B2B e-Commerce market in India will reach USD 2,869.56 billion by 2025

The Indian B2B e-commerce Market was valued at USD 527.48 billion in 2019 and is estimated to reach USD 700 billion by the year 2020.

Its market value is expected to grow at a CAGR of 32.6% within the time horizon of 2020-2025 because of the increasing use of mobile phone platforms, rising investment in B2B commerce, initiative for digitalization, and availability of operational B2B e-commerce websites.

Its market value will reach USD 2869.56 billion by the year 2025.

Definition / Scope
Market Overview
Market Risks
Top Market Opportunities
Market Trends
Industry Challenges
Technology Trends
Pricing Trends
Regulatory Trends
Market Size and Forecast
Market Outlook
Technology Roadmap
Distribution Chain Analysis
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

B2B e-commerce is concerned with the sale of goods and services between the business entities through the online sales portal and supply chain system. Here, the orders of the products are placed through either by telephone, email or through websites by the wholesalers and the manufacturer/business entities process the order.

B2B e-commerce platforms are earning revenue through the facilitation of commerce, charging for logistics services, providing finance & credit, and supplying value-added services (online advertising, analytics, etc.). It has enhanced the effectiveness and efficiency of commercial transactions.

Based on the type of payment methods in B2B e-commerce, it consists of cheque, bank transfers, demand drafts, and third party gateway. As the area of the product selling is considered, the market players have the experience of selling the products outside & inside the country through the online platform in the B2B e-commerce market.

Market Overview

In the context of India, the B2B e-commerce market is almost six times larger than the B2C e-commerce market. The total market size of the Indian B2B e-commerce market is valued at USD 527.48 billion in 2019 and is expected to reach USD 700 billion by the end of the year 2020.

Its market value is expected to grow at a CAGR of 32.6% within the forecasted time horizon of 2020-2025. Its market value will reach USD 2869.56 billion by the year 2025.

As per the area of the product selling is considered, almost 65% of the Indian sellers engaged in the B2B e-commerce market has experience of selling the products inside the country only. The market size of this segment is valued at USD 342.86 billion in the year 2019.

Increased use of mobile platforms, rising investment in B2B commerce, the initiative for digitalization, availability of operational B2B e-commerce websites, increased customization in product order through the self-service system, growth in global penetration of business, and reduction of the inventory cost in B2B e-commerce are the factors driving the growth and development of the Indian B2B e-commerce market.

However, an increasing number of cyber-attacks, low computer literacy, internet shutdown & slow connectivity issues, and difficulties in acceptance towards the digital payment services might restrain the growth and development of the Indian B2B e-commerce Market.

The key market players engaged in this B2B e-commerce market are IndiaMart, Alibaba, TradeIndia, TradeKeyIndia, Udaan, and Ninjacart.

Market Risks

Rising number of Cyberattacks

In the context of India, the number of cyberattacks is in increasing trend. The number of cyberattacks has been increased by almost 37% in the first quarter of the year 2020. Almost 52,820,874 local cyber threats have been detected by the Kaspersky Security Network in the first quarter of 2020, which is increased from 40,700,057 in the year 2019.

The Data Security Council of India has revealed that India is the second most affected country in terms of cyberattacks. Here, almost 53% of all cyberattacks led to financial damage of more than USD 500 thousand and on average, the Indian companies lose almost USD 4 billion annually.

The rising number and extend of cyberattacks might restrain the growth and development of the B2B and other categories of the e-commerce industry in India.

Low computer literacy among the Indian populations

In the context of India, the proportion of people literate about the use and operation of the computer is quite low. It has been estimated that just 6.5% of the people in India are computer literate and knows how to use a computer.

Along with this, the Internet penetration rate is about 10% among Indian populations. Despite the execution of the multiple numbers of the programs for the promotion of the digitalization, computer literacy, and the Internet penetration rate is quite low.

This low level of computer literacy and Internet penetration might create a risk for the growth and development of its market.

Top Market Opportunities

Increased usage of mobile platforms

In the context of India, the number of Internet users is in increasing trend. The number of Internet users has increased from 259.88 million in 2015 to 525.3 million in 2019. The number of internet users is expected to reach 564.5 million by the year 2020 and will reach 666.4 million by the year 2023.

