Uber Eyes B2B Logistics in India with Open Commerce Network

Uber Expands into India's B2B Logistics Sector

Uber is making a significant move into the burgeoning B2B logistics market within India. This expansion involves strengthening its collaboration with a nonprofit organization supported by the Indian government. The aim is to challenge the current dominance of Flipkart, the major e-commerce platform backed by Amazon and Walmart, and to broaden the reach of digital commerce throughout the South Asian nation.

Launch of B2B Logistics Service via ONDC

The ride-hailing company announced on Monday its forthcoming launch of a B2B logistics service utilizing the Open Network for Digital Commerce (ONDC). This will provide businesses operating on the network with access to on-demand logistics capabilities, leveraging Uber’s extensive network of 1.4 million drivers. While a precise launch date remains undisclosed, the initial focus will be on facilitating food deliveries.

Expanding Service Capabilities

The scope of this service is anticipated to broaden considerably. Future plans include extending logistics support to encompass e-commerce, grocery, pharmacy, and even healthcare sectors. Uber will function as a logistics service provider on the ONDC platform.

Competitive Landscape

Uber will find itself competing with established players in the Indian logistics market. These include Shiprocket, backed by Temasek and PayPal; Shadowfax, supported by TPG, Qualcomm Ventures, and Eight Roads; the recently established Indian unicorn, Porter; and LoadShare, which has received investment from Tiger Global.

A White-Label Approach

The service will operate as a white-label solution, mirroring the functionality of Uber Direct, which was introduced in the U.S. in 2020. However, its availability will be restricted to businesses integrated within the ONDC network, according to sources familiar with the plan.

Broader Logistics Initiatives

Uber’s entry into B2B logistics in India builds upon its recent expansion into consumer logistics. The company launched Courier XL in Delhi NCR and Mumbai earlier this month, enabling users to deliver larger items, weighing up to 1,653 pounds, through the rider app using three- and four-wheeler carriers. A standard Courier package delivery service utilizing two-wheelers has also been available for some time.

Market Growth and Revenue Potential

The Indian logistics market is projected to experience substantial growth. Motilal Oswal forecasts a 49% increase, reaching 13.4 trillion Indian rupees ($157 billion) in the financial year 2028, up from 9 trillion Indian rupees ($105 billion) in the financial year 2023. This expansion presents a significant opportunity for Uber to diversify its revenue streams in India.

Last year, Uber reported a 41.1% year-over-year increase in operating revenue in India, totaling $439 million. Revenue from rides grew 21.45% year-over-year, contributing $94.27 million to the total operating revenue.

Competition in the Ride-Hailing Market

Despite its growth, Uber faces increasing competition in the Indian ride-hailing market from local companies. Emerging players like Rapido, backed by WestBridge Capital and Nexus Ventures, and Namma Yatri, which has received investment from Google, Blume Ventures, and Antler, are gaining traction. Diversification into logistics is seen as a strategic move to solidify Uber’s position in the Indian market.

Integration with ONDC and Metro Ticketing

In addition to its logistics initiatives, Uber has integrated metro ticketing into its rider app, powered by ONDC. This development stems from a memorandum of understanding signed with the Indian government-backed nonprofit during CEO Dara Khosrowshahi’s visit to India in February 2024. Currently, Delhi Metro tickets are available through the Uber app, with plans to expand to three additional Indian cities later this year.

ONDC: A Digital Commerce Initiative

Launched in 2021, ONDC represents India’s effort to stimulate digital commerce and empower small retailers to establish an online presence and reach a wider customer base. The network extended its reach to include the mobility sector in 2023.

Challenges Facing ONDC

ONDC was initially conceived to replicate the success of the Unified Payments Interface, aiming to promote the adoption of digital commerce. However, it has encountered difficulties in gaining widespread acceptance, as its open-network model has yet to attract significant participation from major industry stakeholders. Recent changes in leadership, including the departure of its former managing director and CEO, T. Koshy, have further complicated matters.

Retail orders on the network experienced a decline of nearly 34% in April, falling to 4.3 million from a peak of 6.5 million in October.

ONDC's Perspective

“Uber’s initial enablement of metro ticketing and logistics unlocks new possibilities — from seamless multimodal journeys to unifying a fragmented logistics ecosystem,” stated Vibhor Jain, acting CEO and COO at ONDC. “This collaboration lays the foundation for future innovations from Uber on the network, enhancing value for users, partners, and the broader mobility and services landscape.”