A critical analysis of B2B E-commerce companies trying to be a marketplace for SMEs & Manufacturing Industries.Surya Prakash
In a series of articles we were discussing about the companies & startups which are here trying to help SMEs, the rest you can find on CoreLogs. After discussing about Power2SME & Bizongo, we now move on to the few online B2B Marketplaces which are selling products directly to the SMEs.
Two major players in this online B2B E commerce segment for SMEs & manufacturing industries are Tolexo & IndustryBuying. Apart from these two, there are multiple other small players who are trying to get a segment of the market. SME Shop, BazarA2Z etc. are the examples. In B2B E commerce segment, The focus is on bulk sale unlike the B2C segment where you buy one single item and it gets delivered. What attracts startups to this B2B space is the forecast that by 2020, the market size in India would be about $ 700 Billion. Plus In B2B segment, the sales are repetitive and in bulk quantity. so there is much more dependency and stickiness in B2B models. Is this true or just a mirage due to incomplete analysis of this segment. Well, only time will tell.
The kind of Business model, Tolexo & IndustryBuying(IB) is following, they have sellers & manufacturers registered with them as SKUs. So, Tolexo or IB has listed products of these suppliers on its website from where you can directly place orders. Taking a closer look, although they say that they are handling bulk purchase in B2B segment, they actually look like companies selling industrial products (not the household items :) even in small quantities. So basically, they are trying to be the connecting link between buyers & sellers. Once the order is placed, the hassle of packaging and transportation including the last mile delivery is taken care by them (Tolexo & IB) only and the buyers and the sellers do not have to bother much about it. The transaction of money is done online. Normally any purchase above a few thousands of rupees ensures free delivery in both the startups. Apart from that, these two startups are also providing much discounts over products just to capture more market and get ahead in competition as both have deep pockets thanks to investors’ money.
IndustryBuying has been founded by Swati Gupta & Rahul Gupta who are siblings. Both of them have been to prestigious colleges and have much work experience. Also they come from a family which has been involved in transportation business for industrial goods. On the other hand, Tolexo has been founded by the founders of IndiaMart & Inkfruit. It is being backed by IndiaMart which has over 1.7 Million SMEs & suppliers registered. IndiaMart, as most of you know is the biggest player in SME space and is a common name among SMEs & suppliers. So both these startups have certain advantages but Tolexo is far above IndustryBuying when you talk about advantages as it has 1.7 Million SMEs and their internet presence under its belts. So are the projections. for FY 2016–17, Tolexo has set the sales target to $ 1 Billion and getting SMEs as supplier is not a big deal for them nor is burning cash to get this much of sales.
Now, from the point of view of an SME, both these online B2B Ecommerce companies sell industrial goods like power tools, safety equipment, test & measurement items, other industry supply items etc. While IndiaMart tried to acquire IndustryBuying, but could not succeed, both these player although right now try not to come in each other’s way are actually fighting for the same space. So, whatever happens to them, SMEs are going to reap the benefits by buying on these platforms as long as they are providing discounts & free delivery just to compete with each other. When that ends, SMEs have their own ways of procuring materials effectively at low cost and they can get back to that setup making life difficult for all these B2B e-commerce startups.
Also, as the FDI is 100% in B2B e-commerce, two international giants namely Alibaba & Amazon are also trying to get into this space and that would be a big problem for existing companies.
Talking about the reviews of Tolexo & IndustryBuying, they are not very promising. Customers face many problems like late delivery, fake products, low quality, deliveries cancelled at the last time due to unavailability, no refund and many more. Things are not all bad. There are many happy customers who are reaping the benefits of discounts and on time delivery. They have become a good way to procure power tools, hand tools, and other equipment. The big thing here is ensuring quality of products being sold as the suppliers are local manufacturers & sellers unlike in B2C segment where the products are from trusted brands. Once they develop traction and dependency, the business is gonna go upwards creating a good platform for SMEs to purchase products without any hassle.
So, the battle has only started and we have to see these companies go a long way. It is also not very clear whether multiple B2B E-commerce companies can coexist in the same segment selling same things. Even if the battle goes on like the one between Amazon & Flipkart, the question is for how long and to what end.
The case with SMEs is different fromt with normal customers (in B2C). The SME owners go a long way to get the better deal and save even a little money for all they know is that money is earned that way only. So they will use your website to buy till it is providing better deal (as you are burning investors’ cash) and won’t hesitate a bit to get back to offline business mode (when you have burnt all cash) making the market much volatile. They won’t accept a middle man for long if it's not profitable for them.
Right now we cannot tell who will get ahead in this competition. But the bigger question is what will the winner or all the competitors do with the captured market (considering the volatility).