In today's industrial markets of shrinking sales, reduced margins and increasing costs, B2B online companies can decrease sales costs by up to 90 per cent by guiding customers to an online self-service e-commerce environment, says Brijnandan Mundhra, Founder & CEO, Industricals.com.
In the year 2007, B2C e-commerce started gaining acceptance in India. This was the year when the industry picked up pace, the common man started warming up to the idea of shopping online, and a number of start-ups came into the scene.
Fast forward to 2016, and the B2B e-commerce space is gearing up for change, invention and rampant adoption. In the past couple of years, many traditional brick and mortar firms have started moving online and adopting fresh techniques over old school methods of trade and commerce. Such is the scenario, that it is safe to say that in around five odd years, the country will fully accept the concept of B2B e-commerce and dabble in fresh innovation (rather than simply follow global benchmarks).
Several leading experts have predicted that the B2B e-commerce industry is expected to grow to $6.7 trillion in gross merchandise value by 2020. As per Wal-Mart, the Indian B2B e-commerce segment is expected to expand to $700 billion by 2020, from its current worth of $300 billion.
This continuous and consistent proliferation is sure to make the B2B e-commerce market two times bigger than the B2C market ($3.2 trillion) within the same timeframe. And herein lies the immense potential of this space!
To give you a bit of a background, industrial e-commerce started back in 2000 in the land of the cherry blossom, Japan. MonotaRo (a joint venture between Sumitomo and WW Grainger Inc) successfully transacted an order online and the rest, as they say, is history! From a realistic and India-specific point of view, going online in the B2B sector has its perks, for the company, the economy and the country. To begin with, the B2B industry is considered one of the fastest emerging in times of a global slowdown. An Indian survey suggests that the e-commerce industry is expected to contribute 4 per cent to GDP by the year 2020 and that this contribution will go up to 15 per cent in the next 15 years. In addition, an upward growth in the retail sector is sure to have a domino effect on manufacturing and allied sectors like social media, logistics, IT/ITES and advertising, among others, which will result in employment generation.
Currently, the consumer e-commerce model alone provides direct employment to approximately 40,000 people. It is further estimated that this segment will create 1 million direct and another 0.5 million indirect jobs by 2020. That's a lot of potential right there that waits to explored and exploited!
The growth of e-commerce has also ensured that customers have more access to data, because of which their feeling of empowerment is strengthened. And a customer that feels empowered is a very good thing for the economy. In a study of millennials, it was discovered that young, first-time buyers don't want to consult with merchants even when buying a car. Instead, they strongly prefer to make an independent online purchase. This is a definitive indicator of the fact that the concept of self-service will continue to increase year after year. In fact, Gartner predicts that by 2020, the customer will manage 85 per cent of his/her relationship with an enterprise without interacting with an individual. Hence, it only follows that millennials are here to demand a massive improvement of customer service, push for growth and development of more responsive order-taking processes, expect better prices and super-efficient after-sales service.
As a member of this industry since the past fifteen and more years, I've observed a trend that is fast emerging. The trade of industrial and electrical supplies on a B2B e-commerce website is slowly but surely becoming a hassle-free process and there is a gradual increase in the supply and demand of MRO (Maintenance, Repair, and Operations) products online.
From the buyer's perspective, an online website is providing an integrated product list with a wide variety of brands, thereby giving them more choice and freedom of selection. This system is enabling a shorter ordering/delivery cycle which is resulting in the reduction of inventory costs. It is believed that in some businesses, inventory costs account for almost 90 per cent of the total product cost, so even a modest reduction in this area can result in dramatic savings. Also, via this method of sale, the company is receiving an electronic invoice in a timely manner. This enables them to take advantage of discount terms, effectively paying less for the product.
The cost-effective element aside, online sales models are helping manage the irregular consumption rate of select products. This, perhaps, is one of the most powerful advantages of an online sales model wherein a company can now move from the 'one-to-many'model, where one company had to procure all of its supplies from many suppliers, to 'many-to-many,' where organisations are integrating their processes with online B2B retailers to automate and facilitate the purchase of their goods online. The online business growth is beneficial from the seller's perspective too. A consistent decrease in customer acquisition cost is observed along with improved customer engagement. Also, as the e-commerce portal works hard to give customers the best service possible, in the process they earn loyal customers and that invariably leads to a decrease in expenses to support existing consumers. To give you a better perspective of the financial savings, in today's industrial markets of shrinking sales, reduced margins and increasing costs, B2B online companies can substantially decrease sales costs by up to 90 per cent by guiding customers to an online self-service e-commerce environment. There is also a significant decrease in the overhead costs due to the elimination of manpower. The smooth functioning also means the seller can receive payments sooner, thereby improving his/her cash position.
Then again, nothing is perfect and B2B e-commerce certainly isn't an exception. The difficult part of this process is catering to the specificity of each product. Primarily, in my experience, a B2B e-commerce website should provide in-depth product information, high-resolution relevant images, back that up with customer reviews (both positive and negative - product centric), and plug in social media input. To enable this, a multi-step process is needed which will bring back the customers to the site and convert them into steady buyers. A major part of the above process is the provision of tech-help to make the customers understand how the product works and what are its best applications.
Having said all of the above, I do believe that it is going to be difficult for the B2B e-commerce market to find its footing. Why? In B2C, sales are relatively simple, prices are fixed, products are easy to showcase and market, quantities are low, and shipping is easy. Very little regulation or tax complexity comes into play. In contrast, in the B2B sector, prices are highly variable, volumes are much higher, the product range is much wider, all of which necessitates a flexible shipping and logistics solution. In addition to this, tax and regulatory concerns impact sales greatly.
All data points, pros and cons considered, B2B e-commerce surely has growth potential and is showing future promise. Anybody deeply entrenched in the business is well aware of the fact that the world is getting ready for a sustainable online marketplace, where B2B trade occurs with minimal manpower, higher savings, and easier transactions. Today, 74 per cent of B2B buyers research at least one-half of their work purchases online. That's enough hardcore data evidence, leaving years of experience and intuition aside, to suggest that B2B e-commerce is here to stay and prosper.
Let's get ready for a brave new world!
About The Author
Brijnandan Mundhra is Founder & CEO, Industricals.com, a one's stop shop for B2B electrical and industrial products. Brought up in Mumbai, Mundhra, holds an MBA degree from the University of Pittsburgh with a background in finance. He has been a part of Shree NM Electricals Limited, a family owned business for the last 15 years.