B2B enterprises are the flavour of India's emerging business regime

INDIA'S BUSINESS LANDSCAPE

There are several arguments in favour of B2B. First every B2B transaction is at least 2.5 times bigger than a B2C transaction. Moreover the profitability quotient is much higher in B2B owing to higher margins, overall bigger order sizes and relatively low overhead costs. Unlike B2C companies, these companies do not have to shell out precious investor money for their brand building initiatives as promotion is largely by word of mouth and experience. 

Prime Minister Narendra Modi's vision of consolidating the country's international relations' by establishing mutual commercial benefits (with other countries) has translated to unprecedented business opportunities for several sectors of the economy. The B2B e-commerce space is far from being an exception. Infact the very ethos of B2B firms (assisting the procurement, administrative, logistic and allied requirements of multiple business entities) has been intrinsic to the political philosophy of our times. Because pronounced at a very simple and elementary level this philosophy essentially means that as a country we want to pursue economic growth in a spirit of co-operation and complementary partnership.

A close examination of the macro realities of B2B firms and their business models reiterates the fact that these firms are indeed very relevant in the overall context of nation building. Most of the commercial deals that have been inked in the last few years with other countries (particularly the ones that pertain to upgradation of our civic infrastructure) could not have been successfully implemented if the supporting ecosystems were absent. It would not be an exaggeration to say that for enterprises and business ideas to prosper in today's dynamic business scenario a couple of things are critical- one transmission time in procurement of inventory has to be minimal and two the sources from which the inventory is procured should be authentic and benchmarked for quality. B2B firms are the veritable one stop solutions that have been addressing the multifaceted needs of business enterprises.

Also it is important to understand that today business both in India and in the global arena are not operating in silos. They are incorporating interdisciplinary trends to stay competitive and remain relevant to the consumer. And inorder to do this, among other things, they constantly need to reinvent their offerings. Sometimes this entails a quick rejig or fortification of their manufacturing processes. B2B firms often translate to an expansive index of options for procuring the necessary items that would result in a quick and seamless transformation.

B2B firms have been making a yeoman contribution towards upgrading the business environment of small and medium enterprises by assisting their procurement activity. It will not be an exaggeration to say that, these enterprises are the backbone of India's economy and if India has to truly achieve the status of an economic superpower the small and medium enterprise sector need to grow and expand further by global standards. However, these enterprises face a mammoth challenge when it comes to purchasing – Amazon is not an answer for their very niche and precise inventory requirements. Moreover, these firms do not have the resources of a Fortune 500 company with complex software systems and dedicated purchasing teams. This is where perhaps B2B companies like Indiamart are stepping in. The business objective of B2B firms clearly is to build a marketplace that empowers small businesses to find suppliers as easily as their larger counterparts.

Incidentally the superpowers of the world have already understood this business insight which explains the widespread proliferation of B2B firms in US, UK, China and Japan. According to a UN Index on e-commerce readiness, worldwide e-commerce is still dominated by B2B transactions and companies doing business with each other. Incidentally, the global B2B business ecosystem had accounted for $15 trillion in 2013, of which 75 percent was contributed by the US, followed by the UK, Japan and China.

Experts on e-commerce are of the view that B2B online buying trends shall continue to strengthen in the near future as many enterprises and procurement vendors are making mobile versions of their products available. Infact this has already happened to a significant extent. The rate and pace of technology penetration in India is another factor that stands in favour of B2B ecommerce firms. The average supplier in a business chain is conscientious about scale and is fast leveraging/adopting technology to expand the reach of his/her business. Moreover, employees of purchasing companies are increasingly using smart phones and tablets to buy goods anywhere and anytime.

There is a contemporary view in business circles that B2B in India can never command the sheen and luster of B2C. However, there are several arguments in favour of B2B. First every B2B transaction is at least 2.5 times bigger than a B2C transaction. Moreover the profitability quotient is much higher in B2B owing to higher margins, overall bigger order sizes and relatively low overhead costs. Unlike B2C companies, these companies do not have to shell out precious investor money for their brand building initiatives as promotion is largely by word of mouth and experience. In a B2B e-commerce business model, convenience, assortment and easy access to products are the reigning differentiators. Several characteristics of B2C e-commerce like personalization and customization, interactive catalogs, customer reviews and real-time inventory availability have also made their way to B2B portals thereby strengthening the overall forte of B2B e commerce firms. All these factors make B2B companies an attractive proposition for investors. Unlike the B2C e-commerce space (that is largely dominated by college dropouts) the B2B e-commerce space is peopled with experienced veterans, often with a deep understanding of offline B2B industry as well. This translates to another safety net for potential investors. Moreover, unlike B2C, B2B ventures do not face restrictions on foreign direct investment. The government's policy liberalization allowing 100 percent FDI in B2B e-commerce has also given the much needed fillip to this sector.

India's B2B e-commerce market opportunity was approximately valued at $700 billion at the start of 2020 per a Wal-Mart Report.

Some years ago, Indian customers had demonstrated considerable apprehension in terms of transacting on B2B e-commerce firms. Simply put, since the size of the transactions are huge there were trust issues. However, the growth of the internet and e-marketplace has allayed the apprehensions and today India is becoming the most hyper-informed and commoditized B2B marketplace globally. The B2B opportunity is huge and the figure speaks for itself. The total SME market is more than 50 billion, of which 40% are internet addressable. This comprise of 25 million SMEs.

B2B ecommerce organizations in India have tremendous potential but they are still not at the peak of their growth trajectory. In order to be successful they need to address three pertinent issues. In order of priority these are- 1) growing demand for B2C-like B2B ecommerce experiences; 2) increasing channel conflict between direct sales organizations and ecommerce operations and 3) rising demand for scarce B2B ecommerce talent. Although the beginnings have been made in this regard more is desired.

Implementation of GST in 2016 has also lent a fillip (for flourishing) to the B2B e-commerce market.

Enhancing the sourcing landscape for small and medium enterprises so that they can concentrate on their core business goals is still an overarching prerogative of B2B firms. And in this respect, the B2B players of India can emulate lessons from their global counterparts. For instance, some years back US based Kinnek raised $ 10 million from investors to grow the company's marketing and engineering capabilities and fuel its foray and expansion into new industries. Therefore more investment in innovative and real time technologies and better market research on emerging needs of SME's are clearly the need of the hour, for our Indian B2B players to script their next phase of success.

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