Chemical B2B has room for the creation of a unicorn worth hundreds of billions of yuan, thanks to several favorable conditions

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At present, the chemical industry has entered a new normal. Affected by the development environment at home and abroad, the chemical industry is facing multiple challenges such as overcapacity, rising costs, declining benefits, increasing resource and environmental constraints, and insufficient innovation capabilities. Internet+ provides an important means for the chemical industry to resolve contradictions in industrial development, achieve transformation and upgrading, and enhance corporate competitiveness.

1. Trillion-dollar market size

In 2014, the main business income of my country's petrochemical industry was 13.02 trillion yuan, with 26,235 enterprises above designated size and a total profit of 668.2 billion yuan, ranking second in the world. In addition, in 2014, the apparent consumption of China's entire chemical industry [referring to the output of the year plus the net import volume (the import volume of the year minus the export volume)] was 15 trillion yuan. China's chemical market is the largest, accounting for 30% of the global market, and is the world's largest in terms of volume.

Looking at the current Chinese chemical rubber and plastic industry, there are many participants, and the scale of downstream enterprises alone has reached several million, which is very similar to the market development situation in developed countries in Europe and the United States many years ago (the overseas market has been integrated for decades, and the traditional distribution efficiency of the entire market is very high). China is a major producer and consumer of chemical products, and the trade in the chemical industry is very active. According to statistics, in 2014, the main business income of my country's chemical industry was 8.8 trillion yuan, of which the output value of fine chemicals was nearly 4 trillion yuan, and the output value of liquid chemicals also exceeded 1 trillion yuan. The industry is huge.

2. Government Policy Support

The Guiding Opinions of the State Council on Accelerating the Development of Producer Services and Promoting Industrial Structure Adjustment and Upgrading (Guofa [2014] No. 26) pointed out that "deepen the application of e-commerce in large and medium-sized enterprises, promote online transactions of bulk raw materials, online customization of industrial products, and coordinated development of upstream and downstream related enterprises, and innovate organizational structures and business models"; the Guiding Opinions of the State Council on Actively Promoting the "Internet +" Action pointed out that "vigorously develop industry e-commerce. Encourage enterprises in the energy, chemical, steel, electronics, textile, pharmaceutical and other industries to actively use e-commerce platforms to optimize procurement and distribution systems and improve corporate operating efficiency."

3. Prominent pain points in the industry

In recent years, the chemical industry has shown an overall growth in production, a sharp decline in benefits, weak innovation capabilities, and an extremely prominent contradiction of overcapacity. There is great potential for upgrading and transformation with "Internet +". The chemical industry has a long industrial chain, lacks transparency in price information, and has asymmetric supply and demand information. There is room for transformation and improvement using the Internet and big data technology. Introducing Internet thinking into the chemical industry will effectively improve the industry's operating efficiency.

The common problems facing B2B in various industries are: ① The contradiction of overcapacity is extremely prominent, with supply exceeding demand in the industry; ② The intermediate trade chain is long, information is opaque, and middlemen add layers of price increases, resulting in high transaction costs and low efficiency; ③ There is a lack of professional logistics and financial services.

As for the chemical industry, the first problem is information asymmetry and low transaction efficiency. "When I was working in a factory, I often worried about not getting orders and not finding suitable raw materials. The information in this industry is extremely opaque." "Of course, it is not enough to just make the information transparent. Buyers may not be able to trade due to financial problems such as payment period. Transaction payment period, capital turnover shortage, bank loan difficulties and high private financing costs are another biggest pain point in the industry."

4. Future Profit Model

While helping suppliers sell products, e-commerce platforms can also reduce raw material procurement costs. By adding value-added services such as supply chain finance, logistics, transaction guarantees, supplier reviews and recommendations, they can create a data-centric, closed-loop ecosystem covering transactions, finance, logistics and other services, thereby increasing merchant stickiness.

In terms of risk control, it has developed into a system architecture that integrates risk control due diligence, Internet financial access, bank payment channels, insurance guarantees, and access to bank credit systems. Overall, supply chain finance not only solves the issue of transaction periods, but will also have great profit margins in the future as the financing costs of the platform are continuously optimized.

From another perspective, supply chain finance will be an important means to optimize the trading platform. For example, combined with the risk control system, the platform can conduct data credit investigation based on a factory's raw material purchase list, upstream and downstream, price and frequency data, so as to cut into the procurement and sales system, while also improving the ability to control the macro risks of the entire supply chain.

5. Capital pursuit

According to incomplete statistics, a number of chemical e-commerce platforms have obtained financing recently. Kuaisu.com has raised more than RMB 300 million, and Zhaosu.com has raised nearly USD 40 million.

Currently, the hot B2B industries, such as steel, building materials, chemicals, agriculture, and electronics, have a market size of trillions or even tens of trillions. Take the chemical industry, which is worth tens of trillions, for example. The three sub-industries of petrochemicals, plastic chemicals, and fine chemicals all have trillions of market size. Therefore, no one doubts that these industries can breed platform companies worth tens of billions of dollars, and there is even room for imagination of unicorns worth hundreds of billions of dollars.