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Whether companies will embrace going digital or not, most customers undoubtedly have.
That's why modern businesses need ecommerce to stay current.
While most ecommerce talks center on B2C (business-to-consumer) sales, B2B ecommerce is worth 5 times more, globally valued at US$17.9 trillion, and is expected to grow.
If you're curious about B2B ecommerce, stay tuned. This article breaks down definitions, examples, pros and cons, types, platforms, and what the future looks like.
Business-to-business electronic commerce or B2B ecommerce is the online transactions that happen directly between businesses.
Let's say a law firm purchases a legal software license through a provider's website. That's B2B ecommerce.
Or a furniture manufacturer orders essential materials from a supplier's online store. That's also B2B ecommerce.
Some key characteristics of B2B ecommerce include:
The main difference is B2C (business-to-consumer) sells to individual customers while B2B (business-to-business) sells to other business buyers.
However, the target is not the only distinction. B2B ecommerce is also more complicated since the business-to-business model typically involves longer selling cycles, more customized products, and a more complex supply chain.
This table summarizes the key differences:
| B2C Ecommerce | B2B Ecommerce | |
|---|---|---|
| Target | Individual buyers | Businesses buyers |
| Stakeholders | Typically one individual buyer | Multiple decision-makers, such as executives, managers, leads, etc. |
| Order volumes | Smaller order volumes | Larger order volumes |
| Customer behaviour | B2C customers are more prone to impulse buying and emotionally driven purchases. | B2B buyers look at the long term, which means they spend more time researching and sourcing recommendations. |
| Sale cycle | Shorter sale cycle | Longer sale cycle |
| Pricing and payment | Simple pricing and payment structures | Negotiated pricing and payment terms |
| Repeated purchasing | Not necessarily repeat purchasers | Generally repeat purchasers |
B2B ecommerce comes in many forms. Among those could be wholesalers, manufacturers, online marketplaces, and digital or software-as-a-service (SaaS) providers.
Here are some prominent names that you might have heard of, such as:
Alibaba
Led by Jack Ma and first launched with the vision to bring small and medium-sized businesses international sales, Alibaba has grown into one of the biggest online B2B marketplaces in the world with around 900 million active buyers. This giant store offers a vast bulk selection of products, from electronics to clothing, catering to businesses.
Microsoft
Aside from making Bill Gates a billionaire and selling software and services that everyone on the internet knows (Windows, Office, Xbox), Microsoft makes a fortune through enterprise licensing of Office 365, Azure, and Dynamics.
DocuSign
DocuSign is an electronic signature technology and digital management service used by brands like Unilever, UCSF, Aon, and more.
Many factors make B2B ecommerce a great model. Here are some of the unique benefits of doing business-to-business on online platforms.
Increased brand awareness
Compared to a physical storefront discoverable only in local areas, a well-established online store allows businesses to be discovered by a much broader audience at any time and from anywhere. Targeting specific audiences with relevant ads can accelerate this process.
Scaleability
B2B ecommerce can reach more customers and broader markets by optimizing an online storefront or creating new sales channels, which are much more flexible and cost-effective than physical ones.
Automation that boosts sales
Automated sales processes help keep the customer journey smooth and possible 24/7. Customers can place orders and make payments outside of business hours. That is where convenience comes in to retain customers and increase sales opportunities.
A wealth of business and marketing tools
Going online enables access to a suite of ecommerce tools, such as data analytics tools, advanced reporting tools, and more.
Multi-location capabilities
B2B ecommerce allows sales to be made simultaneously through multiple online channels and marketplaces, which won't be imaginable for a physical storefront.
Product catalogues, pricing, and content can be managed across all sites from a single interface. Consistency is maintained while reach and exposure expand.
B2B ecommerce comes with unique challenges, and major ones are the following
Security and payment concerns
Business-to-business transactions involve large purchases and sensitive financial information, which can be challenging online. Payment gateways must prevent fraud and ensure authorized access. Extra verification and authorization steps may be required. Therefore, choosing the right payment gateways or payment methods is extremely important.
Price comparison and negotiation
High-value purchasers want the best deal available and can compare the rates more easily than ever, just with clicks. Therefore, businesses may need to be more flexible with their list prices to win contracts or sustain partnerships. This is also why the B2B ecommerce market is improving its price configurations.
Still, even with price configuration, the opportunity to negotiate seems more limited than face-to-face interaction. Many B2B ecommerce stores counter this by encouraging buyers to contact for more customized options.
Customer's doubts about physical products
While B2B ecommerce increases visibility, the inability to physically examine goods may hinder online sales or lead to after-sales disputes for some products. Many businesses provide detailed product descriptions and video demonstrations to address this.
Despite this limitation, ecommerce remains a convenient choice for many people, especially for various services and repeat purchases by existing customers.
Complex supply chain management
With bigger exposure, bigger orders, and customer expectations may come, which require even more effective supply chain coordination to meet business needs while managing cost and delay.
💡Tips: Going online may bring bigger orders and more complex supply chain management, but digitalization is catching up fast as well. A number of supply chain solution catering to B2B is available, such as IBM and Achilles.
Businesses that sell to other businesses online fall into one of the many types of B2B ecommerce models, and some may fit into more than one category.
Here are the 4 major types of B2B.
B2B2C (business-to-business-to-consumer) is when two companies collaborate to sell products or services to the same end consumers. Typically, one company produces goods while another handles marketing, fulfilment, and customer experience.
