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From accounting for less than 1% in FY21, we forecast e-B2B to reach 10% of India's total B2B (business to business) market value by FY30. Though India's modern distribution channels are at various stages of development, we think the advent of e-B2B could be disruptive for traditional B2B. We expect India's B2B market to deliver a 9% CAGR in FY21-30 to reach US$1.3trn in FY30, but for e-B2B to outpace this by delivering a 43% CAGR to reach US$134bn in the same period. Companies are ramping up their e-B2B, focusing on increasing merchant bases, widening their portfolio reach and strengthening supply chains.

We think India's total retail market growth during FY21-30 is likely to outpace the growth in the last decade, driven by higher discretionary spending, growing aspirations and a deeper distribution reach. This could also expand India's B2B market, which is mostly unorganised and dominated by traditional traders and wholesalers. However, e-B2B strategies could differ between companies—with some following a strategy of wholesaler/distributor-supported e-B2B, while we expect pure e-B2B companies to compete with wholesalers and distributors. Scaling up of pure e-B2B would be capital intensive and time consuming as it requires the setup of distribution infrastructure. However, we think the distributor inclusive model (company-owned e-B2B) would reach, and reap the benefits of, existing distribution channels. We think both strategies could win as they are backed by growing warehouses/fulfilment centres and focused on providing better pricing, inventory management, credit and faster retailer replenishment, paving the way for unprecedented growth, in our view.

Our analysis suggests three evolutionary stages for e-B2B in general retail—phase 1 focuses on penetration, phase 2 focuses on margins, and phase 3 is value-added services (VAS) and private labels. During phases 1-2, e-B2B has a positive impact on consumer firms as e-B2B companies fill the gap between manufacturers and retailers through better services and accessibility compared to traditional distributors. We expect this access to new markets to provide additional growth, in relatively less time and at lower cost. However, in phase 3 we expect private brands to evolve in terms of product quality, aided by an acceleration in modern trade, e-commerce and e-B2B channels. During the initial periods we think private labels could take market share from an unorganised sector and in 'loose foods' (ie, non-packaged) such as cereals, pulses and flour, thereby having a limited impact on branded companies.