A growing number of firms are turning to B2B e-commerce to access the underserved markets in India

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Digitalization across industry verticals is paving the for B2B e-commerce in India. Programs like Digital India have already boosted the internet penetration rate, connecting more consumers and businesses online over the last few years. With consumers becoming more receptive to digital solutions during the global pandemic outbreak, the B2C e-commerce sector has thrived in India and is expected to further continue its growth momentum over the next three to four years. In the B2B space, the market is also gaining strong momentum in the country.

The favorable macroeconomic factors are expected to drive the B2B e-commerce growth in India. According to PayNXT360 estimates, the B2B e-commerce market is projected to reach over US$40 billion by 2026. Already, the B2B e-commerce industry has captured a fair share of the offline market and is expected to further increase over the next few years, as retailers are projected to boost their spending. Furthermore, with more and more retailers expected to shift to online platforms, the outlook for the Indian B2B e-commerce sector remains positive.

To capitalize on this growth potential and to access the underserved markets in India, a growing number of brands are launching their B2B e-commerce platforms. For instance,

• In July 2022, Grasim, the Indian manufacturing firm, announced that the firm will be investing US$25 million to build a B2B e-commerce platform for the building materials industry over the next five years. The firm’s foray into the B2B space is part of the strategy to capitalize on the high-growth in the digital space. Furthermore, the firm announced that the B2B platform will drive the growth of micro, small, and medium-sized enterprises (MSMEs) in India.

According to the firm, the building materials procurement space has recorded a compound annual growth rate (CAGR) of 14% over the last three years. This values the industry at US$100 billion with a digital penetration rate of just 2%. This shows that there is huge growth potential in the B2B e-commerce space.

• In March 2022, Larsen & Toubro, the global construction giant, also announced its foray into the B2B e-commerce space by launching a platform for industrial products and services. Notably, the B2B platform, L&T-SuFin, will allow MSMEs to source industrial supplies online. The launch of the platform is part of the firm's strategy to address the inefficiencies in the Indian industrial supply chain system while accessing the underserved market in the country.
• Across India, the B2B e-commerce platform is expected to serve over 15,000 pin codes. In addition to offering products across 40 different categories, the platform will also offer working capital to MSMEs that are enrolled on the platform. For this, the firm partnered with several different banking institutions to streamline the loan disbursal process.

While new players are entering the segment to capitalize on the high growth potential of the industry, existing players in the B2B e-commerce segment are also raising funding rounds to further accelerate their growth. For instance,

• In June 2022, Solv, a B2B e-commerce startup, announced that the firm had raised US$40 million in a Series A funding round, which was led by SBI Holdings. The firm is planning to use the capital for launching high-margin product categories onto its platform. Currently, it offers products across electronics, apparel, and groceries. In H1 2022, the firm recorded US$260 million worth of GMV run rate.
• In February 2022, ElasticRun, one of the leading players in the B2B e-commerce space, announced that the firm had raised US$330 million in a Series E round, which was led by SoftBank Vision Fund 2. The funding round valued the B2B startup at US$1.5 billion. The firm is planning to use the capital for expanding its reach in the rural market in India, while also offering credit services to more retailers.
• In January 2022, Moglix, a B2B e-commerce startup focused on industrial supplies, announced that the firm had raised US$250 million in a funding round which led Tiger Global and Alpha Wave Global. The funding round valued the firm at US$2.6 billion. Currently, the firm is offering industrial products to over 500,000 SMEs and 1,000 large manufacturers in India and the United Arab Emirates. 

Moglix investors, Tiger Global and Alpha Wave Global, also invested in another B2B e-commerce firm, OfBusiness, which is into raw material procurement and business financing. Notably, OfBusiness raised US$325 million in a funding round in December 2021. Apart from all these players, several startups have also raised funding rounds in the Indian B2B e-commerce space.

With the sector ripe for growth over the next three to four years, PayNXT360 expects more players to enter the space, which will further drive competition in the Indian B2B e-commerce industry. Furthermore, this will also create investment opportunities for global venture capital and private equity firms, who are looking to capitalize on the high growth potential of the B2B e-commerce market in India.