Sales on online marketplaces in India will jump more than three-fold from $100 billion in 2022 to more than $350 billion in 2027 on the back of macro tailwinds and continued investor support, according to a report by venture capital firm Accel and management consulting company Bain.
The report found that funding for marketplaces, including those in e-commerce, fintech, edtech, and food delivery, fell 68 percent to $4.5 billion in the first 10 months of this year. Meanwhile, e-commerce majors like Amazon and Flipkart, and edtech unicorn Unacademy are pulling back spending on investments in new areas.
The study said that online marketplaces are set to create $400 billion to $500 billion in enterprise value, reach 400 million to 450 million online shoppers, enable more than 15 million MSMEs to grow their businesses online, and create 7 million jobs by 2027.
“Marketplace models like e-commerce, food delivery, and ride-hailing platforms have also provided a major boost to the gig economy by creating more than 3 million jobs,” the report said.
“This has allowed India to cultivate a vibrant and successful marketplace landscape, demonstrated by the sheer breadth of more than 300 funded marketplaces across multiple categories. As of today, around 20 marketplaces have achieved more than $1 billion in GMV (gross merchandise value), and many players have turned profitable,” it added.
With mature e-commerce platforms like Swiggy, Zomato and Flipkart yet to break even, the report highlighted that B2B marketplaces like Infra.Market, Zetwerk and OfBusiness were among the fastest to attain profitability.
“B2C marketplaces end up spending more on customer acquisition costs like discounts and marketing. These spends tend to be lower for B2B – and so they reach profitability faster,” said Anand Daniel, partner at Accel.
Of the cumulative funding of around $30 billion attracted by marketplaces between 2018 and October 2022, B2C e-commerce, B2B e-commerce, and online food delivery were among the most funded segments and accounted for almost 60 percent of total funding.
“From B2C e-commerce marketplaces leading the share of deal volumes in 2018, B2B e-commerce marketplaces emerged as the frontrunner in 2022, with deal volumes growing to 31 percent of the total deals in the year so far. We believe that upstream B2B, fintech, and shipping & logistics are attractive segments from a future growth perspective ”, said Ashutosh Sharma, Associate Partner at Bain & Company, and co-author of the report.
B2C e-commerce marketplaces account for a quarter of the cumulative funding every year since 2018. The report said that, in 2021, funding reached $16 billion (growing four times compared to 2018 funding), more than 135 companies raised capital, and more than 45 companies drew Series C and beyond rounds.
Recently, investor confidence in the marketplace model has been further bolstered by big exits via a slew of initial public offerings (IPOs) such as Nykaa, Zomato, and Policybazaar.
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