As we announced our investment in MotorExchange; I thought to bounce my views on broader B2B plays. In last couple of years, I have noticed two broad growth challenges in Indian internet start ups:
1.) Last mile penetration – This is function of internet penetration in the country and the growth is still incremental. We have seen few services scaled up in India.
2.) Payment Infrastructure – This is a big pain point.
However; I have seen good traction in b2b plays in last 9-12 months. Businesses like FlightRaja, ItzCash have scaled up nicely. Observation is that a large number of services and products like travel tickets, hotel bookings, insurance payments, investment products, and real estate brokerage are delivered through local neighborhood entrepreneurs. Though this ecosystem is fragmented and inefficient (in few cases) it solves the problem of last mile distribution and payment collection. I think that there can be possible opportunities in organizing this unorganized market by providing platform driven services to them. If there is a value proposition, small businesses are willing to spend money and invest in a computer with Internet connection.
There are B2B businesses in areas of logistics, commerce, auction exchanges, assisted commerce, and financial products distribution, which are seeing good traction. These platforms are helping fragmented businesses to increase their efficiency, sales, and customer retention. The challenge here is to reach the fragmented channel and there can be a good offline component to such services.
Any thoughts? or similar businesses?
I would love to meet entrepreneurs who are in similar b2b space and understand their businesses.
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Hi Mukul,
Many thanks for sharing your thought on this topic. We are working on a B2B Exchange model and have done initial work.
I would like to meet you discuss this further. If you want I can email you a small executive summary of our business model.
You can contact me on my mail address, naiyer.jawaid (at) bumex.in
Congrats on the Investment Mukul.
India’s internet population is going to double from now till 2013 according to IDC; also we’ve seen more than expected response last few months in people buying online in the B2B segment. As for the payment infrastructure, its again the function of volume of transactions online, transaction charges will only do down from here.
I think the bigger problem is that we tend to consolidate markets in our analysis of the industry, unlike the west our internet market is fragmented and our need fulfillment is very different. A lot of people I have met forget this, we’re a big country and for any successful online business to make sense means understanding not only the geography but also different needs of regions with that.
Small players in the market are good, they get the people started. I see more of an opportunity of consolidating businesses than build a platform.
Dear Mukul
Your comment – “I would love to meet entrepreneurs who are in similar b2b space and understand their businesses.”
This is an exciting idea in logistics space developed with intensive research & with great medium/long term potentiality.
Can you plz. let me know if we can meet/discuss further once we exchange info about each other. Contact sanjaygaggar AT hotmail DOT com
Hey Alok,
Congrats on the investment.
Another problem with online payment, specially when we are talking of last mile, is the ‘white money’ problem. People are used to spending unaccounted cash and it is hard to shift to electronic money because of that.
This is a big reason why I feel that B2Bs and ITZ do better as they come in like a cushion between the cash paying customer and a business which get electronic money.
PG
Alok/Mukul:
Congrats on the investment — good to see some continued bullish bets on Internet in India.
The last mile penetration is a huge distribution problem. So much so, that relying on an offline distribution in the last mile may (a) end up squeezing the margins and (b) take away the scalability of the internet business.
Though Itzcash is doing good — 10 of the people whom I called 6-7 months ago to find out whether they carry the card or not came negative. This is the third issue (c) a provider is competing with other providers as the margins are 2%-4% in the last mile distribution.
In some of our calculations internally for internet plays, we just considered the urban penetration of internet — This also fixes the anomaly wherein the overall internet density comes out to be pittance when pan-India is considered.
Payment is a bitch in India, considering there are few players and transaction charges hover around 5% with annual fees and stuff.