You may have come across two terms which are often confused – Business-to-Business (B2B) retail and Business-to-Consumer (B2C) retail. In this article, we outline the key features of each model so that you know the differences between the two.
B2C and B2B are two forms of commercial transactions. B2C, which stands for business-to-consumer, is a process for selling products directly to consumers. B2B, which stands for business-to-business, is a process for selling products or services to other businesses. The business systems that support B2B or B2C communications, transactions and sales administration differ in complexity, scope, scale and cost, so it is important that you implement the right system for your customers.
B2B stands for “business to business” and is a term used when one business makes a commercial transaction with another business. This typically happens when businesses are sourcing materials for their production process or output. So, for example, a B2B eCommerce transaction could be between manufacturers, wholesalers and retailers of products and services. A perfect example of B2B eCommerce would be when a business buys the product from their supplier or vendor on a website like Alibaba.
B2C, on the other hand, stands for “business to consumer.” This is when a business sells its products and services to consumers directly. A B2C eCommerce transaction will always be with the end-user who buys the product for their use. A good example of this would be when a consumer purchases a new iPhone from the Best Buy website – this would be B2C eCommerce.
The B2C model is possibly the business model most widely understood by the general public. The B2C model sells finished products and services directly to consumers, while B2B models sell products to other businesses.
There are a few fundamental differences between the two models when it comes to purchasing products. Consumers buy products or services for personal use, whereas business buyers purchase products or services for use in their companies, whether as a component to help them produce their finished piece or even for use in the office.
Additionally, the B2B purchasing process can be much more complicated than the B2C purchasing process. For example, decision making groups in B2B purchasing can include members from anywhere from technical, business, financial and operational departments, depending on the type of purchase. Moreover, the person selecting a product may not have the responsibility for making the final purchasing decision. A large capital purchase, for example, may require authorisation at board level.
In contrast, the B2C purchasing process involves just the buyer. For example, when people go to the convenience store to pick up a drink, it’s a straightforward process involving only the buyer.
Consumers buy your products or services for personal use. Business buyers purchase products or services for use in their companies. In B2B-buying, the purchasing process is more complex. Decision making groups include members from technical, business, financial and operational departments, depending on the type of purchase.
The person selecting a product may not have the authorization to purchase or may not have responsibility for making the final purchasing decision. A large capital purchase, for example, may require authorization at board level.
In B2C models, each consumer will likely pay the same price for a product as every other consumer. However, in B2B purchasing some customers may be charged at a different rate for the same product. This may occur, for example, if some customers agree to place large orders or negotiate special terms in order to get a reduced price to other customers.
Payment methods between the two models can also differ radically. For instance, B2C buyers traditionally select products and pay for them at the point of sales using payment mechanisms such as credit or debit cards, or cash. In B2B transactions, buyers select products, place an order and arrange delivery through an agreed logistics channel. Customers do not pay at the time of the order but receive an invoice which they settle within agreed payment terms.
In B2C, consumers who buy products from you pay the same price as other consumers. In B2B, the price may vary by customer. Customers who agree to place large orders or negotiate special terms pay different prices to other customers. Payment mechanisms also differ.
In B2C transactions, consumers select products and pay for them at the point of sales using payment mechanisms such as credit or debit cards, checks or cash. B2B transactions require a more complex business system. Customers select products, place an order and arrange delivery through an agreed logistics channel. Customers do not pay at the time of the order, but receive an invoice which they settle within agreed payment terms.
The final difference between B2B and B2C models is the types and size of consumer audiences that each model aims to target. For example, B2C retailers often strive to reach a broadly defined group of people – anyone from sports fans to millennials who are into music or kids in general. B2C retailers have a larger target audience as a whole.
By comparison, B2B retailers have a much narrower target audience – there are usually a set number of buyers, with a pretty straightforward profile. For example, a B2B retailer might only target ad agency owners or finance VPs at tech start-ups.
B2C and B2B are also different forms of electronic commerce. B2C e-commerce is a process for selling products directly to consumers from a website. Consumers browse product information pages on your website, select products and pay for them before delivery at checkout, using a credit or debit card, or another electronic payment mechanism. Consumers enter their address details and select one of the delivery options you offer.
The basic B2C business system is relatively simple. You need a method of displaying products and prices on your website, a mechanism for recording customer details, and a checkout to accept payment.
Now, let’s dive deeper into the main differences between B2B & B2C eCommerce so you learn some key insights into running your online store as effectively as possible!
At a more advanced level, you can offer groups of products customized to different customers. The business system selects the appropriate products to display when a customer logs in. This streamlines the process for business customers, as they do not have to browse a complete catalogue to find the products they want to buy from you. You can also plan to integrate your business system with the systems of your suppliers and logistics partners so that you can manage purchasing, stockholding and distribution efficiencies.
