B2B e-commerce is silently turning the wheels of the economy

Not Amazon or Flipkart, but B2B e-commerce is silently turning the wheels of the economy

Not Amazon or Flipkart, but B2B e-commerce is silently turning the wheels of the economy

With the economy recovering post the Covid-19 pandemic there has been a significant shift in the way Micro Small and Medium Enterprises (MSMEs) buy, sell and operate. While a lot has been written about the B2C e-commerce boom in India, it is B2B e-commerce that is silently turning the wheels of the economy by facilitating critical everyday commerce between businesses.

Driven by necessity during the pandemic and by the government’s broader push for digitization of commerce, B2B marketplace platforms have been on the rise and are now an integral part of the operations of retailers, wholesalers, distributors, and even your friendly neighborhood kiranas.

While 2022 saw accelerated adoption of end-to-end B2B platforms, trusted networks, alternative credit scores, and easier access to finance, we can expect several new and interesting trends to gain traction in this space in 2023 that will define how B2B e-commerce will develop in the coming years.

Accelerated development of enabling infrastructure

The government has rolled out numerous initiatives to foster a vibrant e-commerce ecosystem in the country. It has put in place a legal framework for enabling e-commerce, including streamlining the licensing process. It has notified consumer protection rules for e-commerce, amended equalization levy rules, and increased the FDI limit in B2B e-commerce to 100% thereby opening the doors for foreign investment in the sector.
The latest Union Budget 2022-23 gave a major push to the sector by giving Data Centres and Energy Storage Systems, infrastructure status. In 2023, we can expect both the government as well as private players including start-ups to accelerate their efforts toward building the right enabling infrastructure for the long-term growth of B2B e-commerce in the country.

Transformation in logistics The government’s warehousing policy with a roadmap for the development of exclusive warehousing zones and Multi-Modal Logistics Parks (MLPs) in public-private partnership (PPP) mode is set to ease transportation and reduce logistics costs in India. These warehousing zones are expected to help significantly cut India’s logistics cost, which is currently 14%-16% of gross domestic product (GDP), compared to 8%-10% of GDP in China and 12%-13% in the US. In addition, the recently announced National Logistics Policy framework also aims to bring a transformative approach to the logistics ecosystem. In contrast, the Unified Logistics Interface Platform (ULIP) will get all digital services related to the transportation sector into a single portal.
With e-commerce being one of the most prominent drivers of Indian warehousing market volumes (the sector’s share in transactions grew from 18% in FY17 to 31% in FY21) and with logistics being a critical growth factor, we can expect these changes to prime the Indian B2B e-commerce market for the next phase of growth.

Innovative, platform-embedded credit solutionsB2B marketplace platforms will play a critical role in driving new and innovative embedded finance solutions to underserved customers. While credit flow to the MSME sector has been improving, nearly 80% of the 63 million+ MSMEs in India still lack access to formal sources of credit. According to an IFC report, the overall credit demand of the MSME sector is $1.1 trillion, of which only 16%, or $168 billion, is financed through formal sources, with the remaining being financed informally through family, friends, and local money lenders.

Innovations such as technology-based invoice financing offered via B2B marketplace platforms will make a huge difference in 2023 and beyond. We have already seen platform-based, transaction-led invoice financing achieve success in the B2C space. Going forward, embedded “pay-later” options targeted toward micro and small enterprises will gain traction. These purchase financing products for small businesses transacting with suppliers, distributors, aggregator platforms, or B2B marketplaces will offer a seamless and hassle-free credit experience. Anchor-led invoice financing models will also see significant uptake as they are particularly suited for the Indian MSME ecosystem and provide even the smallest buyers tied to an anchor-supplier chain, with credit for their regular purchases, through a third-party lender.

The government-promoted e-marketplaces. The government of India is putting its weight behind promoting and facilitating B2B e-commerce to help MSMEs, small exporters, artisans, farmers, etc. come under the ambit of digitization, tap new markets, and grow their businesses. This trend will see increased momentum in 2023.

Since launching the Government e-Marketplace (GeM) in 2016 to facilitate online procurement by various government departments and PSUs, the government launched the Indian Business Portal in 2022 to help SMEs, start-ups, and other small businesses to tap into the overseas market. The National Small Industries Corporation (NSIC) also launched MSME Global Mart to provide a one-stop digital solution to all the business needs of MSMEs and help them become more competitive in the global market.

More such initiatives from the government will give a fillip to the B2B e-commerce sector in the coming year. The emergence of D2C in B2B e-commerceD2C or Direct-to-Consumer models will emerge as an important factor in B2B sales. While this was primarily a domain of B2C brands, there has been a shift with even B2B buyers taking on the expectations of B2C customers in terms of digital-first, personal and connected experiences as they make purchases.
B2B e-commerce players will increasingly leverage the power of data and technology to gain customer insights and create compelling and personalized interactions and experiences for their buyers.

From mining data for insights into individual buyers’ purchase habits and patterns to features like AI-powered live search and product recommendation engines, B2B e-commerce will adopt many of the features that buyers are used to in B2C e-commerce – to create a customized experience for customers.
Omnichannel sales and marketing strategy B2B marketplaces will increasingly adopt an omnichannel strategy for marketing and sales. B2B customers have changed the way they shop in a way that’s mirroring B2C habits and are now using more channels than ever before to interact with suppliers. According to a study by RubyGarage, the average B2B customer now uses 10+ channels including email, supplier websites, mobile apps, and search engines to interact with a company – up from just seven in 2019.

This means B2B e-commerce platforms will need to quickly build the necessary omnichannel capabilities to stay ahead of customer expectations.
Mobile is a massive sales driver enabling customers to buy via their mobile devices is no longer an exception, it’s an expectation. A study by McKinsey shows that the number of customers who prefer placing orders via mobile apps increased by 30% compared to pre-pandemic periods. B2B e-commerce will double down on the mobile commerce experience by creating mobile-first sites and mobile apps and introducing features for faster shopping like one-click checkout.

Overall, the future looks bright and exciting for the B2B e-commerce space in India. Proactive government initiatives in building the enabling infrastructure and transforming logistics, technology-driven innovations in embedded financing and credit, and adopting the best of B2C e-commerce practices to the B2B space will give the sector a well-deserved boost and position it for even faster growth in the coming years.

 

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