What is B2B commerce?
B2B commerce (short for business-to-business electronic commerce) is the online sale of goods or services between businesses. B2B commerce differs from B2C commerce, which is business-to-consumer electronic commerce where a business sells goods or services directly to a consumer.
B2B commerce definition
B2B commerce is a term that refers to any type of business that happens between two companies online. Businesses rely on other businesses to function, whether it's with supplying equipment or supplies to relying on services such as manufacturing or distribution, deals between businesses are key for enterprises to function. As more commerce has moved online in general, so too have B2B transactions.
Types of B2B commerce
There are many types of B2B commerce transactions and relationships which can take place online. The following are examples of common B2B commerce companies:
Manufacturers Manufacturing is a key business function for any business dealing in physical goods and because of the high cost of owning and operating manufacturing plants, many companies outsource their manufacturing to third parties, often located in countries such as China with lower labor costs.
Wholesalers Wholesaling is when is a business buys items in bulk from another business and then sells those items at a retail price to consumers, profiting the difference. There are many companies that sell items in bulk (again, often from China) at a discount, and there are even marketplaces such as Alibaba which help connect resellers with wholesalers.
Distributors Distribution is another key aspect of business and one that is increasingly being done online as the web has grown to be one of the largest marketing channels. B2B distributors leverage online channels such as SEO and social media to promote products and services on the behalf of their business clients.
Software-as-a-Service (SaaS) Software-as-a-Service is a business-to-business software model that was pioneered by Salesforce and has become one of the fastest growing B2B business models for digital commerce focused tech companies. With SaaS, a business provides licenses and access to software that they produce to other businesses, who then pay the business a recurring monthly or annual fee in order to continue to gain access to the software.
B2B commerce examples
Amazon Amazon, in addition to its B2C sales, also serves as a marketplace for other businesses to transact online. Amazon also offers a service called Amazon web services (AWS) which enables cloud-base software companies to outsource their cloud architecture.
Alibaba Alibaba is one of the largest commerce sites in China and it is solely focused on B2B commerce. The site serves as a B2B commerce market and businesses can go to Alibaba to find wholesalers who sell items in bulk or to connect with manufacturers in China for designing custom products.
McKesson McKesson is the largest distributor of health care products and drugs in the US and provides distribution services to pharmaceutical and medical devices companies with the proper care that is needed for sensitive medical equipment.
Google In addition to its B2C search engine, Google also offers many B2B software services. Google's GSuite provides word processing, spreadsheets and calendaring on the cloud for businesses, while their marketing suite Google 360 provides critical tools for digital marketers. Google also offers advertising on its search results, which even is one of their core income streams.
Facebook Facebook is another B2C company that offers B2B services. Facebook and other social networks such as Instagram (owned by Facebook), Twitter and Snapchat monetize their free B2C services by charging marketers for running ads on their platforms.
Microsoft Microsoft also offers many B2B services in addition to its consumer-level office suite. Microsoft offers business licensing for its software products such as Office and Windows, as well as hardware, marketing technology and cloud hosting services.
Salesforce Salesforce is one of the largest B2B software companies in the world and company that helped to popularize software-as-a-service (SaaS). Salesforce provides CRM software that sales representatives can use to keep track of prospects and customers through long sales cycles and buying journeys.
Orcale Oracle is one of the giants of B2B commerce, providing enterprise resource planning (ERP) software which helps businesses streamline their enterprise workflows such as accounting, procurement, project management, security and compliance, supply chains and more.
B2B commerce vs B2C commerce
The types of apps or websites that support B2B commerce may appear similar to consumer commerce platforms and apps, but often offer additional functionality that businesses require since B2B companies often have different needs than regular consumers.
For example, a B2B commerce site might provide pricing for ordering in bulk, since companies often need large quantities of items for their workforces. Or a site may offer different payment options in addition to consumer payment methods such credit cards as or PayPal, since B2B buyers often have to go through approval processes and pay for large orders via invoice.
Larger business deals often require negotiation between companies, often the case with SaaS sales, and in such cases it may not even be possible for users to checkout and pay for a purchase directly through a website. Instead B2B customers get in touch through the website with a sales rep who then begins an enterprise sales process to complete the transaction.
The lines between B2B and B2C commerce websites is not always crystal clear, however. For example, Amazon is the largest B2C commerce site on the web , projected to do over $400 billion in revenue according to Forrester and other analysts.
However, although Amazon primarily serves consumers, it also serves as a marketplace for other companies. Merchants (from individual business owners to major brands) can open their own stores within the Amazon platform and sell directly to consumers. Thus Amazon serves as both a B2C and B2B commerce solution.
B2B2C (businness-to-business-to-consumer) is a business model whereby a business works to provide an intermediary business with a service in order to gain access to their customers.
An example of a company that follows this business model is Instacart. Instacart partners with grocery chains, offering grocery delivery to retailers who otherwise don't offer that service. While the grocery chains benefit in the short term, Instacart gradually gains access to many of the grocery stores' customers, to the point that consumers often end up dealing directly with Instacart, skipping the grocery entirely.
The same business model is followed by companies such as Uber Eats and DoorDash. They partner with local restaurants to again offer delivery services to businesses that otherwise don't offer them, and use that to gain access to the restaurants customers.
This can be mutually beneficial, but can also be symbiotic as the companies gain greater and greater leverage over the businesses that they provide a service to, and can squeeze profits by charging fees to the businesses they provide the service for.
B2B commerce platforms
As B2B commerce has grown as a market activity, many companies have sprung up to facilitate setting up virtual storefronts. Smaller companies may rely on common B2C commerce solutions such as Shopify or Bigcommerce, but there are also B2B platforms that are built specifically for businesses.
Some enterprise-grade commerce platforms include software such as Optimizely, Salesforce B2B Commerce, B2B Wave, OrderCircle, Drupal Commerce, and Shopify Plus. These B2B commerce platforms allow businesses to quickly setup commerce stores that have the specific needs of B2B commerce in mind, such as recurring payments and custom payment methods.
Although many companies have come online in recent years, many lack the expertise to build their own commerce platforms from scratch, hence the popularity of B2B commerce software has grown as more and more legacy businesses come online.