Business-to-business e-commerce may outpace B2C in coming years: Report

At $1.7 bn, eB2B market is fast gaining share of the $700-bn offline B2B retail market

With up-starts like Udaan, ShopX, and NinjaKart, business-to-business (B2B) e-commerce has the potential to surpass the $18-billion business-to-consumer (B2C) e-commerce market in the coming years, shows a new report.

According to ‘Unlocking the Indian eB2B retail opportunity’, a report by consultancy RedSeer, India’s eB2B market, currently at $1.7 billion, is expected to grow at 80 per cent compound annual rate (CAGR) to reach $60 billion by 2025. By comparison, B2C e-commerce market, at $18 billion currently, is growing at 40 per cent CAGR.

The optimism stems from a fairly large opportunity in eB2B. The offline B2B market itself was estimated at $700 billion in 2018-19. And, more than 70 per cent of procurement and distribution between brands and retailers takes place through unorganised channels. India also has about 15 million retailers, 13 million are that mom-and-pop stores often less digitised and without transparent supply channels.

“In an economy that is increasingly getting digital with the cheapest cost of mobile data on the planet, and the highest amount of data consumed per smartphone globally, eB2B has a strong use-case to resolve the traditional B2B retail supply-chain capabilities and enhance the end-consumer experience by addressing the pain points of intermediaries in the traditional B2B and unorganised supply chain,” said Anil Kumar, founder and chief executive, RedSeer.

Investors have also doubled down on eB2B in the recent past, buoyed by sharp growth in Udaan, an initiative of former Flipkart executives connecting retailers and distributors with brands online. It became a billion-dollar company in just 24 months and raised $585 million last month in funding led by Tencent valuing the company at $2.8 billion.

On the other hand, Tiger Global Management pumped $100 million in Ninjacart, creating one of the largest supply chains in the country to deliver fresh farm produce directly to food retailers. Jumbotail, backed by Nexus and Kalaari, also operates in the foods retail space.

Within B2B e-commerce, another segment is represented by Power2SME and Moglix, start-ups focused exclusively on the manufacturing sector. While Power2SME is a marketplace for industrial raw materials like steel and chemicals and is backed IFC, Accel and Kalaari, Moglix is a platform for buying industrial tools like chain saws and boilers.

In all, eB2B start-ups have raised $1.1 billion so far, with the highest funding coming only this year.

Essentially, these start-ups are bringing Flipkart- and Amazon-like experience to B2B trade by offering value-adds like digital cataloguing, online payments and logistics, all seamlessly on one platform. 

In terms of business model, eB2B firms charge a small digital enablement and logistics fee from customers (retailers, in this case). Going forward, players like Udaan plan to experiment with credit as another source of revenue stream.

“Currently, eB2B players have margins between 0 per cent and 4 per cent,” says RedSeer. “We believe that eB2B certainly has the potential to make 7-9 per cent, with room for additional 3-5 per cent through profit streams like marketing and new product launch services.”