A study conducted among the consumers has found that almost 42% of the study participants use mobile phones for B2B purchases. Along with this, almost 52% of the B2B buyers research the products using their smartphones, as mobile devices are convenient.

The increasing use of mobile platforms for online shopping is creating a significant opportunity for the growth and development of the Indian B2B e-commerce market.

Innovative Digitalization initiatives

The government of India and other digital technology-based organizations are executing multiple numbers of the initial programs for the promotion of the digitalization in India. The government of India has launched Digital India; Make in India, Udaan, Umang, Bharat Interface for Money, Start-up India, Skill India, and others. The government also had enforced GST and demonetization programs.

The introduction of the Goods and Services Tax in the context of India has increased the convenience of the transport of goods between the states and the demonetization has compelled the business entities to operate with the digital payment systems.

Along with this, the launch of the 4G networks by the Reliance has provided stable and fast Internet connections for the consumers and business entities. These types of digitalization programs will drive the growth and development of the Indian B2B e-commerce market.

Increased customization in product order through a self-service system

The B2B e-commerce platform is based on the self-service model, which allows the detailed interaction between product buyers and wholesalers about the product order. Because of the use of the self-service system, the buyer can place the order of the products with more convenience, control, and confidence.

For instance, the buyer can define the size, color, location, and other details of the products for the order, and the manufacturing business entities will receive the complete and accurate order of the products.

The self-service system increases adherence of the selling business entities towards the customized order of the specified wholesalers, which will ultimately create a favorable environment for the growth of the B2B e-commerce market in the context of India.

Market Trends

Increasing investment of the B2B e-commerce

In the context of India, the spending of the product manufacturers in the operation of B2B e-commerce is in increasing trend. Micro, small and medium enterprises have spent almost 1.5 billion on digital services and are expected to increase to USD 10 billion by the end of the year 2023.

According to the study conducted by Digital Commerce 360, almost 80% of the manufacturers are expected to increase their spending on the operation of B2B e-commerce activities.

Along with this, it has been estimated that about 38% of the manufacturers will increase their spending on this e-commerce market by more than 20%. The increasing investment of the product manufacturers on the operation of the B2B e-commerce is driving the growth and development of the Indian B2B e-commerce market.

Availability and use of operational B2B e-commerce websites

In India, most of the companies engaged in B2B commerce have their operational e-commerce website. A survey conducted by Econsultancy on the State of B2B Ecommerce has revealed that almost 82% of the B2B companies have transactional websites for B2B sales in India.

It is quite high in comparison to the average status of the other Southeast Asian countries as almost 69% of the B2B companies have B2B websites. Along with this, its value is also high in comparison to Australia and New Zealand as almost 68% of the B2B sales companies have a transactional website in Australia & New Zealand.

The availability and use of the operational websites for B2B sales are driving the growth and development of the B2B e-commerce market in India.

Growth in global business penetration

The use of online platforms as the marketplace for the transactions between two business entities is widening the area for the sale of the products beyond the specified geographical territories.

For instance, Alibaba, a China-based world’s largest B2B platform and company, is attracting millions of users worldwide including India. The introduction of the online marketplace in B2B commerce is increasing the penetration of localized products throughout the world, which is driving the growth and development of the Indian B2B e-commerce Market.

Reduction in Inventory cost

The procurement of the products through the online platform system is quite cheaper in comparison to the offline procurement system. It has been estimated that the inventory costs have been reduced by almost 40% for small and medium enterprises in comparison to the conventional method of business-to-business transactions.

Because of this, the sourcing of the products is about 5% to 7% cheaper than open markets. The reduction in the cost of the inventory and sourcing of the product is creating a favorable environment for the growth and development of the Indian B2B e-commerce market.

Difficulty in acceptance towards the digital services

In the context of India, the merchants in the rural areas are unwilling and unable to accept digital transactions. Although the government of India has implemented the cashless India initiatives, still about 72% of the consumer transaction in India takes place through cash. The government does not approve some of the digital payment applications such as Facebook’s WhatsApp payment service.

