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In 2012, Arpit Almal reluctantly left his job as a bioinformatics engineer to take over his father’s textile business in Ahmedabad. He hated the system of procurement of cloth from mills, which traders had followed for generations.
Last year, he signed up on Xstok, an online yarn and fabric marketplace that connects mills with businesses, to procure raw materials. Apart from the pricing, he liked the fact that he no longer had to carry bags of cash to the auction site but could make payments online.
Almal, 35, is among the next generation traders who are changing the way traditional businesses operate, and opening up space for a host of business-to-business (B2B) e-commerce platforms, which help small and medium enterprises buy goods online. “I like the transparency. We have more real-time information and make better decisions,” Almal says, adding the mills prefer the model too.
“The textile industry is going through a transition with the younger generation taking over family businesses. The educated kids want to run the business in a more transparent and efficient way and are early adopters of technology,” says Sanjiv Khandelwal, founder of Xstok, which connects 8,000 small cloth businesses with large textile manufacturers.
Khandelwal, who travels to distant towns educating sellers about his platform, has found that people are increasingly taking to smartphones for price discovery and the offline ‘mandis’ are becoming irrelevant.
Textile is just one segment; traditional offline shops can order everything from mobile phones to automobiles from online marketplaces that are aiming to change the way retailers and distributors manage businesses.
“With a platform like ours, a retailer doesn’t have to deal with many different suppliers,” says Anish Basu, founder of B2B marketplace Shotang. “A retailer can buy thousands of different products from our marketplace and pay online,” he explains. In other words, they are a super wholesale dealer with everything under the sun, only online. Shotang has 60,000 distributors and sees 180 transactions a day.
It’s not just convenience that is drawing small businesses to marketplaces but also transparency in pricing. R Narayan of Power2SME, a raw material procurement marketplace for small businesses, says the decision to move online is largely influenced by the younger generation of a business family.
“The older retailers need a lot of handholding. Close to 40% of our retailers are led by young people,” he says. Power2SME, started in 2012, has tied up with financial institutions to provide assistance to 40,000 small and medium enterprises (SMEs).
Brijesh Agarwal, founder of Tolexo, started looking at the SME space after customers asked for help. Agarwal is one of the founders of Indiamart, which was set up in 1996 to help exporters, manufacturers and suppliers trade online.
Around 2010, says Agarwal, buyers began asking for a platform where they could also purchase supplies. In 2014, he and his brother set up Tolexo, which sells more than 1 million industrial goods, including safety gadgets and tools, to over 2 lakh businesses.Agarwal, buyers began asking for a platform where they could also purchase supplies. In 2014, he and his brother set up Tolexo, which sells more than 1 million industrial goods, including safety gadgets and tools, to over 2 lakh businesses.
Agarwal says the popularity of consumer facing e-commerce businesses has helped them. “B2C (business-to-consumer) marketplaces like Flipkart, Snapdeal and Amazon have helped sellers realize they can get online,” he says.
All the companies say 60% of their users are SMEs in Tier 2 and 3 cities like Kolhapur, Ballari and Kota. “This is because Tier 1 cities usually don’t have manufacturing units,” says Narayan.
PROFIT FIRST
These platforms also have the opportunity to build profitable businesses. “An average transaction size for a B2C business would be between Rs 500 and Rs 600. For us, it is between Rs 25,000 and Rs 1 lakh. The ticket size is big and the retailer buys these products every week so the frequency of purchase is higher,” says Shotang’s Basu.
Kulin Lalbhai, executive director at textile giant Arvind, was the first seller to come on board Xstok. He describes it as a bold idea. “Most B2B SME traders work on the basis of relationships and Xstok has a deep understanding of how traders function. We are very satisfied with the platform. It is shaking up traditional methods,” he says.
The space is nascent but the opportunities for high growth and the low competition make it a good game to be part of. “It is a specialized domain and one needs expertise to start up, so the competition is not high,” says Swati Gupta of Industrybuying, who started her platform three years ago with her brother Rahul. She says they are growing 25% every month.
The only hitch is that logistics and supply chain is yet to adapt. “The supply chain is built for B2C products. Industrial products are bulkier and sometimes transporting them becomes an issue,” says Tolexo’s Agarwal. Sellers also need to learn to pack products correctly, he says.
