NIRANJAN GIDWANI
CONSULTANT DIRECTOR | MEMBER UAE SUPERBRANDS COUNCIL | CHARTER MEMBER – TIE DUBAI
It’s obvious.
New Age Digital players are beginning to show more and more interest in the highly fragmented B2B market. Some key global players have already started making major investments to build distribution-center networks and expand their B2B fulfillment footprints and capabilities.
This was a logical given. Something that was bound to happen at some stage of the online business cycle.
Digital and online players and aggregators are slowly but surely increasing their technical expertise across many sectors. The biggest advantage available to the leading players in this category is that, since their business models started relying on advanced technology from inception, they are using advanced algorithms, something that most of the traditional distributors have not caught up to. Quite a few big digital players are rapidly building up scale and have now started expanding beyond their core digital markets.
Interesting to note is that quite a few of the key digital players are also building dedicated sales teams which are very similar to those created over decades by traditional distributors. All that the digital players would now require is to start gaining distribution expertise.
Let’s observe what changes are happening.
The biggest digital player of all is Amazon. Amazon business has already started in key countries of Germany, UK, India, Japan, France, Spain, Italy and Canada. This has helped scores of microenterprises in these countries.
Another interesting example that comes to mind is the Chinese giant Alibaba. While almost two-thirds of their business is generated in China, they too have significantly expanded their footprint in Europe.
In India too, both local giants Reliance and Flipkart are actively increasing their stakes in the online b2b space. IndiaMart is unique, in that 95 percent of its revenues come from yearly subscriptions. Udaan is another successful multi-category player.
ABB launched eMart, an online marketplace portal, which will offer more than 6,000 products from its electrification business for home and industrial buyers. Coutloot, a social commerce platform has announced the launch of a wholesale platform to connect thousands of online and offline sellers directly to small and medium manufacturers.
To counter this, major traditional distributors have started working in earnest to create key commercial differentiations. Many have re-focused on investing significantly in technology to narrow the gap with the digital players.
Leading distributors are using the advantage that they have built over decades. They have started providing customers with better seamless experiences across their physical and online channels.
For leading online players wanting to get into b2b distribution, the immediate low hanging fruit would be to get into categories and products with high margins. These players have already started eyeing categories and brands which require limited technical expertise, low value-added services and easy-to-ship box-moving products. Products such as mobiles, electronics and auto parts generate decent margins and very quick scalability of top line business. Listed as well as large companies love to show top line growth.
Digital players have also started forming partnerships with third party vendors to ship large, bulky products, such as refrigerators, appliances and construction products.
There are pros and cons to being a single vertical b2b online player versus being in multiple categories.
Regardless of which segment they are in, all traditional distributors, even those whose customer and brand relationships seem extremely strong today, should work hard on plans to compete with digital disruptors.
Traditional and large distributors possess one major strength they need to capitalize on: they too have the rich volumes of data they need to use advanced analytics and machine learning to work out valuable, real-time insights. If they invest in the right talent and tools, they too will be able to anticipate customers’ needs, pro-actively make the right product recommendations, offer alternative solutions, and achieve profitable growth. Something that many have already started doing.
The general assessment is that the challenge faced by traditional distributors is not when to start. It is where to start.
Nearly every distributor across the world is facing disruption as large digital players build upon their successes in B2C to expand into and take a bigger share of the B2B pie. This would be a logical extension to maintain growth.
In the South Asia and GCC region, we can surely expect the likes of Amazon, Noon, Etisalat, Reliance, Flipkart to make big forays into this b2b space. We can also expect new online startups to come up with innovative solutions to doing b2b business, particularly in spaces where online competition is still limited.
No matter what strategy the online or the traditionalists wish to pursue, the winners will surely need to galvanize their organizations to create more innovative cultures with a relentless focus on customers.
No business is easy these days. And allowing a few global online players to get bigger and bigger will ultimately come with its own set of monopolistic problems.
We live in the “and” generation. The traditional can and must find a way to exist and grow side-by-side with the new. And vice-versa. To create a better business and economic existence.
