Unlocking the B2B e-commerce potential

Since the last decade, all the hysteria has been around B2C e-commerce and specifically the marketplace model. The world is going gaga around predicting whether the B2C model is a boom or a bust. But in the midst of these stories, B2B e-commerce is flourishing in a sensible and scalable manner, with most B2B players achieving break even.

B2B e-commerce is critically important for an economy like India, where major businesses are MSMEs which are spread across different parts of India. Hence it becomes really imperative to leverage technology to connect individual businesses to expand business efficiently. In this context, B2B online commerce has been present since the mid 1990s, fighting off the lack of technological penetration and business averseness to online adoption during the initial years to developing infrastructure to handle vendors from remote corners of India.

These companies have created a strong infrastructure in all these years but have not been aggressive in scaling their business as compared to the B2C counterparts. Indian B2B online transaction today account for only 2% of the total B2B transaction which is quite less in comparison to the 10% globally. This shows that the lack of penetration and adoption of online platform as a mode of doing business to business transactions

World is slowly evolving to become a single large economy due to globalization, and B2B transaction are at the heart of this transition. The global B2B transactions online amounts to $5 Trillion which is far ahead of the B2C transactions. With manufacturing friendly policies like Make In India, the government is encouraging the MSMEs to play a big part in the economical development and B2B online platform will aid manufacturers sell their product across the globe

Food for Thought:

By 2020, B2B worldwide online transaction will be $6.7 Trillion while B2C online transaction will $3.2 Trillion

Indian companies manages B2B GMV from $300 Billion in 2015 (Quite higher in comparison to B2C at $16 Billion) which will increase to $700 Billion by 2020

Signs of Evolution of online B2B business:

1. A Global Business Model: B2B businesses have become highly scalable due to an option for worldwide B2B trading. Any platform which is able to provide efficient logistics and payment system can scale up to become a multinational company which aids in worldwide transactions such as Alibaba
2. Meeting Consumer Expectation and providing integrated solutions : B2B customers need to focus more on CRM more then ever. With the B2C model bring disruptions in the market, the expectation of customers to receive customized service has grown exponentially. Today consumers are expecting a complete integrated system consisting of integration with financing, accounting, order management systems (OMS), or enterprise resource planning (ERP) system which can help manage the growing number of transactions
3. Higher conversion rate and average order value: User interface and customer interaction on online platform plays an important part in the online B2B business because of the higher conversion rate(10% vs 3% in B2C) along with a higher average order of around $400, signifies each customer is very important
4. Robust Payment options: The success of the online B2C industry can be attributed to the efficient payment option like cash on delivery. These help to boost consumer confidence help modify consumer buying patterns. B2B payment system is more complex than B2C. International transactions and high amount transactions require safe transactions with minimum interchange rates. P notes are becoming central mode of B2B transactions. But an integrated solution encompassing paymant, interchange rates, taxes and credit line can help a long way for simplified B2B transactions
5. Logistics and Infrastructure Support: Major B2B scaling is in the form of enhancing the logistics and infrastructure support. MSMEs in India are spread across India, and it is very important for B2B platforms to reach all vendors to build credibility and trust
6. Creating a separate National and International Strategy: Every market is different and customers in different countries have different requirement. Hence an "one fits all" kind of strategy can be used by a B2B platform which is enabling multi country transactions

Thus the Indian online B2B market looks very lucrative with the next way of innovative startups targeting this industry. The implementation of GST and Make in India is surely going to aid in simplified B2B transactions in India.