TECH TO THE RESCUE
Technology could be the differentiator that eases these hiccups. Shotang relies on data analytics and has built an app for retailers. “One retailer will be searching for 17 to 18 different products. Data is important and our system looks into a business’ previous purchases and forecasts future inventory demands,” says Basu.
They are also making retailers switch to digital currency, a significant step for SMEs which are used to dealing in cash. Power2SME, which has a lending platform for SMEs, say suppliers have realized the benefits. “They resisted these ideas in 2012 since they did not understand the platform. Now they are eager to come on board,” Narayan says.
This increasing interest is reflected by investors too. Basu recalls the challenge of pitching Shotang to investors three years ago: “It would take me hours just to explain what we did. It’s different now.” Shotang has raised $5.3 million in two rounds of funding from Exfinity Venture Partners.
Industrybuying, which is turning a profit on every transaction, has noticed similar interest in the past six months. It raised $11 million from Kalaari Capital and Saif Partners. Three months ago, it raised Rs 12 crore in debt from Trifecta Capital.
B2B is an interesting and stable space, says Ash Lilani, managing partner and cofounder, Saama Capital. “It takes longer to build since companies are not used to buying from online marketplaces but it cuts out middlemen,” says Lilani. In 2012, Arpit Almal reluctantly left his job as a bioinformatics engineer to take over his father’s textile business in Ahmedabad. He hated the system of procurement of cloth from mills, which traders had followed for generations.
Last year, he signed up on Xstok, an online yarn and fabric marketplace that connects mills with businesses, to procure raw materials. Apart from the pricing, he liked the fact that he no longer had to carry bags of cash to the auction site but could make payments online.
Almal, 35, is among the next generation traders who are changing the way traditional businesses operate, and opening up space for a host of business-tobusiness (B2B) e-commerce platforms, which help small and medium enterprises buy goods online. “I like the transparency. We have more real-time information and make better decisions,” Almal says, adding the mills prefer the model too.
“The textile industry is going through a transition with the younger generation taking over family businesses. The educated kids want to run the business in a more transparent and efficient way and are early adopters of technology,” says Sanjiv Khandelwal, founder of Xstok, which connects 8,000 small cloth businesses with large textile manufacturers.
Khandelwal, who travels to distant towns educating sellers about his platform, has found that people are increasingly taking to smartphones for price discovery and the offline ‘mandis’ are becoming irrelevant.
Textile is just one segment; traditional offline shops can order everything from mobile phones to automobiles from online marketplaces that are aiming to change the way retailers and distributors manage businesses.
“With a platform like ours, a retailer doesn’t have to deal with many different suppliers,” says Anish Basu, founder of B2B marketplace Shotang. “A retailer can buy thousands of different products from our marketplace and pay online,” he explains. In other words, they are a super wholesale dealer with everything under the sun, only online. Shotang has 60,000 distributors and sees 180 transactions a day.
It’s not just convenience that is drawing small businesses to marketplaces but also transparency in pricing. R Narayan of Power2SME, a raw material procurement marketplace for small businesses, says the decision to move online is largely influenced by the younger generation of a business family.
“The older retailers need a lot of handholding. Close to 40% of our retailers are led by young people,” he says. Power2SME, started in 2012, has tied up with financial institutions to provide assistance to 40,000 small and medium enterprises (SMEs).
Brijesh Agarwal, founder of Tolexo, started looking at the SME space after customers asked for help. Agarwal is one of the founders of Indiamart, which was set up in 1996 to help exporters, manufacturers and suppliers trade online.
Around 2010, says Agarwal, buyers began asking for a platform where they could also purchase supplies. In 2014, he and his brother set up Tolexo, which sells more than 1 million industrial goods, including safety gadgets and tools, to over 2 lakh businesses.Agarwal, buyers began asking for a platform where they could also purchase supplies. In 2014, he and his brother set up Tolexo, which sells more than 1 million industrial goods, including safety gadgets and tools, to over 2 lakh businesses.
Agarwal says the popularity of consumer facing e-commerce businesses has helped them. “B2C (business-to-consumer) marketplaces like Flipkart, Snapdeal and Amazon have helped sellers realize they can get online,” he says.
All the companies say 60% of their users are SMEs in Tier 2 and 3 cities like Kolhapur, Ballari and Kota. “This is because Tier 1 cities usually don’t have manufacturing units,” says Narayan.