Another scenario of B2B2C is when wholesalers or manufacturers produce goods and then sell them to another business that sells directly to consumers without an intermediary.
Amazon
Amazon is one of the biggest public companies existing and it accounts for 49% share of the U.S. e-commerce market. It caters to B2C, B2B, and, you guessed it, B2B2C.
Amazon’s ecommerce hosting and product inventory service is a B2B2C model that allows business to reach larger audiences and their customers to benefit from Amazon’s fast shipping and 24/7 customer service.
Instacart
Instacart is a full-service order fulfilment that lets customers order from its grocery store partners’ catalogues, and Instacart gets them delivered.
Wholesale B2B is when one business sells products to another business in large quantities, typically at discounted or wholesale pricing. Many wholesale customers resell those products at retail value.
Sysco
Sysco wholesales food and non-food products to independent and chain restaurants, healthcare facilities, and educational institutions.
Costco Wholesale
One of the largest wholesalers, offering a diverse selection of products from technology to jewellery. It advertises affordable warehouse costs and caters to both businesses and individuals.
Manufacturers produce goods in large amounts, using raw materials, labour, and machines, and then sell those products to businesses, wholesalers, or other manufacturers.
Samsung Electronic
A phone and home appliances, yes, but also a major manufacturer of electronic components such as batteries, camera modules, and displays. Those components are supplied to various other brands, Sony and Apple included.
Kohler
A company and manufacturer of bathroom and kitchen products sold to home goods warehouses, hospitality, and service establishments like hotels and restaurants.
A distributor buys in bulk from manufacturers and resells to B2B consumers.
This partnership exists because distributors handle tasks that manufacturers don’t do in-house, such as packaging, shipping, and marketing. Therefore help manufacturers achieve more streamlined supply chains, resulting in better customer experiences.
Ingram Micro
Ingram Micro is one of the largest distributors of IT products. It offers technical support, financing, and marketing to IT resellers.
Grainger
Grainger sources industrial supplies and equipment from manufacturers and sells them to businesses and institutions. It manages inventory, fulfilment, and technical support for its business customers.
🔍Tips: While there are other ways to categorize types of B2B ecommerce, these 4 types categorized by the nature of the enterprise and its prospective audience, are the most popular.
A B2B ecommerce platform is an online marketplace or medium that allows businesses to list their products and services, find potential business buyers, manage collaborations, gain network insights, and expand their reach into wider markets.
Shopify Plus
Shopify Plus is one of the most well-known ecommerce platforms, catering to both B2C and wholesale B2B. It advertises frictionless processes, fast checkout, and everything needed for a smooth and scalable online business.
BigCommerce
BigCommerce is a platform for businesses that sell to wholesale and retail customers. It focuses on integrating businesses’ existing software, customized experience, and ecommerce features.
OroCommerce
OroCommerce is a B2B ecommerce platform and CRM software that advertises robust B2B back-end and impressive customer experience on the front end. It comes with Enterprise Edition meant for mid to large-size businesses.
💡Tips: When choosing an ecommerce platform, look for both user base and functions. Most B2B Ecommerce platform goes beyond an online marketplace by offering in-house tools to optimize sales and commerce operation, such as automating buyer signups and syncing inventory and orders.
Although the B2B ecommerce model grows at an impressive rate, many misconceptions hinder businesses from taking its advantage.
The most common ones that we hear often are:
B2B ecommerce is not just for giant companies. It is accessible to businesses of most sizes and industries, with numerous platforms and solutions available to meet a wide range of demands and budgets.
It has its risks but not without solutions. Most B2B ecommerce payments today are secure and trustworthy. Data and online transactions can be protected from unauthorized access or misuse by using encryption, authentication, and verification technologies.
Not necessarily true. Forbes points out that 70% of buyers are open to spending over $50,000 digitally, remotely, or through self-service, without meeting a sales rep.
If your site and payment process are secure, and you manage to communicate to customers about it, there's not much to be scared about.
Since the B2B market is small and fierce, many fear disclosing sensitive information like prices to competitors. However, most B2B ecommerce websites actually require potential business buyers to log in before revealing the custom pricing.
McKinsey & Company report that 60% of business buyers are willing to place orders through digital platforms, which could be why almost two-thirds of B2B sellers are looking to further execute online transactions. Those numbers seem more of a must-have opportunity.
B2B ecommerce is great today but what are the trends that will shape its tomorrow?
See the quick answers below.
Smartphones made up 50% of B2B searches. There's no doubt businesses must ensure their online platforms are as mobile-friendly as they are quick and secure.
52% of B2B marketing leaders are looking to invest more in personalization technology. Evidently, personalized customer experience is becoming more important in B2B ecommerce.
Businesses must consider account-based, context-based, and dynamic personalization. This means segmenting business clients by account, understanding their industry-specific needs, and tracking customer behaviour to tailor solutions.
User experience is critical for any ecommerce business, and B2B is no exception. Avionos reports that 87% of B2B clients prioritize an effective online sales portal and would pay a premium for a good experience. 90% will even change suppliers for a better ecommerce experience.
These days, nothing can go online without talking about data. Customer data helps businesses understand and predict customer behaviour and generate personalized recommendations, which lead to better experiences, and increased satisfaction, retention, and revenue.
While this is a B2C trend, it's getting more popular among business customers. A company like Resolve that offers buy now pay later specifically for B2B has risen in popularity due to customers showing greater interest in this option. This could easily be a new way to boost the checkout conversion rate.
