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What is B2B (business-to-business)?

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B2B (business-to-business)

B2B (business-to-business) is a type of electronic commerce (e-commerce) where products or services are exchanged between businesses rather than between businesses and consumers (B2C).

A B2B transaction takes place between two companies, such as wholesalers and online retailers. Business-to-business models usually benefit both organizations and have similar negotiating power.

According to Grand View Research, global B2B e-commerce will reach $20.9 trillion by 2027, representing a CAGR (compound annual growth rate) of 17.5%.

There are different categories of websites that facilitate B2B (business-to-business) transactions, including:

  • Company websites. The target audience of a company website is business clients and employees. B2B websites function as mini-trade shows around the clock. Customers or registered users may have access to an exclusive extranet through a company website. Businesses can purchase directly from B2B websites of some companies.
  • Exchanges between suppliers and buyers of products. These exchanges enable company purchasing agents to get quotes from multiple vendors, request proposals, and bid on products. Some e-procurement sites serve a variety of industries while others serve niche markets.
  • Portals for specialized industries or vertical markets. Portals for specific businesses provide information, product listings, discussion groups, and other features. The purpose of vertical portal sites is broader than procurement sites, although they may also support buying and selling activities.
  • Brokering sites. Sites such as these act as intermediaries between service providers and potential customers who need their specific services.
  • Information sites. Companies and their employees can find information about a particular industry on these sites, sometimes known as infomediaries. Search sites, trade associations, and industry standards organizations are all examples of information sites.

There are many B2B sites that fall into more than one of these categories. The models for B2B sites are still evolving, however.

There are also software tools and templates for building B2B websites, databases, methodologies, and transaction software in B2B enterprises.

What is the process of B2B?

B2B refers to the sale of a product or service from one company to another. There is usually a department or group that uses the vendor’s products. Occasionally, a single user on the buyer side makes a transaction to support the company’s business goals. Office furniture, computers, and productivity software are just a few of the products involved in B2B transactions.

B2B product selection processes are handled by a buying committee for larger or more complex purchases, which includes:

  • Business decision-makers, such as budget-makers;
  • Technical decision-makers, or people who evaluate prospective products’ capabilities;
  • People who provide input on a decision, such as influencers.

It is common for large purchases to involve a request for proposal, in which the buyer invites prospective vendors to submit proposals detailing their products, terms, and prices.

What is the importance of B2B?

The importance of B2B lies in the fact that every business needs other businesses’ products and services to launch, operate, and grow.

Office space, furniture, computer hardware and software are some of the services provided by a company’s B2B suppliers. Suppliers provide companies with the food in their kitchens and the signs displayed on their buildings.

Related article: What companies are in the consumer services field?

Types of B2B companies

B2B companies come in several forms, including:

  • The producer creates, designs and manufactures their own products. Indirectly, producers sell their products to retailers or resellers or directly to businesses.
  • Retailers and resellers sell products and services made by other companies to businesses directly. It is possible for retailers and resellers to sell online as well as through physical stores, including B2B e-commerce vendors.
  • Consultants and agencies provide advice, oversight, and subcontracting services to businesses. Ad agencies, for example, manage and execute multimillion-dollar advertising budgets for consumer brands. Website agencies design and build websites and mobile apps for brands.

B2B industries

The following industries are served by B2B companies:

  • Financial services
  • Technology
  • Manufacturing
  • Construction
  • Retail
  • Telecommunications
  • Insurance
  • Healthcare
  • Education
  • Engineering
  • Marketing and sales
  • Real estate
  • Food and beverage

Benefits of B2B (business-to-business)

B2B benefits include:

  • Deals with a large average size. B2B (business-to-business) companies can grow their sales with fewer high-value deals than B2C companies, which may have to make thousands or even millions of individual sales. The average B2B transaction is $491, while the average B2C transaction is $147. Since B2B companies sell and buy in bulk, the average B2B transaction is $491.
  • High switching costs. It is likely that B2B customers will remain loyal if they are satisfied with the product and service. B2C customers, on the other hand, can be finicky and not loyal, resulting in high churn rates.
  • Large market potential. Companies targeting B2B enterprises cover a wide range of industries and geographies, giving them a wide range of competitors. It is also possible for them to specialize in one industry, such as technology, and become leaders in that field.
  • Using an efficient digital transaction model, B2B organizations advertise and conduct business online, making it easy for clients to place bulk orders.
  • Faster delivery. Due to the efficiency of B2B e-commerce tools for sellers, they expedite the buying process for buyers as well. Data across channels can be synchronized, fulfillment and inventory updates can be automated, and complicated orders can be managed through integrated systems.
  • Built-in order management Cloud-based e-commerce platforms integrate easily with back-end systems. It enables B2B sellers to synchronize order inventory and customer data across all channels.

The challenges of business-to-business

These are some of the challenges associated with B2B e-commerce:

  • Keeping customers for a long time. It is often difficult for B2B companies to convince buyers to make repeat purchases.
  • Limited market. Business-to-business companies can target organizations across a wide range of industries, but the market size is limited. Small and midsize B2B companies are particularly susceptible to this risk.
  • More competitive. B2B markets are competitive because they are small.
  • Process of making decisions takes longer. The decision-making process in business can be slow because many stakeholders are involved.
  • Price negotiation. Since B2B buyers purchase in bulk, they usually negotiate better prices, ask for discounts, or demand extra services.
  • Supply chain management in e-commerce can be challenging. It is especially important when multiple partners are involved in the supply chain and need access to the same data. When there is a miscommunication in the supply chain, the process can be slowed down.

Here are some examples of B2B companies:

Amazon

Amazon, a well-known B2B (business-to-business) company, has a B2B business called Amazon Web Services (AWS). Businesses can use AWS for computing power, database storage, content delivery, and other services. The company has customers such as Expedia, Philips, GE, Hess, and Hess. The AWS Cloud is available in 80 availability zones across 25 geographic regions worldwide.

Caterpillar

A variety of Caterpillar products are sold to other businesses, including construction and mining equipment, diesel and natural gas engines, industrial turbines, and diesel-electric locomotives. Caterpillar Financial Services provides financial services to businesses as well.

Alibaba

Alibaba ranks among the world’s largest online commerce companies. Alibaba’s B2B marketplace connects and transacts business between buyers and sellers around the world.

Quill

The Quill e-commerce company is owned by Staples and sells office supplies to small and midsize businesses. More than 100,000 products are marketed under the Quill brand, as well as Mead, Coastwide, Snack Jar, and Java Roast.

Upwork

The Upwork platform connects freelancers with employers for projects such as web and mobile application development, social media marketing, content writing, graphic design, and more.

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