Business to Business commerce, as the name suggests, is a transaction between two business entities for bulk purchase/sell. This is an age old phenomenon which has recently got its prominence with maturity of the process and evolution of the industry.
Business to Business commerce, as the name suggests, is a transaction between two business entities for bulk purchase/sell. This is an age old phenomenon which has recently got its prominence with maturity of the process and evolution of the industry. With the increased penetration & usage of ICT (Information & Communications Technology), the transaction process has matured and information / geographic arbitrage opportunities have blurred substantially.
This has brought in a lot of attention to B2B e-commerce as the next big thing. According to recent research from Frost & Sullivan, B2B e-commerce market is expected to grow to $ 6.7 trillion in gross merchandise value by 2020. This trend will make the B2B e-commerce market two times bigger than that of the B2C market ($ 3.2 trillion) within that time frame. Interestingly, 75 percent of this gigantic B2B e-commerce market will be contributed by China & US followed by the UK & Japan.
Though globally, B2B e-commerce space has grown exponentially since ICT revolution, India is still been quieter in this domain. A Walmart report has pointed out that India’s B2B e-commerce industry pegged at $350 billion as on date and is expected to grow to $700 billion by 2020. The most notable pioneer in this space so far has been M-Junction (a JV between two steel behemoths, TATA Steel and SAIL), an e-marketplace for steel. Inspired by the success stories of B2B industry in China and other markets, several startups are also catching up with the rapidly growing B2B e-commerce sector. However, there are few fundamental issues that are impeding the growth and need to be plugged in before the market erupts and joins the global bandwagon viz.
- Logistical connectivity and inefficiency
- Interstate tax issues and bureaucracy
- Cross border supply chain and transaction hurdles
- Inherent lack of mindset for online transaction
Given the significance of these issues and the potential scale of the domain, it will be interesting to see how Indian B2B commerce ecosystem evolves in the next few years. India, as an economy, has been busy getting the fundamental building blocks like infrastructure, policy reforms, telephone / internet connectivity etc. right in the last decade or so.
That has given the manufacturing as well as service sector the desired fillip to ride on a robust growth. Now in the next wave, with the basic tenet of growth in place, technology is going to play the role of an equalizer to provide a level playing field for large as well as small & medium enterprises (SMEs). With the government’s focus on “Digital India” and “Ease of Doing Business”, there will be a forced transition in the way economic activities are done in India. The growth of web and mobile apps is also going to drive B2B commerce, especially as a way for companies to boost sales and marketing efforts.
SMEs which traditionally have been averse to the idea of online transaction, usage of B2B e-market places is going to open up a world of opportunities that was always there but never accessed. Technology will allow a large enterprise, looking for raw materials/consumables to deal with another company, not necessarily large, through an online marketplace. And the transaction can be subsequently integrated to the production planning process factoring the delivery schedule to get real time product costing. Today, final product pricing of a manufacturer involves factor of uncertainty emerging out of sourcing issues, timelines, pricing of raw material/consumables, blocked working capital cost and the list goes on.
B2B e-commerce ecosystem in its new evolved version has the potential to address all these uncertainties real time to drive productivity and efficiency. In unorganized sectors like agriculture, cottage industries also, B2B e-commerce platforms can offer moderated and scrutinized list of local specialties like Tea from Darjeeling or Saffron from Kashmir or artifacts from Assam. Even at the basic operation level, standard domestic B2B purchase will involve catalogues, purchase orders, invoices and credit notes that will be run, driven and integrated with the business.
Whether it is domestic or overseas transaction, technology has the ability to integrate multiple functions and administrative machineries in a seamless manner in enhancing the customer experience while aiding to the economic growth. And to sweeten the entire deal, government of India, is on a policy reform overdrive to introduce GST which is expected to promote hassle free trade across state borders. Here also, technology offers a means of stripping away much of this complexity, performing tax/excise/custom duty calculations in the background so that the buyer or the concerned department is presented only with the relevant information to decide on a transaction.
During last decade, while India has been a hot bed for B2C e-commerce players, the next decade is certainly poised for the emergence of Indian B2B e-commerce space. And the good news is that, while there are many global B2B e-commerce players, there is no clear leader in this space so far.
Any bets for India producing The Global B2B E-commerce Leader?