With huge investments from global players, India is expected to be the next battleground in the B2B ecommerce sector.
The Indian economy finds itself at an interesting stage right now due to several policy changes being implemented. India’s GDP is expected to rebound to 8.2 percent in 2018-19, and a major role will be played by the retail market.
While the overall retail market contributes 24 percent of GDP with $672 billion in value, it is expected to reach $1 trillion by 2020. However, India is largely an unorganised retail market, and this sector contributes 92 percent to the total retail sector in India. The contribution of ecommerce to the overall retail market is less than 4 percent, and this share is expected to increase by 12 percent by 2026.
Recent disruptions in the telecom sector have given a huge push to the Digital India initiative, thereby increasing internet users to 500 million by January 2018. This is a steep rise from the earlier figure of 375 million in October 2015 and it represents a cumulative growth of more than 10 percent Y-o-Y.
By 2020, the Indian ecommerce market is expected to reach $120 billion, growing at an annual rate of 50 percent. This promises major repercussions for the Indian market because globally as well, we are seeing B2B ecommerce almost doubling in size vis-à-vis the B2C ecommerce market and India is no exception to this. As the country is backed up by huge investments from global players, India is expected to be the next battleground in the domain.
Some of the factors, which will differentiate B2C from B2B ecommerce in the near future are:
Impulsive purchases vs rational buying
- Pre-payments vs credit payments
- Lower transaction values of items vs higher value transactions
- Single decision makers vs multiple decision makers
- Single delivery vs multiple deliveries over a fixed period
- Single price vs auction price/derivative prices
Some of the major drivers propelling B2B ecommerce 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.
Categories, which will drive B2B segment the most are consumer durables, mobile accessories, apparels, home furnishings and healthcare. Construction and industrial supplies, which fall into a niche category, are also expected to achieve exponential growth in upcoming years due to the increased contribution of this segment to overall GDP. By 2020-21, India will be the world’s largest construction and infrastructure market with a market size of $600 billion. It will also be the second largest employment creator after agriculture.
Currently, India has 42.5 million SMEs/MMEs which have 95 percent industrial units, employ 106 million people, 40 percent of India’s workforce and are potentially ready to disrupt the market with increased sales and marketing efforts backed up by logistics and technology solutions.
According to research from digital commerce 360, 80 percent of manufactures will increase spending on their B2B e-commerce operations and 38 percent will increase spending by 25 percent or more. This promises plenty for the B2B ecommerce space and its most active players.
Digitisation 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 stickiness and growth in the space. Adoption will not be imminent, but since the whole supply chain is technology driven, Over the next three-five years, digital app platforms are going to seamlessly manage market inventory in this segment. They currently use secondary and tertiary supply chain digitisation in the FMCG segment, but this will soon change.
Technology is helping manufacturers by introducing products into the market within a short span of time, compared to traditional markets in the past.
Secondly, high-quality no-name brands are becoming brands overnight and challenging the status quo and demanding market share and customer recall.
Demand generation is now changing and the cycles of consumption are shorter; so inventory needed by sellers is reducing, just in time manufacturing is also on the rise because the cost of logistics is going down.
All this implies that logistics continues to be a driving factor for pricing. Lastly, credit leveraging will continue to drive volume for the market, even as the face of B2B e-commerce as we know it undergoes a major transformation.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)