#6 Factors Curbing Progress Of India's B2B Sector
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
B2B marketplaces are the unsung heroes of the e-commerce sector in India. It enables the E-tail ecosystem of India to bypass tedious and time-consuming means of offline communication, forming the backbone of e-commerce trade.
They make transactions more uniform, transparent and efficient. While B2C e-commerce platforms like Amazon and Flipkart, owing to their direct consumer connect, enjoy a big portion of the market pie, they are also steadily increasing their market share. What B2B marketplaces lack in media hype and lustre, they make up for it with better business prospects. In fact, as per Confederation of Indian Industry (CII) and Deloitte Touche Tohmatsu India LLP, Indian B2B e-commerce is set to grow into an industry worth USD 700 billion by 2020, easily surpassing its B2C counterparts.
However, despite the tremendous market opportunities, there are several factors which restrict the progress of B2B segment in India. Let’s delve deeper and decipher these factors.
The B2B industry in India faces an absolute dearth of wholesalers and distributors providing systematic and well-organized information, including catalogues and pricing. Besides, these businesses follow their archaic models of operations, making the task of on-boarding and retention furthermore cumbersome for B2B marketplaces. There are many companies whichwish to enter the digital space with often very little knowledge about it. Such aspects adds to the disordered operations and poses an unwieldly challenge of refurbishing the whole sector.
2.Supply Chain Logistics Is A Concern
The B2B sector also has to battle the economics of logistics and reverse logistics. For one, delivering bulk quantities at the earliest is fraught with its own set of challenges; the dynamics are further skewed when we factor in cross-border transactions and delivery to remote locations.
Though, an increasing no. of shipping aggregators and endowing government actions (revamping of India Post) have reorganised the process. In a bourgeoning country like India, supply chain logistics & infrastructure development is yet to be fully industrialised.
3. Tedious Taxation
Ecommerce taxation policies have remained undefined for the longest of time. Taxes like VAT, Excise duty, TDS, CST, and Service taxes have kept the players requesting for a regularized policy system. Bringing about radical changes, the Goods & Services Tax (GST) endeavours to consolidate the entire spectrum of taxes, to be levied only at the point of consumption.
It will levy a tax of 17-18%on the B2B marketplaces whichbuy the products in stock and maintain an inventory.Therefore, while GST will lead to modernise the taxation policy, we still need further policy measures to fully exploit the potential of the B2B ecommerce.
4.The Rural Outreach
With rural India lacking the basic infrastructure and understanding of digital payments and cyber-security, B2B marketplaces have to work hardin order to access and strengthen their reach. The Digital India campaign came as the ray of hope for several B2B Players. Following the increase in Digital Literacy, internet penetration, and smartphone affordability, rural Indians are vastly becoming equipped to go digital.
Collecting payments is one of the greatest worries for any B2B player. With the payment cycles stretching up to 90 days as per industry norms, B2B marketplaces have a tough time managing their cash-flows and balance sheet statements. However, all is not lost, given that the segment is maturing with time and is attracting more online buyers. B2B marketplaces are further weeding out inefficiencies via uniform pricing for all locations, efficient tech-driven processes, bulk discounts on timely payments, and modifying the circumstances to drive in more profitability and sales.
Since the beginning, interpersonal rapport and trust have acted as catalysts in the process of industry buying. However, lacking personalization, B2B marketplaces struggle to establish trust and goodwill. Besides, unlike the consumer internet businesses, the huge ticket size in B2B ecommerce further adds to the distrust and industry-wide scepticism. Although B2B players would aspire for higher targets, in order to establish trust, they need to be flexible with their ambition. By catering to a wide gamut of industry needs and fulfilling orders of smaller denominations, B2B players would gradually enjoy the trust required for closing bigger deals.
However big the challenges are, the B2B sector in India is growing immensely with countless new& innovative entrants. Empowered with the infrastructural prowess and support from the Government of India, the B2B sector is set to boom completely in the coming years. The emergence of FDI, along with increasing number of mobile and web applications is further expected to propel B2B e-commerce on its way to success.
In essence, allowing wholesalers to be accessible 24x7 while making industry buying seamless for businesses, B2B marketplaces have truly disrupted the status quo.The times ahead call for different players in the ecosystem to collaborate and create synergies, with the intention of turning India into truly a digitalized and hence, an empowered market.