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Did you know that the B2B e-commerce market is two times larger than its B2C counterpart?
The size of the global B2B digital commerce market was valued at some US$7.35 trillion in 2020, while that of the B2B sector stayed at only US$3.67 trillion in the same year
Furthermore, the B2B e-commerce sector is growing at an impressive CAGR of 18.7% (2021-2026), and is expected to top US$18.57 trillion by 2026. Demand for B2B commerce is clearly on the rise, and here’s what you need to know as a merchant.
Business-to-business commerce, also known as B2B commerce, refers to the sale of goods or services by businesses to businesses, rather than to consumers.
B2B transactions take place in many stages of the supply chain, where goods typically start from suppliers who provide the raw materials of the finished products to be sold, then ending with the consumers. In-between stages often require businesses to make transactions with one another, say, between manufacturers and wholesalers.
In recent years, the Covid-19 pandemic and other factors in the macro environment have fundamentally changed the way that people live and work. In particular, greater reliance on online technology is observed around the globe.
Instead of filling up paperwork to conduct transactions in the traditional way, many businesses today opt to use the Internet, which provides greater efficiency for those conducting B2B activities — this is what we call B2B e-commerce.
The types of B2B commerce can be divided into three main categories, each involving different actors along the supply chain. They are manufacturers, distributors and wholesalers.
Manufacturers are businesses that produce finished goods from raw materials, then sell them to distributors or wholesalers before the products reach the end consumers.
To name an example, an automotive manufacturer creates car bodies, engine parts and other components before they’re assembled and ultimately sold to car buyers.
While manufactured goods conventionally pass along the supply chain through distributors, wholesalers and retailers before being accessible by individual consumers, some manufacturers now prefer to adopt a direct-to-consumer (D2C) model by selling directly to the end users.
By bypassing intermediaries that profit from markups every step of the way, manufacturers that deal directly with consumers can accordingly sell at lower prices yet achieve higher profit margins, creating a win-win scenario for both sides.
That said, building a D2C business model often requires a fair amount of capital as you need to at least establish an online storefront, bear a number of overhead costs (e.g. warehousing, logistics and packaging), not to mention invest in B2C marketing before you can start earning money via this route.
Looking to boost your business’s bottom line by building a D2C brand?
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Often, manufacturers lack the means to reach and sell to customers in several markets or the resources to contact many retailers at once. This is where distributors come in.
Put simply, distributors work closely with manufacturers, acting as a middleman between manufacturers and other downstream entities in the supply chain.
A distributor usually buys non-competing products or product lines from manufacturers, sells them to retailers or customers, and profits from the markup between the final selling price and the cost of acquiring the goods.
Most distributors also provide a range of value-added services such as quality control, warranty and technical support to manufacturers.
Wholesalers purchase goods in bulk from manufacturers and sell relatively smaller portions of what they purchase to retailers. This occurs in many industries such as food, apparel and medical supplies.
Compared with distributors, wholesalers provide for a smaller portion of a market. Unlike distributors, wholesalers don’t have to promote the goods that they sell, or enter into contracts with manufacturers.
In light of technological advancements as well as the need for greater convenience, however, digitization of wholesale B2B has become a popular trend. Many B2B suppliers now have their goods neatly displayed on websites to provide seamless shopping experiences for their customers. More of this trend will be discussed below.
From manufacturers to wholesalers and marketplaces, business-to-business commerce exists in many shapes and forms.
Boeing, for example, is a manufacturer of aircraft which sells finished goods to commercial airlines, whereas Amazon Web Services serves millions of business users with its multifarious cloud services.
To help you get a grasp of how the B2B commerce landscape looks, four examples of B2B commerce are introduced and detailed below.
Dubbed the “Amazon of China”, Alibaba is a Chinese technology company with a focus on B2B e-commerce. It operates a B2B marketplace where wholesalers can source and buy virtually anything from baby bath oil to the latest Xiaomi wireless earbuds in bulk.
Using Alibaba, sellers can create a virtual storefront to advertise their products, which can then be bought by other businesses. Alibaba also provides marketing tools and data analytics to help merchants optimize their sales performance.
Peeba is a B2B wholesale online platform that connects Asia-based retailers with unique brands around the world.
Unlike the conventional wholesaling process, where payment is made at the point of sale or delivery, Peeba has partnered with Choco Up to provide a “sell first, pay later” option, allowing retailers to test and sell their products in the market before actually paying for their purchases.
Peeba even offers a generous 60-day returns policy to buyers using its platform. Any unsold products can be returned within a 60-day time period with no questions asked. As such, Peeba helps retailers tap into its vast network of brand owners while managing operational efficiency and inventory risks.
Although Amazon is most known for being a B2C marketplace, it also offers cloud computing services under the canvas of Amazon Web Services (AWS).
With AWS, businesses can avail of database storage, data processing, analytics and other functionalities provided by the tech giant. These web services can be used in a multitude of ways across different industries, such as finance, gaming and big data management. Many companies from over 190 countries utilize AWS.
As a manufacturer, Boeing develops and produces aircraft such as the Boeing 777 and Boeing 737 MAX, as well as rockets, satellites, missiles, and other military defense weapons. Aircraft produced by Boeing are typically sold to commercial airlines, that is, finished products are sold to other businesses for their use.
Atypical of the usual supply chain, however, is that aircraft are sold directly to airlines as end consumers. For other businesses such as automotive or clothing manufacturers, it’s common to make use of distributors and wholesalers to pass products further down the supply chain.
B2B selling could be harder than doing a B2C business. This is because businesses tend to be more sophisticated purchasers with much higher stakes.
After all, business buyers act on behalf of their whole department, company or organization. The person who acts in such capacity has his or her career at risk as well.
