Overview-Halal B2B e-commerce market landscape and challenges

The global e-commerce marketplace is estimated at $5.1 trillion and is expected to grow to double the size of retail e-commerce, or B2C, by 2020. With Muslims representing a critical customer segment across the Islamic Economy lifestyle sectors, there are substantial opportunities for dedicated e-commerce platforms that facilitate the trade of halal products.

What is the market landscape for halal B2B e-commerce platforms and what are the key challenges you should know if you’re thinking of entering this market?

GLOBAL MARKET

The largest sector categories of B2B e-commerce sales sites are petroleum and pharmaceuticals but electronic goods are expected to grow the fastest.

The two largest global B2B e-commerce players by revenue, ExxonMobil Corp. and Chevron Corp., are U.S.-based and sell oil commodities to corporate energy buyers through a commercial e-commerce platform, SAP Hybris software, which was launched in 1997.

ExxonMobil and Chevron are both public companies listed on the New York Stock Exchange. ExxonMobil generated B2B e-commerce revenues of $43.45 billion in 2015 (16 percent of total revenue) and Chevron $22.33 billion in the same year (17 percent of total revenue), according to B2B Ecommerceworld, an e-commerce news website.

The third largest B2B e-commerce player globally, and by far the largest in China is Alibaba Group, which holds an estimated 40 percent of China’s market share by revenue, according to EnfoDesk. Founded in 1999 from China, Alibaba Group hosts the largest global B2B e-commerce site, which connects buyers and sellers. Alibaba had $12.3 billion in sales in 2015 and undertook an IPO in 2014 on the New York Stock Exchange.

HALAL OPPORTUNITY

There is significant scope for B2B e-commerce across the supply chain for key halal market segments, including food, pharmaceuticals and cosmetics, as well as modest fashion. Halal is an area that many emerging e-commerce platforms are seeking to address.

According to data shared by halal B2B e-commerce site DagangHalal during the Halal Congress at Spain's industry trade fair Alimentaria in April, and based on WTO statistics, the value of halal products traded via e-commerce was estimated at $123 billion in 2015 and is expected to reach over $230 billion in 2020.

HALAL PLATFORMS

Global players including Alibaba have taken significant share in the market with an estimated 1,800 “halal suppliers” as of September 2014, according to Rushdi Siddiqui, founder of Zilzar, when interviewed by Salaam Gateway in 2015.  However, DagangHalal, Zilzar and Aladdinstreet have emerged in the last few years to offer Shariah-compliant solutions to further cater to the Muslim market.

Malaysia-based DagangHalal is the pioneer in the sector. It was founded in 2007 and caters to companies globally, with the majority from Southeast Asia. There are over 21,000 halal products from over 4,000 sellers on the platform, including pharmaceutical products and ingredients, personal care products and ingredients and food ingredients with flavors, sauces, and additives such as halal gelatin.

DagangHalal’s key point of differentiation is its Halal Verified Engine, which it leverages to confirm the halal authenticity of suppliers.

The company was listed on London’s ISDX Growth Market Exchange in April this year and was valued at over $20 million. DagangHalal itself serves as a case study on how to access Western capital markets and to communicate the halal market value proposition to non-Muslim investors.

Zilzar, founded in 2014 also based in Malaysia, is a Muslim lifestyle B2B and B2C trading platform. Zilzar’s products and sellers are verified by certification bodies. The company currently has nearly 25,000 suppliers and over 30,000 products listed.  

Aladdinstreet is the newest platform. Founded in 2015 also from Malaysia, it plans to enter the B2B and B2C halal markets.  Aladdinstreet received an investment of $5 million in 2015 and plans to accommodate 1,500 merchants and 30,000 products online.

CHALLENGES AND CONSIDERATIONS

There are a number of challenges and considerations in addressing the halal B2B e-commerce opportunity.

Getting companies online

A large number of smaller companies across the halal products marketplace tend to operate offline and are not always aware of the benefits of having an online presence.

These were early challenges DagangHalal faced. It addressed both through its direct outreach and product focus, helping small and medium enterprises (SMEs) access a broad market.

DagangHalal CEO Khairil Ismahafiz said, “Quite often SMEs have a limited budget for branding and marketing. With our platform, we really help SMEs build their brand on a global basis … [and we] have a trade leads manager and provide marketing through social media, more recently online B2B2C, as well as search engine optimization support.”

DagangHalal’s presence at select halal food trade shows globally has been instrumental to signing up small companies on its platform.

Checking authenticity of halal certification

Providing confidence and facilitating trade is a key function that halal e-commerce platforms must carry out, rather than rely on self-certification by suppliers, which is considered a risk on mainstream sites such as Alibaba.

DagangHalal’s Halal Verified Engine is a sophisticated product but to a large extent, all e-commerce platforms require verification.

Aladdinstreet is seeking to work with Malaysia’s certifier, JAKIM, to ensure suppliers are halal, and Zilzar also verifies the halal status of its suppliers.

© SalaamGateway.com 2016