What's Driving the Shift From B2B To B2C In the Thriving E-Grocery Segment Experts say that B2B has a huge challenge to manage with low margins in this segment along with increasing cost of logistics, pricing pressure

Social commerce unicorn Dealshare recently shut down its B2B (business-to-business) arm to focus completely on B2C (business-to-consumer) and D2C (direct-to-consumer). The B2B vertical of BigBasket, posted a wider loss for the fiscal year ended March 31, 2023, according to the annual report of Tata Sons.

We have seen a few more startups scale down or shut their B2B businesses in the recent past. Rajesh Sawhney, founder and CEO of GSF Accelerator spoke about the reasons behind the failure of Udaan, which operates an EB2B model. "What can we learn from Udaan's Failure? Asset heavy models don't scale cost effectively in India ??:- there has been a reckless cost duplication across own logistics, own warehousing and own salesforce. The new infrastructure has not created any significant value either for brands or for retailers. Since Indian Retail works on razor thin margin, asset light models prevail," he said on X.

What could be the reasons behind this shift from B2B to B2C? We asked some experts.

Factors driving the shift

The Indian grocery market is also one of the most complex grocery markets in the world with a huge unorganized segment and a fast-growing organized and branded segment.

According to Statista, the market value of online grocery across India was over 669 billion Indian rupees in 2023. The leading players in the broader e-grocery segment include BigBasket, Reliance JioMart, Walmart-owned Flipkart and Amazon India and in the quick commerce segment leading players include Zomato-owned Blinkit, Swiggy Instamart and Zepto.

Despite this, over 95 percent of Indian grocery stores are made up of Kirana's or a small grocery store, it says. While supermarkets account for about four percent of total grocery shares, online groceries are not even near one percent.

"Online grocery has seen good growth in the B2C segment as new concepts like daily deliveries, 10 minute/quick commerce, which have customer acceptance but a high cash burn rate too. This has also led to many businesses fold their operations. Similarly, B2B segment is also growing but not without its challenges considering the huge number of Kirana stores in India, growing organized retail segment and also the food service market," said Manoj Agarwal, managing partner, Seafund Ventures.

He also added that B2B has a huge challenge to manage with low margins in this segment along with increasing cost of logistics, pricing pressure. Thus, we are seeing many B2B grocery-focused businesses pivoting to B2C segment.

Further, funding is down in the sector because of the current scenario. "As many investors are going slow with writing cheques to high cash burn businesses that also happen to have low margins," added Agarwal.

Take for its Dealshare. The B2B arm brought in nearly 50 per cent of Dealshare's total revenues at one point. And, the startup about 1,000 to 1,100 people on its payroll. But, in January, the company asked around 100 employees to leave. And recently, it shut down its B2B business sacking more than 120 employees.

"We took some action in this direction by moving our operations to Gurugram and consolidating our business to focus on geographies of Jaipur, Delhi NCR, Lucknow and Kolkata with clear priorities on creating an online plus offline model," a DealShare spokesperson told Entrackr in a statement. The spokesperson further confirmed that the company has indeed shifted its focus on its B2C business for now as it aims to be "relevant to its consumers in the market." The shift would mean realigning the company's budgets, reorganising teams and locations etc, the statement added, said Entracker report.

New trends in the online grocery space

According to Agarwal, the new emerging space in grocery will be Premium Grocery as it can lead to higher AOV and has higher margins for the business. We expect to see brands focusing on this segment of the customers who are willing to pay higher for gourmet range of product, he said. Another upcoming trend within e-commerce, including e-grocery, particularly in the organic and premium segment, is cross-border commerce.

According to data shared by our sources, international cross-border shipping from India is expected to be valued at around $ 129 billion by 2025. Further, India is home to approximately 63 million small and mid-sized enterprises, which hold a 54 per cent share in the country's cross-border shipping operations. This is also further boosted by the recent launch of National Logistics Policy (NLP) to promote a seamless movement of goods across India and improve the competitiveness of products in domestic as well as global markets. "Thus far, cross-border B2C e-commerce has been the domain of sellers selling on global marketplaces like eBay, Etsy and Amazon but going forward we expect a lot of Indian D2C brands to expand into this area as well. India is one of the top ten countries in terms of cross-border e-commerce growth," said Akshay Ghulati, cofounder, strategy and global expansion, Shiprocket.

Further, we are also seeing Artificial Intelligence-based sales optimization and personalization. Sustainability is also something that e-grocery players are focusing on. Globally, ready-to-eat meals and subscription delivery are bringing in massive profits for e-grocery players. However, in India, these offerings are yet to take off.