By Nishant Verman
Ease of Doing Business for MSMEs: The past two years have upended the retail industry to its core by exposing critical gaps in the global supply chain, especially for small retailers, whose sourcing journey is no longer linear. With the Covid-19 crisis shutting down major offline trade channels, businesses around the world have been constantly reducing on-ground spends and redirecting it to online channels. This has resulted in the B2B trade seeing a rapid acceleration towards digital adoption in the last 12 to 18 months.
As per Statista’s research, 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 the B2C business, global B2B trade is characteristically marked by long and trusted relationships between suppliers and buyers, large order sizes, complex logistics and customs regulations, detailed forex payment terms, and exhaustive return policies.
Till now, the major barriers for small retailers to source from overseas has been difficulty in finding reliable sellers, ensuring quality checks before dispatch, managing shipping costs, and getting credit. Similarly, small and mid-size manufacturers looking to sell overseas, digitally, have been unable to acquire customers and manage various end-to-end operations, like logistics, quality checks, payments, etc.
These gaps had prevented the B2B online trade from accelerating – leaving both buyers and sellers dependent on intermediaries like local wholesalers and trade fair exhibitors. However, skyrocketing global shipping costs and container shortages have meant that these intermediaries have been unable to meet 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 that this is creating, several small and independent retailers have started sourcing directly from suppliers overseas through digital channels. By doing so, they now enjoy a larger selection of products to choose from, along with better prices as they’re able to save on margins charged by middlemen. For exporters too, this new online demand is helping in recovering from the effects of the ongoing pandemic.
In this context, B2B marketplaces have a critical role to play in accelerating demand for this segment. The largest B2B e-commerce site is currently Alibaba.com, which is primarily an extensive listings directory of primarily Chinese suppliers, with few value-added services. This hands-off approach works for the highly-developed Chinese manufacturing ecosystem, as Chinese sellers have managed cross-border logistics, payments, etc. for several decades now.
However, sellers in newer, high-growth manufacturing hubs like India, Vietnam, etc. require e-commerce solutions focussed on solving problems that are specific to their geographies – e.g. ensuring the timely movement of goods despite infrastructure challenges or quality-related certifications. This is where new-age B2B marketplaces in India and elsewhere are revolutionizing wholesale trade by building a trusted layer of end-to-end operations and removing friction between overseas buyers and sellers. They are reducing intermediaries, enabling targeted selling, improving margins, managing seamless logistics, customs clearances, payments processing, and much more.
In what will be a growing trend in the years to come, the “India Small Online Business Trade Report 2021” states that ‘Made in India’ products are currently being exported directly through online marketplaces to an average of 42 foreign markets every year, including major export destinations like the US, UK, Australia, Canada & Germany.
The nationwide call for ‘Make in India’ has encouraged Indian MSMEs to focus on producing local, handmade, and artisanal products that can compete better in the global wholesale trade, with international retailers of all sizes looking to source these products.
With greater awareness and acceptance by small manufacturers, the digitization of Indian B2B export markets will be a game-changer for the trade economy. There are 2.3 crore MSMEs in the manufacturing space, and only a small fraction is currently export-oriented, with an even smaller number having an online presence. On the other hand, 9 out of 10 MSMEs say cross-border trade 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 worth of merchandise exports in the current fiscal year. Schemes like the ‘Districts as Export Hub’ initiative, multiple Free Trade Agreements that are expected to be signed this year, and local infrastructure like the Direct Freight Corridor (DFT) are expected to greatly accelerate outward shipments from India in the coming years, with local MSME manufacturers playing a key role.
There is no better time for Indian MSMEs in the manufacturing sector to adopt a digital-first approach to cross-border trade and augment India into becoming the next big sourcing destination globally.
Nishant Verman is the Co-Founder and CEO at Bzaar & former Head of Corporate Development at Flipkart. Views expressed are the author’s own.
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