Running a B2B business therefore requires much more skill and care compared with selling to individual consumers, and here’s how you can navigate the competitive landscape.
A competitive advantage essentially sets a business apart from its competitors. Some well-known and time-tested ways to gain a competitive edge include differentiation (e.g. offering unique products or services) and cost leadership (e.g. selling at lower prices).
In the case of B2B commerce, however, building a reputation for your brand and gaining the trust of your customers might require more than that.
For example, better customer support, supply reliability and fulfillment efficiency are ways to attract new customers and make existing ones stick.
So the next time you hit a bottleneck, look beyond your brand’s offerings and think about the hidden yet important aspects that will make your business thrive further.
As we’re now in the 2020s, millennials who were once young and green now hold influential, if not pivotal positions in their respective organizations.
In fact, a survey revealed that more than half (56%) of millennials now fill director roles or above, and are primary decision-makers at their companies.
This insight has profound implications for businesses, who must adapt to the sourcing patterns of millennial B2B purchasers. A good place to start is to offer online services, as this cohort of buyers are found to make 60% of their purchases online.
Furthermore, the use of searchable catalogs, chat boxes, real-time availability and order tracking would help improve the e-commerce customer experience and appeal to Gen Y buyers.
While B2C customers are known to place strong emphasis on the quality of support provided to them pre- and post-sales, the standard isn’t any lower in the B2B setting.
Assigning a tailored sales representative to take care of each of your B2B customers is therefore highly advisable as the representative will be able to quickly and accurately answer customers’ questions as they arise.
Contrast this with the case where you leave unknowns in the information that you provide to customers. This essentially forces them to look for answers elsewhere, and runs the risk of them knocking on the doors of your competitors.
All in all, it’s vital to build a close rapport with your B2B customers. Show that you are a great vendor who provides quality products or services, is willing to help them along the way, and truly cares for them.
Last but not least, we’ve rounded up five trends pertinent to the B2B commerce sector. Staying abreast of prevailing industry trends will surely inform your business strategy, and set you up for further success!
Social commerce refers to the use of social media platforms such as Facebook or Instagram to promote a business and sell goods.
Many social media sites which allow for social commerce give the option for customers to buy goods on the platform, sometimes without having to leave the site.
An example of social commerce is Facebook Shops, on which users can discover and browse products, place an order and even checkout all in one place.
Shopping on Instagram is likewise enabled on the photo and video-based social platform, making it easy for merchants to market their goods and customers to buy using its app.
Increasingly, businesses are seen to be using dynamic pricing. It means prices are adjusted based on market conditions and the purchasing power of customers. This is most useful in volatile markets with constant price fluctuations.
The genesis of this trend is seen in Amazon, where prices on goods are found to have changed 70 times a year on average. Applying the same strategy to your business can help you take advantage of opportunities presented by volatility.
Businesses used to meet up with one another and engage in in-person negotiations before proceeding to close a deal, but a new survey reveals that B2B buyers now spend as little as 17% of their time meeting with potential suppliers. More time (45%) is instead allocated to conducting independent research both online and offline.
This signals that B2B businesses must change and adapt to the sourcing behaviors of new-age buyers to achieve future success.
Digital self-service, which allows purchasers to navigate the catalog and even place an order on their own, has therefore become a priority for many B2B businesses given that buyers now prefer to conduct transactions without the prolonged or back-and-forth communication.
To illustrate this, Mac Tools is an American distributor of professional tools and equipment which makes use of an online self-service portal. Their website allows customers to look through a catalog of different tools to find which one suits them.
With a self-service portal, there’s no need to get in touch with Mac Tool’s salespeople and wait to get a quote, or fill out lengthy spreadsheets to create an order. Rather, orders can be placed quickly and easily at its online site, and the goods are shipped directly to the buyers for an expedited purchase process.
In line with B2B buyers’ preference for a hassle-free purchase journey described above, the B2B sector has seen the rising prevalence of business-to-business marketplaces around the world.
Alibaba and Peeba, for example, are B2B marketplaces in Asia that connect their own merchants to other businesses.
By creating a digital storefront on these online sites, B2B merchants can ride on the traffic brought about by the platforms, and extend their reach to potential buyers across the globe. B2B buyers likewise benefit from the wide range of brands and options available on marketplaces.
Having to pay for inventory before actually making money from sales may cause businesses to experience a cash crunch, especially for small businesses or those that have to stock up to prepare for the high season. Inventory risks of being unable to sell the goods are also inherent when testing a new product in the market.
In view of these difficulties experienced by businesses, an increasingly diverse range of payment terms are now seen in the B2B sector.
One such example is Alibaba, which allows qualified buyers to pay within 60 days of getting their invoices. Another B2B marketplace, Peeba, makes the use of automated in-house credit assessment and provides favorable payment terms and the “sell first, pay later” option to eligible retailers.
While many of us began our first shopping experiences as individual consumers, many are unaware of the vast B2B market that underlies the B2C supply chain, or the complexities of running a business in the B2B sector.
This article therefore serves as a beginner’s guide to the topic of business-to-business commerce, with examples, tips and trends to follow. We hope it has helped you gain a deeper understanding of the topic, and wish you all the best in thyoure B2B venture!
Looking for more resources and insights to grow your e-commerce business? Choco Up can help!
As a global technology and financial services platform, we not only offer revenue-based financing — a type of flexible, zero-equity funding — for digital merchants and startups. We also provide a wide array of how-to articles and business growth solutions for our clients.
Whether you’re just starting out or trying to grow an e-commerce business, Choco Up can always be your trusted funding and growth partner.
We’ve helped clients like BuzzAR and eBuyNow grow their user base and revenue by 10X and 5X respectively. You can learn more about our funding here.
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We’ve put together all the details you need on e-commerce fraud: why it happens, how it works, and how to stop it.
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