The rise of B2B ecommerce may seem unexpected, since bulk buying has been associated with traditional sales channels for a long time. But a report by Statista calculated that the global B2B ecommerce market value was worth around USD $14.9 trillion in 2020. This was over 5 times the value of the B2C ecommerce market. So it’s clear that this evolution is making sense to B2B sellers and buyers. Let’s take a look at why.
In a way, the transition from traditional B2B to ecommerce is similar to the transition in the B2C market. Both sectors were overtaken by ecommerce very quickly, and for similar reasons. The B2C market has always offered buyers the flexibility and independence that B2B buyers lacked, and this became especially apparent after the B2C market shifted to ecommerce and self-service. Noticing this, B2B buyers also started to demand the flexibility of ecommerce, and their wholesalers had no choice but to change as well.
This article explains traditional B2B selling, its shortcomings, and the basics of the B2B ecommerce model that businesses use today.
Traditional B2B
Let’s first take a look at what B2B is and how it has traditionally worked, using an example. B2B, or business-to-business sales, is when one business sells products wholesale or in bulk to other businesses. The transactions are strictly between two businesses, unlike B2C or business-to-consumer transactions which involve a consumer. We’ll talk more about the differences between B2B and B2C later in this article.
If you look at manufacturing businesses, they don’t usually manufacture every part that goes into the final product. So to assemble the finished product, they’ll have to purchase some parts from other vendors. This would make the manufacturing business a B2B buyer, and their vendor a B2B supplier. For instance, an automobile maker assembles parts to form the final product, an automobile. Most of the parts, like the tires, electronic systems, and batteries, are purchased from other businesses. The manufacturers of those components are classic examples of B2B suppliers.
Shortcomings of traditional B2B
The traditional B2B model has a few faults, which B2B ecommerce helps to avoid.
Time-consuming
Completing a B2B through traditional sales channels takes a lot more time than it does with ecommerce. A traditional B2B sale normally starts with one business placing an order with their vendor. In order to keep things organized, some vendors check their orders just once at the end of the day. After receiving the order, the vendor needs to manually check whether their inventory has sufficient stock to fulfill the order. If they do, then the product can easily be packed and shipped off to the customer, but if they don’t, then they need to restock or manufacture more, which further extends the order time. Without at least part of this process performed online, it can take a very long time. To complicate matters, businesses that depend on “just-in-time” manufacturing have a hard time working with the traditional B2B model’s delays.
By switching to online ordering, businesses can cut down a lot of the time spent on each order. The businesses trying to make purchases can check their vendors’ stock without having to wait for someone to manually open their order, and they can place orders to be received, processed, and shipped automatically.
Capital-intensive
With a traditional B2B model, businesses need to shoulder significant overhead expenses: store and warehouse rent, labor and maintenance costs, marketing fees, and more.
By going online, B2B sellers can market to more business customers with a smaller advertising budget, and without a brick-and-mortar store. Ecommerce makes selling in the B2B market less expensive.
Inflexible payments
A traditional sales process doesn’t offer many modes of payment: just checks, cash, and cards. With fewer choices, businesses are likely to receive more late payments. With B2B ecommerce, suppliers can offer a variety of online and offline payment modes and choose whether to pay immediately or in installments. Offering flexibility elevates the seller’s chances of getting paid on time.
Limited scope
With a traditional sales model, a business’ scope is usually limited to supplying a local area, or at most, a national market. But a good B2B solution needs to be able to expand to new markets and buyers, which is much easier when you’re online. Getting online allows B2B businesses to market and be found by other businesses from within their sector, not just the ones that are close by. Ecommerce makes it easier for sellers and their buyers to do business in any part of the world.
What is B2B ecommerce?
B2B ecommerce simply refers to one business selling wholesale online to other businesses. It is ideal for distributors or manufacturers that are already selling wholesale and are looking to expand further. B2B ecommerce allows different industries to make online transactions with each other.
How does B2B ecommerce work?
B2B ecommerce starts with setting up a B2B portal, which is very similar to an online retail store, but is used between two businesses. After a wholesaler or manufacturer sets up their store, they can display product details such as description, stock on hand, prices, and any discounts or deals that may apply. Interested B2B buyers can view and place orders just like they would in an online retail store. Also like online retailers, online B2B vendors can allow their business customers to create an account while making a purchase. This lets them access their account information, like order history and shipping preferences, and also provides a little more assurance of the safety of their transaction.
Think of buying from a B2B portal like buying from an Amazon seller. Vendors sell products on Amazon, and they are grouped into categories that help customers find what they’re looking for easily. Customers can view images of each product, along with details like price, stock on hand, and the vendor’s business name and contact info. With enough time, a customer can browse and compare to find the best offers from different vendors. Amazon also remembers previous purchases made from your account and shows you similar offers that can help you shop quickly. Similarly, a B2B portal displays item details, lets business customers browse and place orders, and uses account history to show the buyer relevant items and deals.
Switching from a traditional B2B system to ecommerce can be difficult at first, but it means a change for the better. Traditional B2B requires you to spend more time completing orders, costs you more money to set up a physical store and maintain it, and limits your customer reach to a geographic area. B2B ecommerce saves you time and money on every individual transaction, offers the chance to expand internationally, and is more flexible to your business’s unique requirements. If you’re looking to upgrade your traditional B2B sales model to something that offers more benefits to your business, B2B ecommerce is your answer.