B2B e-commerce is going through turbulent times. The sector saw billions getting infused in the hope that the distributors and wholesalers would leave the value chain and that these companies would capture that value. The existing organised distribution businesses operated at extremes – a traditional business model where retailers would walk in and buy OR technology business expecting a B2C kind of adoption rate. Both these businesses have failed to disrupt the traditional way of selling groceries. The walk-in model was ill-conceived since Indian traders did not have station wagons to go and fetch their wares. Pure technology offered patchy access to credit, and that disrupted the retailer’s cash flow. That limited the headroom for adoption even further.

The win of this transformation lies in operating at the intersection of inclusion and technology. Inclusion of the existing participants in the new value chain with redesigned roles and margin structures. And in ensuring that the retailers are better off in all service aspects. For instance, offering them daily service in lieu of withdrawal of credit is not a solution. It is a bottleneck. B2B e-commerce needs to enable themselves with technology that cuts down their operating costs versus traditional distributors and then pass on those benefits by way of lower prices, frequent service, complete and relevant assortment, and credit to make their models work.


That is the moat. Operating in a more frugal way than an Indian family business and yet serving the customers with no additional risk than current is where the moat lies. The operating premise that first, let’s grab the land and then worry about economics is untenable.

Scale in this business is a given – there is a trillion $ market out there. The question is, how does one scale to $10 B and make a 1.5% margin on sales? The jury is still out on whether the numbers in this industry will ever get onto that trajectory.


So far, only the narratives, hope, and backgrounds of the founding team were attracting capital. The next round of investments in this sector would clearly be driven by financial performance and not hope and hype. In our current context, where frothy narratives are facing the heat on new fundraise and recently listed entities that have no line of sight to profitability are getting a whack in the public markets, road kills are a given.

So, if someone wants to look out for real businesses, get ready. This sector will offer only that. Businesses that have the scale and free cash flows.