It’s Tuesday, and today we’re covering Fairdeal.Market, an Indian B2B quick commerce company. Founded in 2022 by two brothers, Prateek and Yash Bansal, the company just raised $3 million in a pre-Series A round led by Incubate Fund Asia and Waterbridge Ventures.

To understand why Fairdeal is an important business we first have to discuss the two actors it serves: kirana stores and D2C brands. One is legacy retail, the other a modern phenomenon, but both have faced mounting struggles in recent years, though for different reasons.

Kirana stores have been a staple of Indian retail for decades, defining the industry and employing millions of people. Here’s an excerpt from my article on KiranaPro on their impact:

Most stores are small, individually-owned outlets with a limited assortment and limited financial upside. Many unsubstantiated claims here, so let’s specify:

Of course, economics vary with location, catchment size, and competition. But consider one real example: in Gurgaon, a kirana store’s sales dropped from roughly $550 to $300 due to quick-commerce competition. If we assume that this store has a gross margin of 14%, that would mean $1,260 monthly gross profit. That’s before operational expenses and taxes. That’s in one of India’s wealthiest regions, less developed areas are likely worse.

And that is a part of India with one of the highest per-capita incomes, so there’s probably a bit more room to charge higher prices. Imagine what’s happening in the less developed regions.

And whatever revenue kiranas generate, they must convert that revenue into working capital: distributors visit only once every week or two, so shopkeepers have to hold enough cash to cover days of replenishment.

Tight margins and the rise of quick commerce have led to kirana store closures: last year alone over 200,000 stores had to close down.

Estimates for India’s D2C market vary widely—some place it at $30 billion by 2025, others at $100 billion. But growth has been rapid, around 40% CAGR, fueled by e-commerce expansion and cheap digital ads.~

However, with initial interest in D2C brands drying up somewhat, marketplaces launching private labels, and more competitors entering the market, profitability questions arise: 80% of D2C brands in India are unprofitable.

One way to reach profitability is to diversify and sell through other channels.

Some are finding opportunities in quick commerce, with brands like GoZero getting 80% of revenue from q-commerce platforms. Others are opening offline stores, like Zudio.

However, as I mentioned, most retail is still concentrated in kirana stores, and that may very well be the next retail segment to expand into.

Fairdeal.Market built a B2B quick commerce platform for micro-retailers, or kirana stores. The company is currently focusing on the Delhi region and targets between 260,000 and 280,000 retailers.

The main offering is a B2B e-commerce app where buyers can order staples for their kirana stores: soft drinks, cookies and chips, basic cleaning products, and similar everyday items. The overall assortment is ~1,000 SKUs, all of which can be delivered in 20–60 minutes.

Alongside the big FMCG brands, Fairdeal also lists emerging D2C brands. That creates value on both sides: Fairdeal adds something unique to its assortment, while D2C brands gain exposure offline.

So what’s in it for kirana stores?

Two things.

1. Delivery speed reduces the need for working capital. The pitch to retailers is clear: buy only what you need, when you need it, in the quantity you need. And get it in under an hour. That shrinks the amount of cash locked in inventory; in some cases, it means just a single day’s worth of stock needs to be financed.

To illustrate how important that is, let’s look at hypothetical example.

Imagine me and you have a kirana store. Daily we sell 10 packs of chips, each costing $1. On average a distributor visits our store once every 10 days. That would mean that we need to purchase $100 worth of chips to last those 10 days. Since next delivery maybe delayed, demand might be higher, and other factors, our hypothetical store has safety stock — additional $20 in chips.

Average inventory is (100/2)+201, or 70 packs ($70)

Now suppose we switch to Fairdeal.Market. We know they can deliver in an hour, but we prefer to order once a day, keeping just one pack as buffer. Average inventory becomes (10/2)+1 = 6 packs, or $6. That’s a 91.4% reduction in working capital. For just one SKU.

2. Emerging brands offer higher margins. This isn’t as central but it still matters. The app even has a “High Margin” button: if you click it, you land on a page with deals on D2C brands that offer better retailer markups.

That means kiranas can stock products that stand out from competitors and improve their economics at the same time.

That’s pretty much it. The product is very easy to understand, but that’s what makes it compelling. The value for store owners is palpable and easy to unlock.

Rather than trying to capture market share in every major city, Fairdeal has stayed focused on Delhi. Even there, it isn’t serving the whole region at once; it expands sub-region by sub-region, leaning on its flywheel.This deliberate and gradual rollout has enabled Fairdeal to already be profitable on a unit-economics basis.

So what is Fairdeal’s flywheel?

The company is heavily invested in data, believing it is the key to success. With each new seller onboarded, it get more daily orders and gathers more information on assortment and pricing, which helps it understand what sells best in each neighborhood. That allows Fairdeal to make highly specific decisions: recommend cheese-flavored Lays in one sub-region, paprika in another. It can also see which D2C players are gaining traction.

By being implicitly offered the best assortment, i.e. items with the highest margins or fastest sell-through, kirana stores raise their own margins and turnover. That increases their loyalty to Fairdeal, which in turn raises their lifetime value. As capacity to expand grows, Fairdeal can deploy more field agents to onboard more kiranas, reinforcing the flywheel.

One more thing to note is how Fairdeal runs this without relying on large corporate partners. It uses independent contractors to sell the product, pack orders, and deliver them to stores. So the whole infrastructure is being developed internally, which takes more time to scale, but allows for better control and predictability.

At its core, Fairdeal acts like a wholesaler: it buys goods from distributors or producers at X and sells them to kirana stores at X+%.

Quick commerce is notoriously a very tough space to become profitable. And becoming profitable just a couple of years after founding is commendable. However, continued scaling will require more and more capital, especially when entering new cities. There are some scale economies, but you still need new dark stores to keep the 20-minute delivery promise; you still need new order pickers, riders, etc.

If kirana density falls in Delhi’s sub-regions, or other cities don’t offer the same density, reaching true profitability may be hard. The density question is even more prominent with kirana store closures. If the net number of kirana stores continues to fall, that would harm the business even more.

Outside of the economics question, I also wonder whether traditional quick-commerce players can enter Fairdeal’s market. They obviously have a very different model. But what if there are pockets of quick commerce where they can’t achieve any form of profitability and need another set of consumers just to unload stock? I think it’s unlikely, but still something to think about.

The value + frequency equation builds loyalty and strengthens the flywheel. If the model works in Delhi, there’s no reason for it not to work in other densely populated cities. There’s no reason for kirana stores not to onboard; there’s no reason for D2C brands not to use an additional distribution channel.

As demand grows from both sides, Fairdeal’s brand becomes stronger, which makes it easier to acquire both supply (D2C) and demand (kirana stores).

It can then venture into an extremely profitable business, an advertising product for D2C brands, as well as a very capital-generative business, which is financing kirana stores.

Maybe I should look into it more, but I feel like there aren’t that many businesses targeting kirana stores. While it’s a tough market with kiranas not having much supplemental capital, not every consumer market has 13 million potential customers—let alone a business market.

1: Because we’re looking at how much cash is tied up in inventory on average over the cycle, i.e., $120 at the start and $20 at day 10, so the midpoint is $70