Editor’s Note
As India’s digital transformation accelerates, the focus is shifting from consumer platforms to business-to-business marketplaces. This article explores how the next wave of digitization is poised to reshape enterprise commerce, building on the explosive growth of online consumer transactions over the past decade.
Consumers were the first beneficiaries of India’s rapid digitization wave—businesses are up next.
Over the past decade, India has undergone a remarkable journey of consumer digitization. In 2010, the number of users engaging in online transactions was less than a million. Fast forward to 2022, and that number has skyrocketed to over 100 million. This phenomenal growth has primarily been driven by the emergence of various B2C marketplaces in the country, such as Flipkart (Multi-category), Zomato (Food Delivery), Swiggy (Food Delivery), Ola (Transport), Big Basket (Online Grocery), Pharmeasy (Pharmacy), Urban Company (Home Services), Livspace (Furniture), and Myntra (Apparel and Accessories). These companies have harnessed macro enablers like the decreasing costs of data, the increasing penetration of smartphones, and the adoption of the India Stack initiative’s open APIs, among others.
Today’s massive shift to online transactions is just the beginning. As India’s $3.75 trillion economy grows to $6 trillion within the next decade, we anticipate a significant portion of this growth will be driven by the digital economy, which we estimate will grow from its current ~$100 billion to $1 trillion.
While most of the first $100 billion of India’s digital economy has come from consumer digitization, we believe a large portion of the digital economy’s next 10X will come from business digitization and online transactions, or what we broadly call business-to-business (B2B) online marketplaces.
B2B marketplaces in India hold immense potential, driven by the sheer size of the country’s predominantly unorganized B2B economy and fragmented supply chain.
In 2022, B2B e-commerce accounted for a mere 1% of the overall B2B market in India, a stark contrast to its negligible presence in 2019. However, the trajectory of B2B e-commerce adoption indicates a significant upswing, with projections indicating its share will rise to just under 5% of the overall market by 2030.
By 2030, we anticipate that online-first, tech enabled B2B marketplaces will represent a remarkable $200 billion market opportunity.
It’s important to note that even with such substantial growth, online B2B gross merchandise value (GMV) would still account for only ~5% of overall B2B business in India, which is significantly lower than the penetration in other countries.
We believe that four different factors—increased digital adoption, mature digital infrastructure, favorable regulatory policies, and a conducive cross-border environment—have led to a unique inflection point for B2B marketplaces in India.
Business digitization has been a major driver of B2B marketplace growth in India. Tech adoption in the country has its roots in consumer internet adoption: as over 750 million people in India have gone online, micro, small, and medium enterprises (MSMEs) have benefited from discovery, price, convenience, and assortment. As of 2022, India has over 60 million MSMEs, and two out of three MSMEs have adopted tech in some form. Out of these, while only 10% of MSMEs (six million) currently engage in buying and selling online, 25% (15 million) are expected to transact on online marketplaces over the next four years.
1. Digital Payment Services – Developed payment infrastructure has transformed B2B transactions in India, offering businesses a fast, secure, and convenient way to transact with suppliers and customers. This shift has streamlined operations, reduced reliance on cash transactions and manual processes, and expanded business reach across geographical boundaries. India has witnessed substantial growth in online payment transaction value, projected to reach $208 billion by 2025, with companies like Razorpay, Juspay, and Rupifi playing a key role. Among these advancements, India’s Unified Payments Interface (UPI) has revolutionized B2B payments in India. It enables instant fund transfers, eliminating the need for time-consuming cheques or NEFT transfers. UPI’s low transaction fees make it ideal for frequent small-value transactions, enhancing cash flow management. We think UPI represents one of several payment infrastructure tailwinds for efficient, secure, and hassle-free B2B transactions.
2. Open Network for Digital Commerce (ONDC) – ONDC is a significant development that will aid B2B marketplaces in India by facilitating secure data exchange and streamlining operations. It is a technology infrastructure that enables seamless integration and interoperability among different participants in the digital commerce ecosystem. It offers standardized integration through APIs, enabling seamless connections with logistics providers, payment gateways, and financial institutions. B2B marketplaces can benefit from a wider network, improved operational efficiency, enhanced trust, and regulatory compliance.
3. Open Credit Enablement Network (OCEN) – OCEN can play a vital role in empowering B2B marketplaces by streamlining credit access, fostering trust and transparency, enabling personalized loan products, and enhancing efficiency. By facilitating the exchange of credit-related information, OCEN can support the growth and development of the B2B lending ecosystem, benefiting both lenders and businesses seeking credit.
