Here’s Why Asia’s B2B eCommerce Scene Is Heating Up

If there ever was a time for B2B e-commerce to cement itself as the dominant way of doing business, it is now.

With COVID-19 forcing people around the world to stay indoors and rely on digital channels for everything from food deliveries to entertainment, it’s a good opportunity for firms to embrace a new way of doing business and drive the bulk of revenue through e-commerce.

In Myanmar, for example, the government committed in April to supporting e-commerce as part of its COVID-19 economic stimulus plan. Before end-2020, it aims to launch a central e-commerce platform to facilitate online trading. Local experts have said now is the best time to cultivate the strategic habit of digital trade in the developing nation.

Before the pandemic, research firm Frost & Sullivan had predicted that global B2B e-commerce sales would reach over US$6.6 trillion this year, surpassing that of B2C sales, which it valued at US$3.2 trillion in the same period.

In Asia, Forrester is forecasting growth of 12.1% per annum in B2B e-commerce, with B2B online marketplaces being the prevalent mode of business.

Notably, it is companies in India that are most likely to commit to investing in the B2B consumer experience, according to a 2018 survey by EConsultancy and Magento.

Since then, B2B e-commerce has flourished in Asia, backed by factors such as government support as well as rising mobile penetration in India and across Southeast Asia.

So what are the unique factors driving B2B e-commerce in those economies? And what should other businesses do to leverage on the trends for growth?

We spoke to three of the biggest B2B marketplaces in India, Singapore and Indonesia to find out what made them tick.

Monetising the middleman

For Vaibhav Gupta, co-founder of India’s top B2B e-commerce platform Udaan, it was the hunger to do what it takes for growth that spurred Indian businesses to adopt new technologies, and trade and transact online.

“In India, Flipkart and Amazon have grown very well. And almost every single manufacturer was thinking: how can I become Flipkart? They were hiring people to build apps for them. They were signing up for web listings, they were building their own websites. And the biggest underlying factor or intent was a hunger for more growth.”

Meanwhile, for buyers like smaller merchants and retailers, what matters is access to variety, good pricing, convenience and reliability. “They want the ability to order, forget about it and have it delivered. They want [the reassurance] of having the same experience every time they order,” he said.

Mr Gupta also noticed it was the middlemen who were generating up to 40-50% returns on capital. Yet, there were far fewer of these compared to the buyers and sellers. For Udaan, recognising the need for a trusted connection between upstream manufacturers and downstream retailers in the Indian B2B supply chain has been the key to its growth.

When it stepped in with its online marketplace, Udaan took the role of the middleman in India to a new level. Buoyed by demand from traders at both ends of the supply chain, the startup reached valuations exceeding $1 billion in just 26 months.

Bringing value to the supply chain

In other areas of the economy, middlemen are a dime a dozen, so ensuring relevant value-added services are provided is crucial for success. Vietnam’s largest b2b eCommerce platform, Telio has this well in hand.

“We need to do the business that our customer wanted us to do,” said SyPhong Bhul, founder of Telio. “ So that is how we decided to work closely with the household businesses or small retailers across the country.”

In Vietnam, traditional retail stores have to liaise with 50 to 80 contact points for their store supplies as typical suppliers do not carry multiple brands or multiple goods verticals. The pricing system was also rather opaque, with retailers only able to calculate the goods prices after receiving the goods.

This made selecting suppliers with competitive prices and goods quality costly and challenging.

A third pain point these stores faced was the cost and reliability of goods delivery. Suppliers only offer free delivery with a certain order quantity, which put smaller mom-and-pop stores with less inventory space at a disadvantage. The timing of delivery was also restricted to certain days or arrived late, which made the flow of goods unpredictable.

The company has its sights set on becoming a unicorn of impact, and has plans to expand beyond its bases in Hanoi and Ho Chi Minh with 15,000 more retailers onboarded on the platform by June 2020. It also completed a $25 million Series A Funding round in December 2019.

Staying true to the mission

Based on Tokopedia founder William Tanuwijaya’s experience, the biggest enabler of growth has been a focus on carrying out the company’s mission.

The way he tells it, when Tokopedia raised its first $100,000 ten years ago, it had to compete with the likes of eBay and Rakuten. Then it raised $100 million, and had to contend with Lazada at that size. “Then, when we raised a billion dollars, we had to prepare ourselves to compete with Amazon, which is a $1 trillion company.”

Soon, Tokopedia realized that it was not about the volume or scale of resources it had, but about how those resources are deployed to fulfil the company’s mission and goals, said Mr Tanuwijaya, adding that Tokopedia’s mission is to “democratise commerce through technology,” or making e-commerce accessible to the masses.

That focus eventually led Alibaba to become a minority stakeholder in Tokopedia. “It’s no secret that Tokopedia’s business model is really inspired by what Alibaba did in China and how they helped small businesses become big brands. That is our mission as well,” Mr Tanuwijaya said.

“There’s a new B2B revolution happening in China that is not happening anywhere else in the world. Having this ability to learn from China so closely is a big advantage for Tokopedia. In the past two years, we have been growing faster than before, and that is basically because Alibaba is one of our closest partners,” he said.

Now, 89% of sellers on Tokopedia do not own a physical store and 86% of merchants are first-time entrepreneurs. According to the company, the firm’s annual gross merchandise value has reached $15.8 billion, which would be equivalent to 1.5% of Indonesia’s GDP.

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