Redefining B2B e-commerce for a market boom

Swati Gupta wakes up at six every morning, like millions of others. She drives to her office in South Delhi’s Ghitorni at 8.45 am, like many others. She then talks shop with industrial product dealers across the country, like no other. Gupta is co-founder of industrybuying, an online platform and entrant into the $300 billion business-to-business (B2B) market, which could grow to $700 bn by 2020, estimates suggest.

The e-commerce part of the business, however, is nascent. Analysts state the B2B e-commerce market would not exceed $1-1.5 bn. And, is primarily driven by companies dealing in industrial goods. Mjunction, a 50:50 partnership between Tata Steel and Steel Authority of India, which sells steel online, is the category leader. The more popular business-to-customer (B2C) e-commerce market, dominated by Flipkart, Snapdeal, Amazon and Paytm, is worth $5-6 bn.

In industrial B2B e-commerce, there's only another significant entity beside Mjunction, called Tolexo. It is backed by IndiaMart, a B2B industrial goods listing firm.

The upstarts

Swati and Rahul Gupta worked in America till a few years ago. The brother-sister duo, on various business trips, saw the explosion of e-commerce in China and the US. Their father had an industrial distribution business in the 1980s and they knew how the sector worked. In 2008, Rahul quit his Wall Street job to take over the family business. In 2012, Swati quit her job and returned to India, and they started to consider industrybuying.

“B2B e-commerce was wide open in India. We pooled our savings and started industrybuying in July 2013,” said Swati. She spent days before the launch of the website in the walled city’s Chawri Bazaar, convincing dealers to come on board.  

The company follows a curated marketplace model. “The products are selected from a carefully chosen list of vendors. Unlike a Snapdeal, the customer is not buying from one seller. A customer places an order for 70 safety boots. Our algorithm skims through the list of sellers to find the right one and the order is placed,” said Rahul. Eighteen months after the launch, SAIF Partners, a venture capital firm, gave them $2 million.

Around the same time, Dinesh Agarwal, founder and chief executive (CEO) of IndiaMart, decided to start Tolexo. He appointed Brijesh Agarwal, co-founder at IndiaMart, to run the company.

The Guptas, for the first time in almost a year, had a competitor and one who came armed with IndiaMart’s legacy and its 18 million customers. “We have already taken on Tolexo. Step one was to raise enough capital to compete with a well-established company that has been around for many years, which is now done. Step two is to build a world-class team and ecosystem of investors, influencers and alliances,” she explained.

In September came Kalaari Capital and Beenext, a Japanese early-stage fund, with Rs 60 crore. Sumit Jain from Kalaari joined them on the board.  The focus is now on merchant acquisition, hiring and growth. “We plan to reach 10,000 dealers by year-end. The numbers seem less but we are not playing a numbers game. We want a good, strong and nimble product,” said Swati.

The company has already set up fulfilment centres (warehouses) in Delhi, Mumbai, Pune and Bengaluru. Those in Chennai and Ahmedabad will be set up in the next few months. industrybuying is planning a digital marketing strategy to get more vendors on the platform.

The company currently has 1,200 dealers, who list 300,000 products online. The company, claim the Guptas, is growing 30 per cent month-on-month and plans to grow to 10 times its present size by the end of FY16.

Incumbent

Dinesh Agarwal, CEO of IndiaMart, knows everybody in the business. His 19-year-old entity has been built to take on competition. He says he builds his business to evolve to changing trends. And, one trend he saw and took to was e-commerce. In June 2014, Brijesh and he started Tolexo. It was a natural progression from a listing website (IndiaMart) to a transaction one (Tolexo). Agarwal isn’t worried about the upstarts.

“I don’t consider them competition...They will be smart to not consider us competition, either,” said Dinesh, who isn’t excited by the numbers yet. “I don’t even know how to count in billions. I am dealing in crores. Once we reach the billion mark, we will talk about how to capture that and beat competition.”

IndiaMart is valued at Rs 200 crore and Dinesh is sure Tolexo will soon reach that mark organically.  “Even our business model is different when compared to them. We are a true marketplace. We even allow vendors to open their own store, using our back-end,” said Brijesh, co-founder and CEO of Tolexo.  Tolexo currently has 7,000 dealers and a million stock-keeping units. They say the company has grown 100 per cent since July 2014.

Dinesh says he has his eyes peeled on the horizon and dreams of two things — to get online all stores in Chandni Chowk, the popular wholesale shopping destination in Old Delhi, and to harness the power of tier-II and III cities.