Funding into e-marketplaces fell 72% in 2022 | The Financial Express

Funding into e-marketplaces fell 72% in 2022

Almost 20 marketplaces reached more than $1 billion in GMV and many players are turning profitable.

Funding into e-marketplaces fell 72% in 2022
However, by 2022, deal volume in internet marketplaces tapered off to 130.

Funding into internet marketplaces across B2B and B2C companies declined 72% year-on-year in CY2022 (year-to-date) to around $4.5 billion from a record high of $16 billion in the previous calendar year, estimates from the report released by Bain & Company and Accel on Thursday showed.

The report titled ‘The Rise of Digital Bazaars in India’ added, however, that deal value actually more than tripled from CY2018 to CY2021 from $3.5 billion to $16 billion, respectively. Deal volume (number of deals) also doubled from around 100 deals reported in 2018 to 200 in 2021. However, by 2022, deal volume in internet marketplaces tapered off to 130.

Roughly 110 individual internet marketplaces raised funding in 2022, compared to 200 companies in 2021 and just around 100 in 2018, the report said. B2C e-commerce, B2B e-commerce, and online food delivery were among the highest-funded marketplaces sectors, together accounting for close to 60% of total funding received in the last five years. From B2C e-commerce marketplaces leading the share of deal volumes in 2018, B2B e-commerce marketplaces emerged as the frontrunner in 2022, with deal volumes growing to 31% of the total deals in the year so far.

With a large addressable market, growing online shopper base, and increasingly digitised MSMEs, online marketplaces in India contribute more than $100 billion in gross merchandise value (GMV), with B2C e-commerce marketplaces being the single largest segment, contributing $50 billion.

Also Read: 15 million MSMEs to buy and sell goods online by 2027: Report

Over the next five years, the online marketplaces sector is expected to more than triple to reach $350 billion in GMV. These marketplaces will be creating $400–500 billion in enterprise value, contributing more than 5% to India’s GDP, enabling more than 15 million micro, small, and medium enterprises (MSMEs) to grow their businesses online, and creating seven million jobs by 2027.

Arpan Sheth, partner at Bain & Company, said online marketplaces have contributed to India’s growth story by offering greater access to capital and innovative financing solutions for traditionally underserved segments. “They have also enabled MSMEs to transact online with an increased pan-India reach, and have provided employment opportunities to more than three million gig workers in India,” Sheth said.

India has a vibrant and successful marketplace landscape, demonstrated by the sheer breadth of more than 300 funded marketplaces across multiple categories like retail, education, healthcare, travel and financial services. Almost 20 marketplaces reached more than $1 billion in GMV and many players are turning profitable.

While online marketplaces will continue to be dominated by B2C e-commerce with 40% of the total GMV in 2027, the B2B e-commerce marketplaces GMV is slated to grow by five times its current size to reach $55 billion, followed closely by online food delivery, which will almost triple in size to reach nearly $22 billion, the report added. Not just for buyers and sellers, marketplaces have also seen significant traction with investors in recent years, having received cumulative funding of $30 billion between 2018 and October 2022.

The upstream B2B segment presents a $1 trillion+ opportunity and a high margin potential. With fragmented supply, the need for disintermediation, and government initiatives being key growth drivers. Fintech marketplaces have also grown owing to the low penetration of financial and insurance products, digitisation of user base, and availability of easy-to-use digital platforms. An approximately $200 billion addressable market and supply chain inefficiencies have resulted in a surge of tech-based shipping and logistics marketplaces.

Anand Daniel, partner at Accel, said India is one of the world’s fastest-growing and most dynamic emerging markets. “More than 1/3rd of large outcomes in our start-up ecosystem have been marketplaces and contribute to more than $100 billion in GMV. Accel India is fortunate to have partnered with many of these marketplaces from seed to scale. We have invested more than $700 million in these companies, and continue to look for more such opportunities,” Daniel said.

The report further pointed out that sectors like gaming, caregiver services, creative content, Web 3.0, have large-scale marketplaces in mature markets, but are currently nascent in India. “They represent future trends in the Indian marketplace landscape, and are a precursor for these segments to grow large in India given proof of scale in the US and China, where multiple unicorns are present in these areas,” the report added.

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First published on: 02-12-2022 at 02:00 IST