Authored by Freddy Radena
The Business-to-Business (B2B) eCommerce marketplace has witnessed tremendous developments in the last few years and skyrocketed during the pandemic. A survey by Mckinsey & Company showed that more than 90% of B2B transactions have transitioned online during Covid-19 as businesses migrated to digital channels to keep their operations functioning. Additionally, Gartner estimates 75% of B2B procurement spending will be done online and B2B online marketplaces are forecasted to account for 40% of the global online retail market within the next 5 years, with Asia being the key market driver.
Source: Verz Design
Key drivers for B2B eCommerce Marketplace beyond Covid-19
While we cannot deny the key role played by Covid-19 in digitizing B2B transactions, B2B marketplaces are gaining popularity for several other reasons such as:
accessibility to a wider range of products
greater transparency in service, pricing, and supplier availability
increasing flexibility in payment options
A recent study by YCP Solidiance showed that a large 94% of B2B buyers conduct online research prior to making a purchasing decision, and 68% eventually make purchases online. From a manufacturer standpoint, a B2B online marketplace provides access to new customers, visibility into the market’s pricing structures, and features and services they might not have otherwise been able to afford, such as lower shipping costs and better market analytics. On the supply side, internet and mobile penetration are growing tremendously and various policies are implemented to support the transition toward an internet economy. Together, these favorable factors create a catalyst for the upward trajectory of the B2B eCommerce marketplace.
The Asian Context - A diamond in the rough?
Asia breeds the largest and fastest-growing eCommerce marketplaces in populous countries such as China and India where domestic consumption is the key driving force of their economic growth. It is no surprise that Asia B2B eCommerce marketplace is projected to grow at a rate of 12.1% per annum. Tapping on the region’s manufacturing prowess and the strengths of Small and Medium Enterprises (SMEs), Asia B2B eCommerce started with a strong focus to bring B2B buyers and sellers onto the same platform. Since SMEs make up more than 96% of all Asian Businesses, big players in Asia such as Alibaba and IndiaMART saw the golden opportunity in creating eCommerce marketplaces to serve the unmet needs of a largely fragmented market.
New business models have emerged over time within the B2B eCommerce Marketplace. Some offer and sell a wide range of general products from multiple vendors and suppliers (horizontal marketplace), while others could be niche and highly specialised in their industry sector (vertical marketplace). Interestingly, another marketplace model (service-focused) has also recently come under the spotlight to address the gaps in the gig economy via the offering of rental or professional services.
A battle ring
Despite their established dominance, we can hypothesize the gradual decline of Alibaba's market dominance as B2B e-commerce marketplace startups compete for a share of the pie in Southeast Asia. In one corner, we have startups following the growth story of Alibaba and IndiaMart - started as a B2C model and gradually expanding into the B2B space with their vast network of vendors and highly integrated supply chain (think of the big boys such as Bukalapak and Tokopedia). In the other corner, we see burgeoning startups within the vertical marketplace space, actively seeking to establish their own niche by addressing the supply chain inefficiency of a particular industry (GudangAda in FMCG, TaniHub in Agriculture). Therefore, in the context of Southeast Asia, we have yet to find a clear winner. This presents a vast playground of opportunities for startups and investors.
So what’s in store (no pun intended) for B2B marketplaces in Asia? We can confidently say the prospect of this space will continue to expand in the long term as the opportunity for embedded finance and digital logistics in B2B eCommerce integration is particularly significant. Moreover, as more consumer activities and business operations find their place online, there will continue to be areas available for disruption in a specific industry by online marketplaces. While the B2B eCommerce marketplace in Asia is at its growing stage, such a concept is relatively nascent in Southeast Asia. Despite that, more marketplace startups are emerging to capitalise on the diversity of consumer and business profiles as well as ineffective supply chains across the region that need to be urgently addressed.
Full integration of B2B eCommerce marketplace platforms will bring significant benefits to both buyers and sellers.
That said, what are some key industries where there exists vast unrealised synergy with the B2B eCommerce marketplace in Southeast Asia? This question will be answered in our next article on B2B eCommerce marketplace!
This is definitely a segment to watch!
McKinsey Insights - The B2B digital inflection point: How sales have changed during COVID-19
Supply Chain Dive - Gartner: AI and B2B marketplaces will dominate procurement
Asian Development Bank - The role of SMEs in Asia
Uppler - A brief history of B2B marketplaces: The rise of Alibaba