Online marketplaces transforming the future of B2B business

Online E-B2B marketplace platforms in India are growing at a rapid pace, as they enable cheaper procurement, faster deliveries, higher fill rates, and consistency in product quality. While e-B2B platforms in the country operate in fewer categories or verticals, multi-category e-B2B platforms operate in many product categories. As a result, their market share is expanding, and so is their criticality to overall expansion of the Indian B2B space.

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Sudden urgencies and demand shortages that emerged during the pandemic, followed by a thrust by the government towards digitisation have resulted in the rise of E-Business-to-Business (E-B2B) marketplace platforms in India. They have become an integral part of the functioning of retailers, wholesalers, distributors, and neighbourhood kiranas.

By facilitating critical everyday commerce between businesses, B2B e-commerce is progressively bringing a transformation in India’s retail space. Online B2B platforms provide lower prices, easy exposure to customers, logistical expertise and cost optimisation, and have thus proven their merit and utility.

Vasudevan Chinnathambi, Co-founder, Ninjacart, comments in a discussion with IBT, “eB2B has a huge potential with many segments of the trade still not digitised yet. With unorganised retail being a dominant part, eB2B is the way ahead. We have digitised the fresh produce (fruits and vegetables) B2B and similarly many other segments are still open for digitization.”

Understanding B2B e-commerce

Business-to-business (B2B), is a form of transaction between businesses. It may involve a manufacturer and wholesaler, or a wholesaler and a retailer. Such transactions are integral to the supply chain, where one company will purchase raw materials from another to be used in further manufacturing processes. Indian B2B market is twice the size of the B2C (Business-to-Consumer) market.

While affordable internet and Unified Payment Interface (UPI) have accelerated the process of digital adoption, the implementation of GST (Goods and Services Tax) has formalised many small businesses, thereby leading to a rise in B2B e-commerce. Indian B2B trade is recognized as one of the largest and fastest-growing in the world, with a potential unorganised general trade (GT) opportunity of US$ 1.2 trillion by 2030.

According to Mrigank Gutgutia, partner at Redseer, “India’s e-B2B market is projected to grow at a CAGR of 40-45% from US$ 5-6 billion in CY 2022 to US$ 90-100 billion by 2030. Platforms catering to retailers constitute 70-80% of the e-B2B market, while the remaining 20-30% is occupied by platforms catering to wholesalers.”

Higher prices, no credit option, late delivery, and the poor quality of products, are some of the challenges being confronted by the unorganized retail sector. E-B2B platforms have been successful in addressing these to a great extent.

Retailers, brands, and manufacturers, all have realised the e-B2B market’s potential. They have expressed confidence that it will transform their way of doing business, riding on the benefits offered by these platforms.  E-B2B platforms enable cheaper procurement, faster deliveries, higher fill rates, and consistency in product quality.

Many brands are shifting to e-B2B for gaining access to the ‘underserved’ markets. They are either adding to their current distribution network or replacing ineffective traditional distributors. According to a report by Redseer Strategy Consultants, nearly 50% of non-users are willing to shift to eB2B platforms in the coming year.

However, the report also cites challenges that the sector still faces, which include:

• Higher prices: E-B2B trade in India faces the challenge of inflated prices, which can deter buyers and impact their purchasing decisions.

• Lack of transparency: The absence of clear and transparent information regarding pricing, product quality, and terms can hinder trust and confidence in e-B2B transactions.

• Limited credit options: The availability of limited credit facilities or delayed payment terms can restrict buyers ability to make larger purchases or affect their cash flow.

• Restricted brand variety: The e-B2B market may offer a limited range of brands, limiting buyers’ options and potentially impacting their ability to find specific products or cater to diverse customer demands.

• Untimely delivery: Timely delivery of products is crucial for business operations, and any delays or inconsistencies in delivery can disrupt supply chains and impact customer satisfaction.

• Product stockouts: Inadequate inventory management or frequent product stockouts can lead to lost sales opportunities, customer dissatisfaction, and potential disruptions in business operations.

• Difficulty in placing orders: Complicated or inefficient order placement processes can create barriers for buyers, making it challenging for them to complete transactions smoothly and efficiently.
• Subpar product quality: Poor-quality products received through e-B2B channels can result in customer dissatisfaction, returns, and damage to brand reputation, impacting business success.

Emergence of multi-category e-B2B platforms

Most e-B2B platforms in the country operate in fewer categories or verticals, accessing regional and national levels. Multi-category e-B2B platforms offer various product categories including grocery (staples & FMCG), electronics and accessories, fashion, general merchandise and other product categories.

As per the Redseer report, the ‘multi-category approach is effective in optimising supply chain costs as grocery contributes to higher fleet utilisation while discretionary categories enable better economics.’

Multi-category platforms with an inventory-based model get the advantage of leveraging ‘staples’ that enable low-cost distribution and penetration. it increases the frequency of service in an area, which is then followed by development of the distribution chain through other ‘non-staples’ categories. It thus creates the right gross margin to cost structure balance. There are only a few multi-category national platforms like Udaan, IndiaMART, ShopKirana and ElasticRun.

Vertical e-B2B platforms essentially face the challenge of optimising cost structures. Over the past few months, many vertical platforms like Bijnis, Dealshare, ElasticRun, Jumbotail etc. have been struggling in the market. They are said to have shown either limited growth or decline due to challenging unit economics and prevailing macro-economic conditions.

On the other hand, multi-category platforms like Udaan have seen an expansion in their market share. Presently the share of multi-category platforms stands at 55-60% of the retailer-led eB2B market. The adoption of a multi-category approach has not only enabled higher competitiveness but has also facilitated cross-leverage, which in turn results in marked cost efficiencies.

By implementing optimization strategies, the Multi-category platforms are able to optimise costs. Go-to-Market (GTM) cost optimization for multi-category platforms is enabled by leveraging the same tech (used to implement beat plans/route optimization) and customer service across all categories/portfolios, according to Redseer.

A single Feet-on-Street (FoS) resource may be allocated to multiple sub-categories. Moreover, a multi-category, First-Party (1P) model facilitates higher collection efficiency, which is enabled by better ‘underwriting efficacy’ and lower collection costs as the delivery agent also assists in the collection. Cost optimization is also enabled by cross-leveraging the same collection infrastructure across all categories and sub-categories. This makes them best positioned to tackle the US$ 100 billion e-B2B market opportunity by 2030.