You can use a similar website-based business system if you sell low-value products to business customers and you make payment with orders. However, B2B transactions normally require a more complex business system. The system must be capable of accepting orders in different formats such as email, documents or electronic orders. It must integrate order capture with your other administrative systems such as invoicing, customer records and accounting.
A B2C transaction doesn’t happen until a consumer feels the emotional need to buy a product or service. The fact that consumers often spend the whole night waiting outside an Apple retail store to buy the latest iPhone proves the extent to which emotion is involved in the B2C world.
Clearly then, the way decision making happens in the world of B2C is a lot more compulsive and sporadic in nature, with a lot depending on the mood or the feelings a consumer is experiencing. Also, it’s usually only one person that makes the buying decision, so the buying process is a lot quicker with only one decision-maker involved!
On the other hand, B2B eCommerce is a lot more rational. Buyers make decisions based on logic and usually make purchases that help their business make more money, save money or act like an investment that leads to a rate of return in the long run. Impulse buys are extremely low and basically nonexistent – this means any type of flash promotions or add on purchases are not effective with this type of audience, so there’s no real ROI on these types of tactics.
The buying process in the world of B2B is a lot more planned and systematic than B2C. When B2B buyers are looking to buy or restock products, it’s usually due to a departmental need as opposed to a spur of the moment buying decision.
In B2B eCommerce, it may take a business several weeks to go through the process of issuing a purchase order, deciding on the number of products they want to buy and seeking out finalized purchase permission. Usually, there’s more than one person involved in the decision-making process too, which makes it much more complex than a B2C purchase.
In a nutshell, it’s important for eCommerce retailers in the B2C world to stimulate the emotions of their buyers in order to attract them to transact with them. On the other hand, in the B2B world, an eCommerce retailer needs to provide buyers with relevant information to ‘persuade’ them to make the purchase, while winning their trust in the process.
Scope & Size of The Audience
B2C eCommerce is usually targeted at a specific segment of the overall general public. For instance, a sports shoes retailer could target athletes or people who’re interested in sports, which could be a very large volume of people.
For this reason, B2C eCommerce websites must be able to handle a large volume of traffic, as the transaction value is a lot smaller, but the volume of transactions is a lot larger! That’s why it’s important for B2C eCommerce websites to focus on the security of any payment information their consumers might give out on their website, like credit card details.
On the other hand, B2B eCommerce is only targeted at a very specific type of business. For instance, a business may be targeting law firms of a certain size within a specific location. Therefore, the volume of transactions may be a lot lower, but the dollar value of each transaction may be a lot larger.
Since a lot of B2B transactions don’t happen online due to their size and nature, it’s best for B2B eCommerce websites to gear their websites towards generating leads. B2B eCommerce websites should also seek to secure information pertaining to their leads, like the contact details of their target audience.
While the design is important in both the B2B and B2C world, there are some subtle differences between both types of websites. As explained earlier, in B2C eCommerce, users are motivated by their emotions and their desire to make the buying decision. And, the design is an important part of stimulating a user’s emotions!
So B2C eCommerce website stakeholders should be focusing on making their website look visually stunning in order to stand out from the competition and create a website that’s in line with their brand’s image and persona.
B2B eCommerce websites, on the other hand, need to be a lot more factual in nature and should be geared towards providing relevant information to their users in an organized and easily accessible manner. A quality site search is also very important when it comes to a B2B eCommerce site. In fact, 62% of online B2B buyers ranked enhanced search functionality as “increasingly essential” to their shopping experience.
In terms of the kind of content on a B2B eCommerce site, buyers are looking for something more educational in nature. Nowadays, many B2B buyers educate themselves on products using content they find online. This may include videos showing product demos or case studies showing how your B2B product helped another company. The content itself matters more than the way in which it’s presented!
Customer life cycles are a lot longer in B2B eCommerce than they are in B2C eCommerce. B2C customers may only make one-off purchases from an online store and never return. Once their purpose has been served, they may not make another purchase for some time, unless they have a compelling reason to do so. It’s a lot easier for consumers to look for alternatives these days!
In contrast, B2B customers are usually interested in building a long-term relationship. Once you build trust with your B2B customers, you might work with them for years to come.
The concept is quite simple if you think of it. A B2C eCommerce business has to sell 10 million products at $10 each to become a $100 million business, but a B2B business may only need to sell 1000 products worth $100,000 each to become a $100 million business! For these reasons, customer acquisition takes a lot longer in the world of B2B eCommerce.
While there are plenty of similarities between B2B and B2C eCommerce, you must keep the differences in mind, and make business, design and tech decisions based on what suits your type of business and what your audience would love you for!
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