By Tejinder Oberio,
With the government’s digital growth plans slated to pick up steam in the days ahead, B2B e-commerce in India can become a wide platform with lots of scope. However, there are many hurdles it faces along the way – apart from policy ambiguity, B2B works on thin margins, hence, there are concerns about its scale and operation. The e-commerce industry continues to evolve and experience high growth in both developed and developing markets. With the emergence of non-banking players in the payments industry and innovative vertical specific start-ups, the Indian e-commerce market is expanding at a rapid pace. The digital commerce market in India has grown steadily from $4.4 billion in 2010 to$13.6 billion in 2014 while the global market is forecast to reach $1.5 trillion in 2014. Increasing mobile and internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts, and the push into new international markets by e-businesses are the major drivers of this unprecedented growth.
The big retailers are increasingly focusing on their digital strategies in order to gain the obvious benefits of online platforms – wider reach, always on, personalization to name a few. The e-commerce companies are concentrating their efforts on increasing the penetration of their mobile apps for higher growth. Big players in this space claim to have more than 50 per cent of their revenue coming from mobile apps. The supply chain and logistics in e-commerce business are highly complex to manage in a vast country like India where infrastructure is not well-developed to reach every remote and rural area. The taxation policies for the e-businesses are not well-defined depending on different business models and transaction types. The complexity has further amplified with transactions happening across borders for online selling of goods and services. Moreover, e-businesses do not take sufficient steps to deploy a security solution, which is hindering the consumer from transacting online.
Game-changers for e-commerce
Increasing internet and mobile penetration, growing acceptability of online payments and favorable demographics has provided the e-commerce sector in India, a unique opportunity to fundamentally alter the way companies connect with their customers. Due to this digital revolution, the e-commerce sector in India has become four times its previous size and is expected to cross the $100 billion mark within the next five years, contributing over four per cent to India’s GDP. Mobile commerce (m-commerce) is growing rapidly as a stable and secure supplement to the e-commerce industry. Shopping online through smart phones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 per cent of their total revenues. The Government’s ambitious ‘Digital India’ project that aims to offer a one-stop shop for government services will further bolster the sector by introducing internet and broadband to remote corners of the country and increase trade. This initiative through a targeted investment of nearly $17 billion, will transform India into a connected economy and also attract investment in electronics manufacturing and create millions of jobs. It is therefore important to overcome challenges in Financing, Infrastructure, Logistics and focus on building Customer Loyalty to usher in the next wave of sustainable growth in e-commerce. Dedicated e-commerce laws are required to address issues in the sector’s legal and regulatory framework and banks must play a leading role as ‘Facilitators’ by offering cost effective cash management solutions, secure payment gateways and other relevant banking services.
B2B e-commerce: Upside and downside
B2B e-commerce in India is in line with the government’s digital growth plans. Online B2B can be a wide platform with lots of scope. However, there are many hurdles it faces. Apart from policy ambiguity, B2B works on thin margins, hence, there are concerns about its scale and operation. In India, there will also be a taxation hurdle which exists for interstate transactions. The biggest barrier that will be faced when B2B e-commerce takes over the market will be of trust and flexibility. Brands will make a big difference and will also determine how successful
a venture is. Another factor is the flexibility of the business model that the organization has in place. When getting into B2B e-commerce, companies need to keep in mind that they need to control a lot of sub-bodies like pricing, sales, channel and distribution, and hence should take help from a specialized sales body while developing the online portal. Newer technologies that could significantly bring a paradigm shift in the online businesses are analytics, autonomous vehicles, social commerce, and 3D printing. Companies have started to invest in data analytics to gain real-time insights into customer buying behavior and thus offer personalized user experience.
The e-commerce companies are building communities on social media networks to better understand customer needs and to drive effective marketing strategies. The future of e-commerce is bright and growth will come from mobile platforms, personalization, social media analytics, Omni-channel service, and sharing economy business models. The e-commerce industry is an exciting place with the interplay of social, mobility, analytics, cloud (SMAC), digital, 3D and, virtualization. The current high valuations, in spite of losses, perhaps, are indicative of the future potential. The most important aspect of e-commerce is identifying your customer segment and having a strategic plan to ensure appropriate proposition to each segment. The company should also have its long-term goals clear. After considering the essentials for a successful B2B E-commerce venture, the likelihood of an e-commerce era in India is high. Firstly, because the government will be for the proposal as it is part of their digital growth plan and secondly because it proves to be beneficial to both the government and organizations. It will help cut overhead costs and other variable costs while at the same time make the process of obtaining goods easier and faster. India, being a developing country, is prone to such change and evolution.
The writer is Founder Director,m1Order
Published in: Progressive Grocer, Ahead of What’s Next, August 2016