Ecommerce in India currently contributes a miniscule four percent to its overall retail market. And yet, these are exciting times, if one were to go by what experts are suggesting in terms of the B2B markets growing to over $60 billion over the next four to five years from a measly $1.7 billion estimated by end of fiscal 2019. This estimate is contained in a report released by advisory firm Redseer which had earlier claimed that the B2B digital services are growing at a stronger pace of about 39% CAGR, driven by the rise of over 7000 digital start-ups in the country.
The New B2B wave
In its new report, ‘Unlocking The Indian EB2B Retail Opportunity’, Redseer says, the mammoth growth opportunity is expected to come from the new age eB2B retail business models as adopted by companies such as Udaan, ShopX, Moglix, and Jumbotail, and many more, who are trying to resolve traditional retail value chain challenges through technology led innovation.
The Indian retail sector that contributes 24% of GDP largely remained unorganized, leading to multiple issues like limited product availability, quality issues and longer timelines for delivery, the new age eB2B companies are filling these and many more gaps by addressing their pain points.
Many of them are connecting brands and manufacturers to different buyers and sellers through their technology platforms. Some of these eB2B firms are also trying innovation around B2B2C, by enabling consumers place order through their app, but fulfillment happening through local retailers, thereby adding newer demand avenues for last mile retailers.
Read more: 5 Game Changing Technologies In E-Commerce
Setting the trend
Most of the successful eB2B players have worked around their own sets of strengths. While some have a better product selection, others offer better competitive pricing and trade schemes. Logistics and reach is something most of the players are working on and are improving, said the report.
One of the youngest and fastest growing unicorns in the country, Udaan, has positioned its revenue model around charging on add-on services such as credit and advertising, keeping the core service (product portfolio and logistics) cost low.
Likewise, ShopX has developed a unique just in time inventory (JIT) management system that boosts efficiency and reduces wastage of goods received. The company is driven by solid technology and knowhow of the retail space and has created a B2B2C model which is enabled via its tech-based solution. According to a senior official, retailers working with ShopX are now selling offline as well as online and are becoming future ready.
Another player trying to make a difference is Jumbotail, which has been working on transforming kirana shops into convenience shops. Thousands of kirana store owners rely on its robust in-house supply chain and logistics for procuring staples and FMCG.
It provides tech driven solutions which effectively is “Retail as a Service” platform that helps sellers with everything starting from point of sale solution to inventory management systems to help them modernize their stores. eB2B firms such as BigBasket have developed analytical tools that ensure automatic inventory replenishment at retailers’ end.
Farm-to-fork model which is a factor in running a successful fresh produce business is being perfected by players such as Ninjacart who directly procure from farmers. Few of the largest logistics networks and delivery fleets are owned by companies such as Amazon Business, BigBasket and Udaan.
Filling the gaps in the supply chain has also helped in coming up with varied revenue models. Some companies charge commissions on every transaction, by connecting seller and buyer on the B2B retail platform. Companies such as Udaan and ShopX for example enable brands to sell directly to buyers and run highly targeted campaigns, says Redseer.
The Right Time
Ecommerce pundits believe, the timing is right to venture into the eB2B space and the biggest fillip is the allowance of 100% FDI. This has opened a floodgate of opportunities for the sector. FDI norms in the recent times have been inviting more international investments.
Between 2016 and 2019, around $1.1 billion in investments have been made in eB2B space in India, indicating that eB2B sector is growing at a much higher speed than the eB2C sector. Investments that have gone into B2B space have been much better utilized vis-à-vis the eB2C space that has seen big dollar figure investments being made over the years, said the report.
The GST regime has triggered a transformation in the manufacturing sector like never before. The migration from a multi-layered indirect taxation system to a unified indirect taxation system is fueling India’s manufacturing sector. In the latest Ease-of-Doing-Business rankings, India has made the highest jump of 30 spots with a year’s time bringing the nation to the 100th position among 190 countries.
Other major drivers propelling eB2B growth in India are the increased usage of mobile platforms which are providing app-based solutions for customers’ problems, development of Artificial Intelligence and Machine Learning algorithms to identify buyer behavior and segmentation of categories, and lastly, social media marketing and analytics which are driving user traffic and increasing user penetration across different market segments.
But Hurdles Remain…
Despite the optimism, the buyers and sellers in the B2B marketplace face continue to face challenges in the retail value chain, one such being around credit and logistics coverage. The Redseer research shows that smaller players in this sector operate on very thin margins and have limited scope for sustainability, forget investing on logistics. Besides, buyers and sellers are often caught up in long drawn verification processes for uploading and listing on eB2B platforms. Moreover, barriers to entering the eB2B are high, given that players have to develop strong business and logistical connections with exporters, businesses and banks to ensure smooth delivery.
Trust and skepticism too continue to be a major problem. In an interview published in the Economic Times, Rahul Garg, Founder of Moglix, currently serves B2B customers in the automotive, metals and mining sectors, said, India’s manufacturing sector has immense potential but its contribution remains very less. Quoting a report by consultancy PwC, he reasoned, “80% supply chain of manufacturing companies are still running offline and indirect purchase across India is largely unorganized.”
He added, “In the next few years, eB2B market is expected to mature – with manufacturing companies adopting online mode of purchase. “The B2B model will transform India into a connected economy and attract investment in electronics manufacturing while creating millions of jobs.”
The Recipe for Success
The Redseer research claims that a higher level of buyer and seller engagement for eB2B model to be successful. “Buyer’ engagement is critically important in this market to enhance CLV (Customer Lifetime Value). It can be increased through acting as a one stop shop for all the Buyer needs and addressing the key pain points. Likewise, strong relationship with sellers (including brands) could open up new monetization streams, and ability to extract better margins. It can be achieved by offering a mix of services such as new product launches, data insights, in-store marketing, etc.,” the report said.
Viresh Oberoi, former Managing Director and Chief Executive Officer of mJunction services limited (a JV between SAIL and Tata Steel) told CXOToday, “What leads to a successful B2B entrepreneurship is an understanding of strategic goals, customizing your products accordingly and ensure an appropriate proposition of these products to each segment.”
Secondly, Digitization in the supply chain ecosystem, especially with regard to traders, wholesalers, dealers, retailers and consumers using apps and other platform-driven methods hold the key to growth in the space. They currently use secondary and tertiary supply chain digitization in the FMCG segment, but this will soon change. As Redseer research noted, the supply chain management (SCM) technology platform should be able to integrate with all partners across the supply chain, to keep tight quality control, inventory management and delivery experience. In addition, the SCM capabilities should be scalable enough to support category expansion.
Read more: B2B E-Commerce: The Big Supply Chain Game
A Deloitte study notes that constant innovation on monetization levers such as in app advertisements, tie-ups with financial services firms and integration with other channels will help these players succeed in the market. Other innovative strategies include optimizing store space and boosting their omni-channel retail experience through technology. (Read the full Deloitte report here)
Researchers also see a direct and strong correlation between growth of eB2C and expansion of eB2B in the country. B2B ecommerce has been and is going to further benefit from the infrastructure, digital ecosystem and digital maturity which eB2C growth will enable. This is the same phenomenon that struck China, UK and US among other mature markets.
Oberoi said, “In this context, it is important to encourage dialogue with your customers – listen and act and measure and monitor your B2B model and use it strategically alongside your B2C business model to achieve optimum gain.”
While the new wave B2B players are getting it right with their technology prowess, they can further capitalize on the increasing influence of the eB2C space for further gain. Albeit, slow and steady wins the race!