Each week, PYMNTS will turn the B2B spotlight on a single nation. This week we take a look at India, whose rapidly growing startup community and a growing B2B presence from some of the world’s largest names (think Amazon and Alibaba) combine for a robust, innovative market. A focus on technology helps create a win for India’s B2B sector, from eCommerce to the Internet of Things.
Amazon, Walmart and Alibaba are just a few of the big names supporting the rapid rise of B2B eCommerce across India. After seeing the success of traditional eCommerce sales, the B2B sector is taking advance of buyers increasing comfort shopping on the Web and committing to eCommerce. A report from Walmart estimates the Indian B2B eCommerce market could be worth $700 billion by 2020.
B2B eCommerce may be playing catch-up to consumer online retail in terms of age, but B2B is proving to be the premier model when it comes to foreign investment in eCommerce. Currently, India allows 100 percent foreign direct investment in B2B eCommerce, but not in B2C. A report from India Opportunity Advisors revealed eCommerce sales could reach $60 billion and generate 700,000 jobs by the end of the decade if foreign direct investment was permitted in both the B2B and B2C sectors. The policy is under pressure as businesses hope to take advantage of one of the fastest growing eCommerce marketplaces in the Asia-Pacific region.
With an eye toward improving transparency, the Indian state of Kerala has recently expanded the range of transactions covered by the e-government procurement system. Located in the southwest region of India, the Kerala state government lowered the threshold for e-procurement to roughly $8,000 from the previous minimum of nearly $4 million. The change will increase the number of departments and organizations able to use the e-procurement system, “increasing transparency and efficiency of the tendering process,” said the director of Kerala State IT Mission, the agency responsible for the system.
Since it launched in 2012, 167 government departments, public sector undertakings and autonomous bodies now use the system. Some 35,072 transactions have been processed. Kerala joins multiple nations across Latin America that now mandate the use of electronic networks for procurement.
Big-name corporations and government agencies all contribute to India’s robust B2B market, but startups are making a name for themselves in the segment, too. Linked to the boom in B2B eCommerce, India’s startup scene is maturing and showcasing its innovations on a global stage. Several new companies have emerged to harness the power of the Internet to close the gap between buyers and sellers, helping to consolidate a very fragmented landscape.
Former head of R&D at Yahoo India, Sharad Sharma, believes India’s startup scene is uniquely positioned to become a bastion of B2B innovation. “The Indian consumer is not the same animal as the western consumer,” Sharma told The Times of India. “And it’s very hard to solve a western consumer problem sitting in India. We are more likely to see large companies emerge on the B2B side.”
New businesses focused on eCommerce may grab the most headlines, but Indian entrepreneurs (and venture capital dollars) are focused on the Internet of Things (IoT) too. From wearables to networked sensors, businesses are taking on every aspect of B2B-related technology. After raising $17 million from investors including Walden Riverwood Ventures and Samsung Catalyst Fund, Ineda Systems low-power system on chips can be used in multiple applications. Covacsis Technologies aims to make creating the smart manufacturing plant of the future easier. Backed by Reliance, Cisco and Blume Ventures, the intelligent plant framework translates the information from the factory floor into actionable KPIs.
Sharma sees a potential dark side to the incredible interest in startups—inflated valuations. Going from possibly happening to widely accepted fact, he believes the exaggerated values can have two outcomes. “If it is a soft landing, there might not be many victims, but if it is an earthquake, there will be many victims. […] People will shy away from investing in India.”