Along with this, the CEO of the digital business at Hitachi Payment Services has said that digital payment isn’t accepted in almost 70% -80% places where he needs the money. This type of difficulty in the use and acceptance of the digital payment services might restrain the growth and development of the Indian B2B e-commerce market.

Delay in products shipments

The existing pandemic outbreak of the COVID-19 disease has influenced the B2B e-commerce market. Although it has increased the online order of the products, it has caused a delay in the shipments of the ordered products.

According to the convey data, the average time of the shipment of the large format products (weight more than 150 lbs. and length more than 48 inches) has been doubled since the initial week of March 2020.

The average time has been increased from 32 hours to 68 hours. It might be due to the social distancing protocols enforced in the manufacturing business entities.

Although the modality of the lockdown has been changed and manufacturing business entities are opening with safe and secure measures, the delay in the shipments is still expected to continue. This type of delay in the product delivery from the manufacturers might restrain the growth and development of the Indian B2B e-commerce market.

Industry Challenges

Advanced pricing system

In the business-to-business structure, the price of the products are maintained and displayed in the web portal before the transactions. The B2B companies can sell the products in bulk quantities for large vendors.

While doing so, the market platform engaged in the B2B e-commerce market should maintain the dedicated prices for the groups of customers based on the quantity of the products ordered. So, it is quite challenging for the B2B e-commerce market platforms to maintain the flexible pricing module to adjust all types of customers.

Increasing internet shutdowns and connectivity issues

In the context of India, the number of internet shutdowns is in increasing trend. Within two years, the number of internet shutdowns has been increased from 30 times to 135 times.

The longest shutdowns of the internet services have occurred in Jammu and Kashmir, which is more than 136 days in the year 2019. Along with this, less than one-fourth of the towers are fiber-connected in India and it has been ranked at a level of 126 in terms of fixed-broadband subscriptions per individual.

The increasing shutdown of the internet is creating difficulties for the use of the online retailing system. It is quite challenging for the market players to cope with the shutdown and slow internet connectivity issues.

Technology Trends

Advancement in technology is creating a favorable environment for the growth and development of the Indian B2B e-commerce market. The major technological changes occurring in this market are artificial learning, Internet of things, personalization, digitalized payment solutions, blockchain, and virtual reality.

Here, artificial intelligence and the Internet of Things were the most exciting technological trends in the Indian B2B e-commerce market. Some of the key technological trends in the B2B e-commerce market are discussed as follows:

Artificial Intelligence and Machine learning algorithms: This technology assists the business entities to identify the behavior of buyers and segmentation of categories. It also facilitates the categorization of the products for social media marketing and analytics.

Augmented and virtual reality: This technology is used to enhance the visualization of the products and enable us to feel the virtual visual in reality.

Chatbots and virtual assistants: it is used to improve the experience of the customers in the online retailing by providing details about the order status and delivery details.

Internet of things: It is an integrated system consisting of mechanical, digital, and computing machines that allows the transfer of the data over a network without a human to human and human to computer interaction. It assists to recognize the consumer behavior related to the digital shopping systems.

Pricing Trends

The price of the products in the B2B e-commerce transactions depends upon the of this market depends upon the type of product, type of online retailing platform, brand name, and quantity of products.

The B2B e-commerce platforms have an advanced pricing system in which the price of the products is displayed and maintained before the order of the product. The price of the same product might differ by different B2B e-commerce platforms by the quantity of product, and negotiation strategies of the business entities.

Regulatory Trends

In the context of India, the government has developed policies and initiatives related to the B2B e-commerce market. In the year 2018, the government of India has developed the FDI policy, which allows up to 100% of Foreign Direct Investment in the Indian market for B2B e-commerce merchants.

The interested foreign business owners can establish their B2B business on the Indian grounds without paying for the investment cost and are also allowed to invest in this sector without prior permission from the government.

According to this policy, the manufacturer is allowed to sell manufactured products through e-commerce in India. Along with this, a single-brand retail trading company operating through mortar stores is also allowed to conduct retail trading through e-commerce.

