit economics right,” says Deshmukh.

ElasticRun, which reported a total revenue of ₹2,545 crore in FY24, according to Tracxn data, now gets about 30% of its sales from the regional brands, 20% from private brands and 50% from national FMCG brands. Before the shift in its strategy, the company would garner 80% of its sales from the national brands and 20% from the regional brands. ElasticRun currently caters to about 200,000 stores across the country and only caters to villages that have a population of less than 5,000 people. It has over 300 brands on its platform and 25 stock-keeping units (SKUs) in its private brands portfolio. The higher margins offered by regional brands also attract the retailers, as it gives them a competitive edge.

CityMall, earlier a social commerce company, which now calls itself a pure-play B2C e-commerce company, is also counting on regional brands to drive its growth. “We have a significant share of regional brands and private labels (about 60%) in our portfolio as this helps us to be much more competitive,” says Angad Kikla, co-founder, CityMall. “For instance, a kirana store typically has 400-500 SKUs in its assortment, while we have 4,000 SKUs. So, we have many more products at a cheaper price,” he adds.

CityMall targets consumers in rural areas. The company believes that while these consumers are already buying products online in segments such as fashion and electronics, no one is catering to their grocery needs due to the lack of the supply chain. And, hence, it is tapping this unmet need of the rural consumer. Its average order value is in the range of ₹400-500 and involves participation from local community partners who run a digital kirana store of sorts for the company.

Even as e-commerce companies strive to optimise their unit economics, they are exploring various channels to generate revenue. ElasticRun, for instance, besides its core service of offering distribution to brands, also offers marketing automation, using which the brands can position their products in certain regions and markets and target consumers.

The company is also working on another revenue-generating opportunity of credit injunction. Deshmukh of ElasticRun says the company has several distribution partners and store owners on its platform and lubricating their businesses with credit is among some of the leverages “that we use for monetising our network”.

Moglix also has similar plans. The company has introduced a supply-chain finance platform called Credlix and plans to expand it to international markets such as the U.S. and Mexico. Several e-commerce companies are also looking at international expansion. E-commerce enabler GoKwik, for instance, is looking to launch its five products in countries like the U.K., Germany and the U.S. “We have five products, and we want to take them international. We believe that there is a lot of demand for data-driven products,” says Chirag Taneja, co-founder & CEO, GoKwik.

Experts, however, believe that e-commerce startups, especially in the B2B subsegment, need to identify their niche and focus on it instead of tapping too many channels.

“The idea behind B2B e-commerce was that these companies would create efficiencies in the supply chain. The basic idea was that they buy cheaper from the vendors and sell cheaper to the retailers. But that promise has not been lived up to,” says Bhattacharya of EY India.

This has led to stalled growth in the segment compared to consumer-facing e-commerce segments such as marketplaces. According to industry estimates, B2B e-commerce is growing at 20% year-on-year as compared to the 300% growth being witnessed by B2C e-commerce companies.

Industry watchers, however, are optimistic about the other segments such as social commerce and quick commerce, where startups such as Zepto (read a detailed story on the venture elsewhere in this issue) are going great guns.

“We are officially now a GenZ economy and the next 10 years are going to be about how this generation drives consumption,” says Praveen Govindu, partner, Deloitte India. According to Govindu, this generation is a natural consumer of social media, and it will drive their consumption habits going ahead. “Startups that are in the social commerce space and understand the behaviour of this segment are slated to gain,” he says.

The e-commerce startup ecosystem is also positive about the segment’s prospects going ahead due to the rise in income, arrival of GenZ consumers and AI. “We are going to see a 5x-6x rise in the number of brands crossing ₹100 crore in five years. So that’s one megatrend. The country is going to become more brand-conscious, which we have seen play out in other countries as well,” says Taneja of GoKwik. The founder expects to ride on the back of these trends for the next leg of growth for GoKwik, as an e-commerce enabler.

Despite the rocky road for startups in the e-commerce space, the forecast remains positive.