Evolving Landscape Of Online B2B Marketplace
Published by Sharekhan Education | March 10, 2023
Amit Pathak | Sharekhan Education
Introduction:
Online B2B marketplaces provide a platform for business buyers to discover products and services and connect with the suppliers of such products and services. It brings traders, retailers, wholesalers, and manufacturers onto a single platform. It provides ease and convenience to buyers (small and medium enterprises and large corporates) by offering a wide assortment of products and a responsive seller base. These platforms provide lead generation, lead management, and payment solutions to their sellers. As of FY22, estimates place the Indian B2B online classified market at around Rs 12 billion. It has grown at a CAGR of ~18% over the last five years.
Players in e-commerce marketplace:
The B2B e-commerce marketplace is a combination of horizontal and vertical players. Horizontal platforms grow by expanding into any industry. For example, a business buyer can find medicines as well as construction machinery on the same platform. Vertical platforms grow by expanding into the same or adjacent industries in the supply chain. Platforms in this sector generate revenue in multiple ways. Some businesses employ a subscription model where they charge sellers for receiving buyers’ references. Others operate on a commission-based model that charges a % commission on the number of transactions conducted over their platform.
Growth Prospects:
India has ~12.8mn GST registered businesses. Out of these, close to 2-3mn would be B2B product‐oriented suppliers, which becomes a total addressable market for the sector. Increased internet penetration acts as a catalyst for SMEs to adopt digital technologies and move their businesses online reaching out to a larger enterprise customer base. Digital migration pushes down the costs of communication, advertising, and rentals. Aggregator platforms are witnessing an increasing number of SMEs getting listed. The sector is estimated to see the gross merchandise value (GMV) grow to $350 billion by 2027. The growth of B2B e-commerce will propel the online marketplace ecosystem.
About IndiaMart:
Let us discuss IndiaMart in this space. The company is India’s largest online B2B marketplace with ~60% market share. It offers diversified products across 95k+ categories with 87mn products. It has a pan‐India presence covering 1,000+ cities, with a total of 7.4mn+ suppliers and a registered buyer base of around 165mn. Over a period, it has evolved from just being a listing website to a product catalog website. It has gradually built a comprehensive compendium of product videos, photos, specifications, and seller information. The company is expected to achieve a Revenue and EPS CAGR growth of 21% and 17% respectively, over FY23-FY25E. It would register such growth owing to dominant market positioning, strong network effect, and a large untapped pricing potential.
Source – Company Presentations and Consensus Analyst Estimates.
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