Rapid digitalisation drives B2B ecommerce during pandemic

As traditional supply chains that served Indian businesses dried up amid Covid-imposed restrictions, well-capitalised B2B ecommerce players grabbed the market by coming to the aid of raw material-starved businesses. Companies like Bizongo, Udaan, Medikabazaar, Moglix, Ofbusiness and Inframarket are seeing 100-300% growth in order volumes and revenues since April 2020.

These firms are also evincing considerable investment interest from institutional investors at high valuations. In 2021, B2B ecommerce players raised a record $2 billion (about ₹15,000 crore) across 60 rounds, as per data sourced from Tracxn.

“Growth in B2B ecommerce will have an impact on the overall economy; it will reduce inefficiencies and ensure better quality and pricing for everyone present in the value chain,” said Sujeet Kumar, co-founder of Udaan, a unicorn B2B platform with operations across staples, fruits & vegetables, FMCG, electronics and lifestyle merchandise.

According to Bizongo founders Aniket Deb and Sachin Agrawal, traditional supply chains got disrupted when Covid lockdowns were imposed.

“Lack of digital options to manoeuvre supply chains is a big problem; raw materials are often sourced from multiple sets of vendors, fragmented players and even SMEs. Traditional supply chains are replete with adhoc processes… Players like us help companies to streamline their supply chains,” said Deb, CEO of Bizongo.

During the pandemic, access to capital and financing became extremely difficult, offering B2B ecommerce firms newer and bigger opportunities.

“This improved the product margins of these B2B players, making them highly profitable with a high return on equity to boot,” said Pankaj Naik, ED & co-head (digital & technology) of Avendus Capital, which has helped several B2B companies to raise capital.

Bizongo, Moglix, Udaan, OfBusiness, Ninjakart and Zetwerk are amongst companies that have raised significant sums of money from institutional investors this year. Just last week, industrial goods and services procurement platform OfBusiness raised a round of $325 million from a clutch of private equity investors.

“India’s B2B ecommerce market is one of the fastest-growing in the world, and is expected to reach over $1 trillion by 2024,” said John Curtius, a partner at Tiger Global, which has invested in several Indian B2B platforms. “Over the past two years, adopting a digital and automated supply chain ecosystem through platform-driven methods has become key for business growth for manufacturers, traders, dealers, wholesalers, and retailers. Such growing digital adoption by Indian consumers presents a lucrative opportunity for B2B startups,” he added.

However, Curtius is quick to point out that limited digital penetration in far-flung areas and among many MSMEs could pose a challenge to this industry. “Also, a slow post-Covid recovery or another prolonged economic slowdown – akin to the one that plagued the economy pre-Covid – might adversely hamper the sector’s prospects,” he told ET in an email interaction.

Pankaj Makkar, MD, Bertelsmann India Investments, believes that the B2B ecommerce market in India is 2-3 times larger than the business-to-consumer (B2C) market. “This will help B2B companies to scale up at a much faster pace,” he said.

“Typically, the margins for B2B ecommerce players should be lower than direct-to-end consumer businesses; but this could be offset with high volumes of repeat orders. Launching private labels is another option these players have… The B2B sector will continue to evince investor interest,” he added.

B2B ecommerce players in India can be divided in 3-4 ways – with a few focusing on multi-product categories (or sectors), while many specialising in one or two sectors. The likes of Udaan or Bizongo serve several sectors; but Infra.market (building & construction materials supplier), Medikabazaar (medical/healthcare goods supplier), Moglix (industrial products) or Zetwerk (manufacturing & heavy engineering) cater to narrower segments.

“The opportunity is huge, even if your business is limited to a sector or a sub-sector,” said Vivek Tiwari, founder-CEO of Medikabazaar. “We are currently managing the entire supply chain of several large hospital chains across the country. Our clients also include small nursing homes, standalone hospitals and dispensaries. We have started getting customers from smaller cities as well,” he added.

B2B ecommerce operations are different from B2C players such as Amazon or Flipkart. Take the case of Moglix, which sells products across price-ranges—low to very high, often running into lakhs of rupees per unit. The quantity requisitioned may also vary—from a few grams to several tonnes. Their delivery locations are mostly remote—at a manufacturing site or factory.

“While GMV is one metric, customer retention, strength of the supply chain, digital and financing infrastructure are more important when it comes to looking at B2B businesses,” said Rahul Garg, founder-CEO, Moglix. “We see technology penetration getting deeper; in B2B, customers look for full stack solutions—including financing options. One must remember, for every B2C transaction, there are 6-10 B2B transactions happening in the background.”