Market Size and Forecast

The total market size of the Indian B2B e-commerce market is valued at USD 527.48 billion in 2019 and is expected to reach USD 700 billion by the end of the year 2020.

Its market value is expected to grow at a CAGR of 32.6% within the forecasted time horizon of 2020-2025. Its market value will reach USD 2869.56 billion by the year 2025.

The B2B e-commerce market is almost six times larger than the B2C e-commerce market in India.

Based on the area of product selling

Almost 65% of the Indian sellers engaged in the B2B e-commerce market has the experience of selling the products inside the country only through the online platform. The market size of this segment is valued at USD 342.86 billion in the year 2019.
The remaining 35% of the Indian sellers engaged in the B2B e-commerce market has the experience of selling the products inside and outside the country. The market size of this segment is valued at USD 184.61 billion in the year 2019.

Market Outlook

The Indian B2B e-commerce market is expected to grow at the CAGR of 32.6% within the forecasted time horizon of 2020-2025 because of increased use of mobile platforms, rising investment in B2B commerce, the initiative for digitalization, availability of operational B2B e-commerce websites, increased customization in product order through the self-service system, growth in global penetration of business, and reduction of the inventory cost in B2B e-commerce.

Its market value will reach USD 2869.56 billion by the end of the year 2025.

Technology Roadmap

The major technological changes occurring in this B2B e-commerce market are artificial learning including chatbots, Internet of things, personalization, digitalized payment solutions, blockchain, and virtual reality.

The introduction of this technological innovation in commerce activities is driving the growth and development of the Indian B2B e-commerce market.

Distribution Chain Analysis

The key stakeholders involved in the operation of the Indian B2B e-commerce market are business organizations, wholesalers, and distribution systems.

At first, the wholesaler places the order either through the website, email, or telephone in detail description to the manufacturer/business organizations. This business organization processes the order and supplies the products to the wholesalers.

Here, B2B e-commerce is concerned with the financial and product transaction between business organizations and wholesalers.

Competitive Factors

The key market players engaged in this B2B e-commerce market are competing for the displacement of the wholesalers by the online retailing system. They are focused on the reduction of prices, and increment of the margins of manufacturers and retailers.

Along with this, they are focused on setting the infrastructure for online retailing and digital payment system rather on the marketing.

Key Market Players

Short profile of the key market players engaged in the Indian B2B e-commerce market are discussed as follows:

IndiaMart: It is one of the most popular Indian B2B e-commerce marketplaces, which accounts for a market share of almost 60% of the total Indian B2B e-commerce market. It is providing more than 60.73 million products and services since 1999. The number of paying suppliers of this company has been increased from 72,000 in the year 2016 to 130,000 in 2019.

TradeIndia: It is one of the top Indian B2B e-commerce platforms providing more than 12,000 product categories and subcategories. It provides information about sellers and buyers all over the world including India.

TradeKeyIndia: It is the online directory for retailers and manufacturers which directs the search of the manufacturers, exporters, importers, suppliers, and service providers from the Indian and international markets.

Udaan: It is the network-based B2B trade platform that was launched in 2016. It facilitates the buying and selling of products such as fashion, groceries, and electronics between manufacturers, brands, and retailers with its operation in more than 900 cities.

Alibaba: It is one of the world’s largest B2B companies found in China in 1999. It has invested almost USD 2 billion in the Indian e-commerce industry.

Ninjacart: This B2B platform enables the retailers and merchants to source out the freshly produced food products (fresh vegetables, fruits) directly from the farmers daily to the different firms in the seven cities. It is delivering the farmed sourced fruits and vegetables in more than 20 Indian states.

Strategic Conclusion

The Indian B2B e-commerce market is growing at the rate of 32.6% because of increased use of mobile platforms, rising investment in B2B commerce, the initiative for digitalization, availability of operational B2B e-commerce websites, increased customization in product order through the self-service system, growth in global penetration of business, and reduction of the inventory cost in B2B e-commerce.

References

Appendix

GST= Good and services tax
USD= United States Dollar
CAGR= Compound Annual Growth Rate