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SMEs who would earlier procure raw material from various sources and stock it for one month to three months, are now opting for B2B e-commerce players like Power2 SME, Tradohub and IndiaMart are offering inventory on behalf of SMEs, thereby reducing the former's inventory costs by over 40 per cent. According to SMEs, this has reduced their stock maintenance cost drastically and also supplying has become easy.
"Because of technology, new kind of traders have emerged in past few years which known as SME marketers. They have strong domain knowledge. SMEs are now not creating inventory as 'just in time' sourcing has increased in India," said Dinesh Agarwal, founder and chief executive officer of IndiaMART.com.
Agarwal said, "SMEs can get local catchment in offline procurement while in online, B2B are offering multiple choice for SMEs to source any materials from online. It connects them with the world where SMEs gets best of their requirements."
According to B2B companies, as the availability of information is easy, many SMEs who stock raw material for a month or three months are now storing their required goods for a week only. Moreover, online procurements is also quite cheaper then offline.
Anil Gupta, executive director of Delhi based Allied Strips Limited said, "Two years back we had stored raw materials for a month which cost us something about Rs 16 crore but after sourcing materials online, we have stopped to create inventory as we get it any time. Supply becomes easy so we need not to stock it."
R Narayan, founder and chief executive officer, Power2SME said, "Direct procurement from large companies may costlier for the SMEs as their order size is small. But as B2B platform we sources different types of raw materials from big suppliers in a bulk and SMEs procure it from us as per their requirements. Sourcing goods from B2B platforms is almost 5-7 per cent cheaper than open markets."
The way 'just in time' sourcing trend is increasing, B2B platforms are also providing working capital fund and marketing support to the SMEs. B2B ecommerce players, by offering various services are trying to tap more and more SMEs from across India.
"B2B ecommerce platforms also assist SMEs in marketing. Moreover, we are offering easy funding for working capital to the SMEs. All this things attracting the SMEs to the B2B platforms," said Narayan.
Power2SME has close to 40,000 registered SME users. The company raised foreign direct investment (FDI) from Inventus Capital, Kalaari Capital and Accel Partners in three rounds of funding. Power2SME raised Rs 42 crore in its third round of funding from its existing investors. A total of $15 million have been raised in the three rounds.
Siddhartha Agrawal, managing director of Surat based Hutch India Private Limited said, "B2B provides raw materials on credit which helps us manage our cash deployment better. Also The production cost has been reduced due to better pricing of raw material that we buy online."