B2B stands for business to business. This business model involves the exchange of products or services between two or more businesses. Here, the transactions take place among businesses without the direct participation of consumers. The end customers come into the scene at a later phase and purchase the products or services from retailers.
B2B business models usually comprise wholesalers, manufacturers, and retailers as stakeholders. A large portion of B2B businesses accounts for the exchange of raw materials at different factories. And the rest of the transactions happen between wholesalers/manufacturers and retail sellers.
B2B vs B2C: Basic Differences in the Business Model
Wondering how B2B is different from B2C business models? Well, the prime difference lies in the nature of buyers and sellers. B2C refers to business to consumer. In B2C, the transactions take place between retailers and consumers directly.
In B2B, you will receive fewer orders with large volumes, and in B2C, you’ll get more orders with low volumes. Let me explain it with an example. Imagine you have a business of tee shirts. You order 10,000 pieces of tee-shirt from the manufacturer. And the manufacturer gets 100 such orders each month.
On the other hand, you get thousands of orders each month. But each order consists of only one or two tee shirts. So, you’re getting more orders, but the transaction is still lower than that of B2B business models.
Still not clear? The following table will help you understand the differences in basic concepts of B2C and B2B business models.
|B2B Business Model
|B2C Business Models
|Other businesses, manufacturers, wholesalers,
|End-users of the products/services
|Long, repetitive, comparatively stable
|Short, low retention, mostly new customers
|Order Volume and Transaction
|Fewer orders with high volume
|More orders with low volume
|Business to business
|Business to consumer
|Logical, data-driven, fact-based
|Emotional, story-based, personalized
|Involves more people and takes more time
|Involves fewer people and happens fast
|Takes longer to complete
|Immediately ships to consumers
B2B vs B2C: Advantages & Disadvantages
Both B2C and B2B business models have pros and cons. In both cases, you can attain your business goals within a few months with the right strategies and resources. The benefits and drawbacks of B2B business models are as follows.
Pros & Cons of Business-to-Business Models
- B2B businesses sell products on a large scale
- More sales result in more profit
- Secure business since most sales are based on contract and preorder
- Easy to judge the market demand and determine the production volume
- Good cashflow, since the payments carry high financial value
- B2B models require huge investment and more human resources
- B2B products demand multiple pricing and quotes tailored to the buyers’ needs
- The sales cycle is longer, starting from decision-making to shipping and transactions
- B2B sellers operate in a niche market, limiting the number of buyers
Pros & Cons of Business-to-Consumer Models
- B2C models are easier to start with less documentation and investment
- The B2C market is massive, open to multiple industries
- Simple operational process- stock, sell and restock
- Easy to convert the visitors into customers
- Short sales cycle, since an individual (in most cases) makes the buying decision
- B2C business models require fewer people to run the business
- Easy to connect with the end-users of your products
- The competition is too high as more B2C businesses are entering the market each year
- Difficult to find trustworthy suppliers/wholesalers
- B2C business depends more on marketing and product promotion
- More number of orders with lower order volume
- Hard to get repeat customers
- B2C models need to integrate highly responsive customer services
- These models are susceptible to fraudulent buyers
B2B Business Model: Evolution & Timeline
The trade of goods and services in exchange for money is an age-old practice. B2B business models also share a deep-rooted history with the inception of civilization. But, during the last 20 years, B2B business models reached a whole new level. The transition to digitalization is the most revolutionary change in the B2B arena.
More and more B2B businesses have been shifting to digital reality with the advent of high-speed internet and other supporting technologies.
“Gartner’s Future of Sales research shows that by 2025, 80% of B2B sales interactions between suppliers and buyers will occur in digital channels. This is because 33% of all buyers desire a seller-free sales experience – a preference that climbs to 44% for millennials.”
During the 1800s, B2B business owners used to run advertisements in Trade Journals. This continued till the early 1900s. In the 1920s, the publishing industry reached the next level and printed advertisements became the most performing and effective method of marketing. Follow the below timeline of B2B businesses from the 1950s to 2022.
Mega-corporations came into existence during this period. Companies started to delve into the minds of the consumers. User behavior and customers’ needs were taken into account in this era.
1960 – 1970s:
This period saw a great transformation of B2B business models and their marketing. Business owners started to focus on business development and use other marketing strategies such as direct mail, event marketing, and telemarketing in the late 1970s.
1980 – 1990s:
Computers and the internet announced their supremacy in this era. E-commerce and email communication are the two things that reshaped the nature of B2B business models. Having a website became a necessity and the development of content marketing concepts took place during this period. Most importantly, Google came to the scene and transformed the online arena to a great extent.
2000s – Now:
After 2000, the internet has been reigning in both B2C and B2B sectors. It almost became mandatory for each company to have a website and strong presence on social media like Facebook, YouTube, Instagram, LinkedIn, Twitter, and more. Print advertising has shifted largely to digital reality, and new forms of communication (blogs, paid ads, SEO-friendly content) emerged.
Traditional B2B business models require salespersons to hit the road, visit clients, and negotiate pricing and offers. But things have changed now. The mechanism of B2B sales changed dramatically within the last few years, especially in 2020. After the first blow of the Corona pandemic, more than 70% of B2B buyers say that they prefer making digital and self-service purchases remotely.
Major Types of B2B Business Models
B2B businesses cover a wide range of products and services. Research and development, payroll and tax, web development, web design, SEO services, advertising agency, call center, etc. are a few services that fall under B2B business models. And any business related to raw materials purchase and wholesale is a B2B business dealing with products.
