Are you considering whether you should sell your products B2B or B2C? We’ve put together a list of key differences between the two so you can make a more informed decision on which one suits your business better.
Business to Business (B2B) – Business to business refers to business that is conducted between companies, rather than between a company and individual consumers.
Business to Consumer (B2C) – Business to consumer refers to the transactions conducted directly between a company and consumers who are the end-users of its products or services.
When we speak of B2B and B2C in e-commerce, we’re mostly speaking about either selling our products to other retailers and becoming a wholesaler. On the other hand, if we’re talking about selling B2C we’re referring to selling our products direct to the consumer through our websites, or through online marketplaces.
1. Order Size
The key difference between the selling B2B and B2C is the order size. Selling your products B2B means you can set your own minimum order quantities. On the contrary, selling directly to consumers means you’re often selling only one or a few units at a time with no certainty your customer will come back.
It isn’t at all uncommon for B2B buyers to purchase hundreds or even thousands of items in one transaction. The numbers back up this notion, with the average order value of a B2B transaction clearing $491 as opposed to $147 for B2C.
If your aim is to sell as many units as possible, doing B2B could be a great way to sell more units.
2. Branding & Pricing
If you’re more concerned about the exclusivity and branding of your own products, you might be more reserved to the idea of B2B. We’ve seen many highly successful e-commerce brands who have managed to exclusively distribute only through one channel, through B2C on their own website. Though this is extremely difficult to execute, when done right you have no other competition and you are in complete control.
Selling B2B doesn’t necessarily mean you’ll lose your branding, but it often means you won’t be able to govern what your stockists or retailers price your products at. If a retailer ends up undercutting your recommended retail price on a sale, your own customers who you own on your channels could shop elsewhere. In a very competitive market these days, customers are becoming less and less loyal. If customers can save $5 on another site, that’s exactly where they’ll go. Selling B2B opens the opportunity for this to happen.
3. Profit Margins
Profit margins are something every online seller has to consider. Selling direct to consumers means your profit margins can be much higher and can be set yourself. With B2B transactions, your profit margins per unit will be considerably lower. In order for other retailers to want to sell your products, you need to give them enough profit margins to make themselves. This often means you only make 20% margins or less per unit. However, if you’re selling more units at once – this often balances out or becomes much more lucrative.
Many sellers begin with B2C before selling B2B. Before doing this, you need to make sure your retailers buying wholesale from you can also gain enough in their margins. This often means selling your products at half the price of recommended retail price.
4. Cash Flow
B2C goes by impulse buys. In B2B, businesses buy based on more carefully considered factors and research. An advantage to selling B2B is that your customers rely on selling your products to keep their businesses in business. This means, they’re committed to selling your products as best as they can to keep their own businesses afloat. Instead of selling your products only through your own channel, you could have several retailers promoting your brand and products for you.
On the contrary, relying on B2B business can also limit your cashflow when you’re first starting out. Instead of relying on a large number of customers buying your products, you’re relying on a smaller number of retailers to buy your products at a less frequent pace.
Larger orders, will also mean you’ll be able to negotiate a better price on logistics. Shipping one order at a time will cost you a lot more than shipping in bulk. As you begin to sell in higher volumes, you’ll realise that every cent counts towards your profit margins. Being able to negotiate with shipping providers and having the ability to use International Logistics could cumulatively save you a lot of money in a year.
In addition to this, selling B2C means you’re fulfilling orders one at a time. This often means you’re often committed to free shipping and even same day shipping, with only a hope that this customer will become a repeat customer.
6. Supply Chain
Your supply chain is the single most important part of your business whether you sell B2B or B2C. Finding the right supplier and manufacturer for your products is crucial and could make or break your business. If you’re currently selling B2C and are looking into manufacturing more units to break into the B2B market, it’s best to double check your manufacturer can facilitate in the quantities you require. Additionally, you will be able to negotiate better rates and cross check them against other manufacturers.
The number of customers is typically much greater in a B2C relationship than in a B2B. This has important implications for managing relationships. It can be difficult to manage the numerous relationships that come with a B2C supply chain, whereas there are often few customers in B2B supply chains, meaning that relationships are much closer.
Whether you’re currently selling B2B or B2C, it’s always a good idea not to limit yourself to selling on one. Both have their advantages and disadvantages and both have very different models so its important to fully re-evaluate your business and products to see which one to focus on. It sure is a lot of work to upkeep both channels but we can assure you it’s worth it!
We’ve helped many manufacturers go from a holistic B2B operation to helping them sell their products globally to consumers all over the world.
We’re always here to help! Email us at firstname.lastname@example.org to discuss your options!