The eB2B landscape in India is on the verge of a remarkable transformation, as projections indicate that by 2030, 35-45% of the total number of buyers in India will engage with eB2B platforms, translating to an estimated 14 to 18 million users. This finding comes from a recent report published by Redseer Strategy Consultants, highlighting a significant comeback for online business-to-business transactions, which experienced a setback in recent years.
In 2023, the report outlines that only 12-15% of total buyers were active on eB2B platforms, down from 25% in 2021. This decline has primarily been attributed to the challenges faced by B2B players such as optimizing key costs related to supply chains, go-to-market strategies, and credit management. These factors have negatively impacted unit economics, leading to scaled-down operations and reduced buyer penetration in the market.
A crucial portion of the report emphasizes recognizing the importance of effectively implementing cost structures. Doing so will be vital for eB2B firms aiming to scale operations and ensure viability, particularly during challenging financial periods—often referred to as “funding winters.” The expectation is that the buyer penetration in eB2B platforms will not only recover but also surpass the peak periods labeled as the ‘Goldilocks Years’ from 2019 to 2021.
Another compelling insight from the report is the strategic moves of eB2B platforms towards enhancing profit margins. Methods employed include category expansion, launch of private label products, vertical integration, and direct brand partnerships. A notable success story highlighted in the report is Udaan, an eB2B platform that has effectively implemented a micro-market strategy. Through this approach, Udaan has seen its penetration jump from 35% six to twelve months prior to the strategy rollout, achieving a remarkable 75% in key markets like Bengaluru. In Hyderabad, its penetration more than doubled from 25% in January 2024 to 56% by June 2024, showcasing the efficacy of targeted strategies in increasing user engagement.
Despite the promising projections, the report cautions that eB2B firms must navigate several challenges, including capital efficiency, competitive pressures, and the rise of brands pushing their proprietary platforms. This competitive landscape suggests that eB2B platforms must remain agile and innovative to capture market share.
In tandem with the growth of eB2B, the report outlines the behavior of the retail essentials market, which is predicted to remain predominantly offline. As of 2023, 98% of essential goods were sold through physical channels, primarily through general trade and kirana stores. As we look ahead to 2028, the online contribution to retail sales in this segment is expected to rise only modestly, increasing to 4-6% from a mere 2% in 2023. Essentials, which constitute approximately 65% of total retail spending, remain a vital market due to India’s substantial rural and middle-class demographics.
The report further projects that essentials will capture 62% of the retail market by 2028, with non-essentials accounting for the remaining 38%. This projection underscores a persistent inclination towards essential purchases, influenced by factors including inflation and wage growth. Retailers will continue to grapple with numerous challenges, such as supply chain inefficiencies— faced by around 40% of retailers—service challenges (29%), procurement issues (17%), and pricing or financing concerns (15%).
For businesses engaged in eB2B activities and retail, understanding the evolving dynamics of both online and offline markets will be crucial. As digital channels increasingly gain traction, players must refine their strategies to address customer needs effectively, optimize their supply chains, and address emergent challenges. The landscape, while fraught with complexity, also presents ample opportunities for growth for businesses able to adapt and innovate.
As we stand on the brink of this resurgence in eB2B activity, the collaborative efforts between eB2B platforms and their buyer base are likely to reshape the landscape of business transactions in India, heralding a new era of commerce that seamlessly integrates technology with ongoing consumer needs.