Depending on the nature of the business, B2B businesses are classified in the following ways.
- Customer-Centric Model
- Buyer-Centric Model
- Intermediary-Centric Model
- Direct-Connection B2B Model
- Network B2B Model
- Hybrid B2B Model
- Managed B2B Model
The name customer-centric suggests that in this model customers get the highest consideration and priority. This model aims at making a long-term relationship with the consumers. So, here the business tries to fulfill the requirements of the clients and thus encourages them to make deals with them again in the future.
The best aspect of this business model is that here the sellers try to ensure the quality of their products or services. They never exaggerate anything; instead, remain true to the specifications. The same customers visit the same sellers again and again.
This model is best for the sellers in the sense that once one trader achieves fame and trust among the mass, they always stay on the top of the customer’s choice list.
Buyer-centric model refers to the marketplace where a big business invites sellers and providers to place their products on the portal with the quotations and features. Then the buyers decide whether they will finally take the products or services and put them on the display. As the buyer decides here everything, this model is known as buyer-centric.
In this model, the buyers fix the standards for the products. Sellers from around the world then take part in the bidding to be enlisted. Only do the highest bidders get the opportunity to supply products for the buyers.
Buyer centric model requires large-scale activities to run operations all around the world.
This model of b2b means the system of conducting business where an intermediary connects between the sellers and buyers to make a successful business deal. Here the agents or middlemen play a vital role in meeting both the parties and carry on all the activities of the business.
These third parties create the marketplace so that the sellers can display their products on the portal along with other similar products maintaining the modern market policy. As a result, customers can make the best comparison among the things and make the right decision.
As the intermediaries build these platforms with their own ideas, investments, and technologies, they take a justified charge from the sellers for all successful sales and transactions.
Intermediary centric model is arguably one of the most appreciated b2b business models as it gives the consumers the best opportunity to compare different sellers to know their features and costs deeply. Consequently, they can always make the decision by taking time and having the proper study.
Direct Connection B2B Model
As this business model makes all the arrangements of connecting a business with all its partners directly by exchanging the related things between them, this model is called the direct connection model. Like the intermediary-centric model, no third party works between the parties.
Now the question is what do they exchange? They receive and transfer all electronic documents like mapping, tracking documents, translation, assisting technical support, etc. So, this model deals with all the IT activities and makes the business quicker, smoother, and more successful.
When the stakeholders get connected, this model monitors the communications and solves all the troubles the partners find on their way.
Network B2B Model
The b2b model that came into being after the direct model but before the arrival of the internet is known as the network b2b model. Some utter limitations and unbearable complexities of its former model encouraged the experts to invent this model to connect traders more exclusively and solve any problems quickly.
In this model, the Service Provider known as Value Added Network (VAN) provided different protocols like AS2, SFTP, FTPS, FTP over VPN, and RosettaNet. A company would take any of the connections as per their needs and policies. Other companies would select the protocol according to their desires and demands.
Thus different traders or parties would exchange information among them being connected with the same Provider but using their respective protocols.
Hybrid B2B Model
The word hybrid means a product that is the outcome of mixing two or more different things. In b2b, the hybrid model means the same thing. This refers to the model that got the birth combining two former models- Direct and Network.
Companies started following this model when they found that the Service Provider took high fees to make the maximum transactions. This model uses the internet to make transactions with a huge number of lower-volume business partners.
So, the hybrid model reduces the cost but increases the connections between the businesses.
Managed B2B Model
Managed b2b model is the system where the business outsources the products or services. This outsourcing is arguably the most effective way as this reduces the cost incredibly. At the same, the whole process turns easy and time-consuming as well.
This model is much more effective because here the service provider exchanges documents through the direct medium of the Enterprise Resource Planning (ERP) system.
The provider delivers the processed documents to the partners either directly or through the network. This model operates functions like mapping, data center operations, translation, technical support, document tracking, etc.
Is B2B Business Ideal for You?
The best answer to the query whether b2b is suitable for you solely depends on the depth of your Knowledge of the business you are planning to start, the experience and investment you have, and most importantly the huge infrastructure to support the whole process.
No model can work equally for all. In case you have limited capital, materials that cannot be stored for a long time, or have a place and manpower constraint, you better try a b2c business.
The b2b platform has some incredible and distinctive possibilities. If you have the required investment, a large storehouse to gather things and then deliver them properly, b2b is ideal for you. You can then make huge profits dealing in products or services everywhere.
But you must be able to maintain the most effective strategies to make good relations both with your providers and other businesses, make a team of some energetic people to flourish your business. If you can make the best combination of all these elements, your b2b business must grow quickly and successfully.
This study attempted to dig out all the issues related to B2B and B2C. As an e-commerce entrepreneur, you must know these matters clearly and deeply. How are these two different? While the first one deals in large-scale businesses with other businesses or sellers, the second type sells products or services directly to the consumers.
To operate your business successfully, you need to learn the different models of b2b business. These models with their unique characteristics and policies show you the best possible ways of conducting your business and satisfying all the stakeholders. At the same time, you can achieve your own goals when you apply these ideas in the business.
For spreading your business ideas quickly to the most number of people and for achieving success in your business in no time, you have few alternatives to B2B. So, why don’t you try your best to start your own B2B business?
Md. Tanvir Faisal is a Content Writer at weDevs with 3 years plus experience in Content Writing, Copywriting, Proofreading, and Editing. He emphasizes writing content that draws social media attention and enhances search engine visibility. To date, he has successfully developed useful content for many websites across all formats.