India is developing into a hotbed of ecommerce activities. The industry is witnessing a titanic growth in a short span of time, and is in an upward swing. The most common model is the marketplace setup, where a company acts as a mediator to connect sellers and buyers. Most ecommerce companies in India are exploring more roles by providing warehouse and logistics facilities to its sellers.
Business to Business
One of the less commonly known business models is business to business. As the name suggests, a business to business (B2B) transaction is where two businesses carry out commercial activities. A retail transaction is between a business and a customer (B2C), whereas when company A purchases goods from company B for A’s business requirements, it is B2B. One simple example for this is when an apparel manufacturer purchases buttons in bulk from a button manufacturer in order to sew them on the apparel.
“B2B typically relies on its sales function and account management team to establish and strengthen customer/client relationships,” says Brent Walker, VP and chief marketing officer of healthcare marketing consulting firm C2B.
Experts agree that B2B is the next big thing, particularly for India. Ecumen.in, an ecommerce consultancy company based in Ahmedabad, feels that the B2B in Indian ecommerce will hit Rs. 45 lakh crores by 2020.
Ecommerce and B2B
Ecommerce has the potential to aid the growth of B2B in India. A company looking for raw materials can directly deal with another company selling the raw materials through an online marketplace. Doing business online reduces several hassles for both parties involved in the transaction.
Performance of B2B
Ecumen has observed in its report that classifieds will be the big winner in the B2B segment, with a valuation of roughly $ 150 million. Chirag Dagli, Director of ecommerce strategy at Ecumen notes that the international scene also looks good.
He says, “By 2020, global B2B market is expected to reach $6.7 trillion, almost four times from present size. Countries like USA, China, and Japan have the highest share of B2B market as compared to B2C.”
The report makes some rosy predictions. Ecommerce marketplaces could well end up leading the pack in B2B commerce.
The report notes, “If 100% FDI capital is allowed in B2B e-commerce market, it would promote innovation like ERP integration (buyer and supplier), single window buying and service and solution alignment as per the business needs. Also, implementation of GST in 2016 would make India one market and that could help B2B e-commerce flourish.”
Brijesh Agrawal, co-founder of Tolexo, a leading B2B company in India feels, “After US, India is going to be the most important market globally. The opportunity for growth that India offers is tremendous.”
Leading B2B companies in India
Mjunction is the largest player in the field. It is a privately held company, and is a joint venture between Tata Steel and the Steel Authority of India Ltd (SAIL). Founded in 2001, the company has so far carried out transactions worth Rs. 3,50,000 crores.
CEO Viresh Oberoi shares the secret of Mjunction’s phenomenal performance over the years, “We needed to create value. If we were able to create value we would get profit. So we did not offer any service free or at a discount.”
Oberoi also makes a powerful statement with regards to retailing, “E-retailing brings you a lot of attention, but does not bring in the money. It is not to say that we will not get into retailing,” he says, “We are building a strong foundation in B2B before we get into B2C, without spending humungous amounts.”
There are others in the B2B arena. Here again, Amazon has found the pulse of the market. The US based company has launched a business to business platform for merchants. AmazonBusiness was introduced in May 2015 in an invite only model, but towards the end of 2015, Amazon has opened its doors to all businesses in Bangalore and Mangalore. They also have a 30,000 square foot warehouse in Bangalore for AmazonBusiness.
Kaveesh Chawla, General Manager at AmazonBusiness, said, “The number of buying members has increased five times since launch and we have thousands of buyers across Bengaluru and Mangalore.”
Tolexo.com founded by Brijesh Agrawal is a fairly new kid on the block. Started in 2014, the company offers last mile delivery, apart from a payment gateway.
There might be a few hiccups in the growth path, though. Ecumen.com in its report, notes that B2B commerce will require ‘differential marketing’. The report notes, “B2B e-commerce in India has to develop strong business and logistical connections with exporters and businesses to ensure smooth product delivery.”
Brijesh Agrawal points out, “The other important area of focus for us is the supply chain required to distribute the products all across the country. A lot of these sellers are local or city focused so far. Hence, their readiness of process and mindset to sell online and deliver goods is in early stage. This becomes even more difficult with forward logistics network for business goods, which restricts reach, quick and error-free deliveries.”
Tax policies are also a problem says the report, “Interstate taxation is also a big problem wherein SMEs are restricting their online presence due to thinner margins online.”
Technology – a simple solution
Lyn Duncan, CEO of cloudBuy, a UK based e-procurement firm, also feels the same. She says the complicated tax web (in India) puts off most foreign investors who are interested in investing in India. Duncan opines that technology can help ease this problem.
She says, “Technology offers a means of stripping away much of this complexity, performing many of these calculations in the background so that the buyer is presented only with the relevant information to evaluate a purchase. This makes doing business with India much more straightforward.”
To sum up, the full potential of ecommerce is yet to be tapped. Likewise, business to business is a very lucrative opportunity, which has been unable to establish itself due to hurdles. The ecommerce industry can work in tandem with the B2B segment to benefit both businesses. Hopefully, there will be more takers for B2B in the next couple of years.