A slew of new startups in India has industry experts wondering whether B2B eCommerce is ready to take off on the same path taken by traditional retail eCommerce.
According to reports, several new businesses are fueling India’s newfound B2B online shopping hype. BazarA2Z, StoreRoom.in and Industrybuying.com are just some of the emerging players in the market, which has already seen significant attention from Walmart through its BestPrice.in invoice procurement service, as well as IndiaMart.
“Industry products in India are not catalogued in one place and are very fragmented,” Industrybuying.com co-founder Rahul Gupta told the Economic Times of India. “You would have to contact 50 vendors to negotiate to buy each product. So building all this information on one Internet platform would be of huge value.”
While the emergence of these new startups has increased optimism among the industry, reports note that there are significant barriers to entry into the B2B eCommerce industry. Margins can be smaller than B2C online commerce, and marketplace platforms must establish strong relationships with suppliers, buyers and exporters to ensure proper item delivery. “In India, purchasing of local distributors and wholesales is archaic and unorganized, with high information asymmetry,” said SAIF Partners principal Mukul Singhal. SAIF recently made a significant investment in Industrybuying.com.
These challenges are strengthened, reports said, by the existence of strict taxes on interstate transactions. Those rules, however, are slated to fall at the beginning of 2016, when new tax policies come into effect that blends all of India into a single market. It is then, according to BazarA2Z founder Amit Chatterjee, that “B2B eCommerce will flourish.”
Singhal agreed, telling reporters that the industry is ready for a growth spurt. “There is a fair amount of inefficiency in the ecosystem and not a lot of innovation has happened, so it is ripe for tech-based platforms and models to make big business,” he said.
Until then, many B2B eCommerce platforms are focusing on their region and on a single vertical category of inventory. Profits are modest for these platforms, but according to Walmart, the nation’s B2B eCommerce sector will likely be worth $700 billion by 2020, far beyond its current $300 billion valuation.