Why has B2B e-commerce for MSMEs taken so long to gain traction compared to B2C, D2C?

Ease of doing business for MSMEs: The nationwide call for “Make in India” has encouraged Indian MSMEs to focus on producing local, handmade and artisanal products that can better compete with global wholesale trade, international retailers of all sizes looking to source these products.

By Nishant Verman

Ease of doing business for MSMEs: The past two years have shaken up the retail industry by exposing critical gaps in the global supply chain, especially for smaller retailers, whose supply journey is no longer linear. With the Covid-19 crisis shutting down key offline business channels, companies around the world have been steadily cutting back on-the-ground spending and redirecting it to online channels. This has led to a rapid acceleration of B2B commerce towards digital adoption over the past 12-18 months.

According to research by Statista, global B2B e-commerce was worth $14.9 trillion in 2020, more than five times the size of the B2C market. So why has it taken much longer for B2B e-commerce to gain traction compared to B2C or D2C e-commerce?

Unlike B2C business, global B2B trade is characterized by long and trusted relationships between suppliers and buyers, large orders, complex logistics and customs regulations, detailed payment terms and comprehensive return policies.

Until now, the main obstacles to sourcing small retailers overseas have been the difficulty of finding reliable sellers, ensuring quality checks before shipping, managing shipping costs and get credit. Similarly, small and medium-sized manufacturers looking to sell overseas, digitally, have been unable to acquire customers and manage various end-to-end operations, such as logistics, quality, payments, etc.

These shortcomings had prevented B2B online commerce from accelerating, leaving buyers and sellers dependent on intermediaries such as local wholesalers and trade show exhibitors. However, soaring global shipping costs and container shortages have prevented these intermediaries from meeting their supply and price commitments in recent years. On the other hand, large retail chains like Ikea and Walmart are able to leverage their scale to maintain a reliable supply chain.

Realizing the competitive disadvantage this creates, several smaller independent retailers have started sourcing directly from overseas vendors through digital channels. By doing so, they now benefit from a greater choice of products, as well as better prices, as they can save on the margins charged by intermediaries. For exporters too, this new online application is helping to recover from the effects of the ongoing pandemic.

In this context, B2B marketplaces have an essential role to play in accelerating demand in this segment. The largest B2B e-commerce site currently is Alibaba.com, which is mostly a large directory of mainly Chinese supplier listings, with few value-added services. This hands-off approach works for the highly developed Chinese manufacturing ecosystem, as Chinese sellers handle cross-border logistics, payments, and more. for several decades now.

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However, sellers from new high growth manufacturing hubs like India, Vietnam, etc. need e-commerce solutions focused on solving problems specific to their geographies – for example, ensuring the rapid movement of goods despite infrastructure issues or quality-related certifications. This is where new era B2B marketplaces in India and elsewhere are revolutionizing wholesale trade by creating a trusted layer of end-to-end operations and removing friction between foreign buyers and sellers. They reduce middlemen, enable targeted sales, improve margins, manage seamless logistics, customs clearance, payment processing, and more.

In what will be a growing trend in the coming years, the “India Small Online Business Trade Report 2021” indicates that “Made in India” products are currently exported directly through online marketplaces to an average of 42 overseas markets every year. , including major export destinations such as the United States, United Kingdom, Australia, Canada and Germany.

The nationwide call for ‘Make in India’ has encouraged Indian MSMEs to focus on producing local, handmade and artisanal products that can be more competitive in the global wholesale trade, with international retailers of all sizes seeking to source these products.

With greater awareness and acceptance by smaller manufacturers, the digitalization of Indian B2B export markets will be a game-changer for the trading economy. There are 2.3 million MSMEs in the manufacturing space, and only a small fraction are currently export-oriented, with an even smaller number having an online presence. On the other hand, 9 out of 10 MSMEs say that trading across borders is a key area for business growth. This gives an idea of ​​the vast potential that can be unlocked.

The government has identified exports as a crucial lever for the economy and has targeted $400 billion in merchandise exports in the current fiscal year. Programs such as the Districts as Export Hub initiative, several free trade agreements expected to be signed this year, and local infrastructure such as the Direct Freight Corridor (DFT) are expected to significantly accelerate outbound shipments from India in years to come, with local MSME manufacturers playing a key role.

There’s no better time for Indian manufacturing MSMEs to take a digital approach to cross-border trade and make India the next big sourcing destination globally.

Nishant Verman is co-founder and CEO of Bzaar and former Head of Corporate Development at Flipkart. The opinions expressed are those of the author.

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