What Is Business To Business (B2B)? Definition, Types, & Examples

The use of e-commerce greatly enhances your company’s global expansion potential. It is anticipated that online retail sales will reach $4.5 trillion by the year 2022, which demonstrates the widespread adoption of online shopping.

Online shopping makes it easier for customers to purchase goods and services wherever, whenever, and without hassle, making e-commerce more attractive than traditional storefronts.

The success of an eCommerce firm is directly related to its customers’ satisfaction. As a result, numerous organizations that specialize in the development of eCommerce websites are assisting their customers by creating online stores that are easy to use.

We can categorize the e-commerce business according to the method we use to sell the goods to end users.

E-commerce companies choose one of the following four business models to sell their wares online: business-to-business, business-to-consumer, consumer-to-business, and consumer-to-consumer. These are the conventional categories of businesses that use e-commerce.

Businesses of all kinds depend on B2B suppliers and enterprises to continue to operate, even though there are many types of businesses.

What exactly are these business-to-business companies, and how did they get their name?

What is Business to Business (B2B)?

Business-to-business, or B2B, is a way of doing business that involves companies doing business with one another rather than with individuals. 

A company might either incorporate the traded item into its product lineup or resell it to generate profits in the b2b business model.

Business To Business Definition, Types, & Examples

This stands in contrast to the companies that sell their wares to individual consumers. Take this one, for instance:

An automobile manufacturer builds the entire vehicle, while another company, which manufactures automotive parts like brake pads, supplies those parts to the automotive manufacturer. It is believed that this company operates using the B2B approach. It is a company that provides services to another company.

It’s as easy as that.

When a business generates value to consume it by other businesses (B2B model), it is said to have a Business to Business (B2B) model of operation.

The business-to-business model, which differs from the business-to-consumer model, focuses on creating value for businesses rather than the individual customer.

When goods, services, or information are transacted between businesses and not between businesses and customers, this is known as B2B, which stands for “business to business” (B2C).

A transaction known as “business to business” (B2B) occurs between two businesses, such as wholesalers and online retailers. In the vast majority of B2B business models, each company profits in some way, and in most cases, they have comparable negotiation capabilities.

How Does Business To Business (B2B) Work?

A business-to-business (B2B) transaction occurs when one company sells goods or services to another. Most organizations use the vendor’s goods and services through a section or group within their organization.

Occasionally, a solitary user on the purchaser side will complete a transaction to aid the company’s overall business objectives.

In addition, some business-to-business deals entail using the products of the entire firm, such as the purchase of computers, office furniture, and productivity software.

The process of choosing products to buy for a business-to-business transaction is typically handled by a buying committee, which typically consists of the following members:

  • Business decision makers, such as budget managers;
  • A person responsible for making technical decisions or assessing potential products’ capabilities; and
  • Influential input on a decision is provided by those who provide feedback.

When making significant purchases, a buyer may issue a request for proposal (RFP), in which they ask potential suppliers to submit bids outlining their products along with the terms and prices of the transaction.

Why Is Business To Business (B2B) Important?

B2B is crucial because to start, maintain operations, and expand, every firm needs to make purchases of goods and services from other businesses.

B2B suppliers provide a variety of goods and services to businesses, including office space, office equipment, computer hardware and software, and so on.

The food in a company’s kitchen and the signs on the building are items that are purchased from different sources.

What Are the Types of Business To Business (B2B) Models?

The B2B model is large and complex so it can be divided into popular and mainstream categories.

Product-based B2B Model

Product-based B2B models are a subcategory of B2B models where one company sells tangible goods to another.

This company has the potential to operate as a supplier, meaning they might offer your individualized items to a variety of different companies.

You should know that the business provides products to another business and does not provide directly to customers or individuals.

A company that sells security hardware to other businesses and institutions is an example of a product-based business that caters to the B2B market.

Also, product-based B2B companies can have a physical presence, an online presence, or both. It is also helpful to mention that the products are generally physical (in nature), requiring a significantly higher initial investment and much higher overhead costs than other B2B companies.

Service-based B2B Model

Service-based Business-to-business (B2B) companies provide their services to other companies, as their name suggests.

The following are some instances of service-based enterprises that sell to other businesses:

  • Providing consulting services.
  • Advertising and marketing agencies
  • Providing call management services.
  • Employee Training
  • Translating services

WebFX is a fantastic example of a B2B firm that focuses on providing services. It helps other firms improve their marketing reach and tactics by providing marketing consultation services to those other organizations.

Businesses that sell their services to other businesses are quite common and substantial since it is much easier to expand in line with demand. 

A business-to-business organization that provides services is also easier to set up and manage than one that sells products.

It is important to note that the type of services offered by these business-to-business (B2B) enterprises determine whether or not they have an online, physical, or both presence.

Software-based B2B Model

B2B software companies can be classified as either “product” or “service” based on the B2B model. A software company offers its customers solutions, while a service company provides services to third parties.

Software-based tools can provide many goods and services to other companies, so it is necessary to have a distinct model from other business models.

The software-based B2B model can generally be broken down into the following categories:

  • “Product-focused” software-based business-to-business model
  • “Service-focused” software-based business-to-business model (SAAS model)

“Product-focussed” software-based B2B model

A good example of a “product-focused” software-based business-to-business (B2B) organization is Xero and Freshbooks, which provide accounting and invoicing software to businesses.

“Service-focussed” software-based B2B model (SAAS model)

One excellent illustration of a “service-focused” software-based business-to-business organization is Salesforce.com

Salesforce provides companies and businesses with cloud computing and customer relationship management (CRM).

Business To Business Definition, Types, & Examples

Software-based solutions are typically based on a membership or subscription model, and they are the ones that are easiest to scale appropriately. The software can adapt quickly to changing needs due to its rapid installation and deletion capabilities.

These are a few of the most prominent and easily identifiable forms of B2B models, but several others are hybrids. Conversely, an eCommerce that takes place between businesses should be categorized separately.

B2B Ecommerce

A business-to-business transaction involving commodities exchange through digital markets is B2B eCommerce. The business-to-business (B2B) model relies heavily on e-commerce, which treats all aspects of the model well, including customer service and business support. 

B2B eCommerce can be divided into three distinct sub-models. They are –

Supplier Centric Model

E-commerce companies that follow the “supplier-centric model” are suppliers to other companies. It is mainly because there are more buyers than sellers at the moment.

The company will typically offer its wares through its own or third-party platforms to various companies.

Cisco is a fantastic illustration of the supplier-centric business model because the company has its marketplace and uses it to sell networking equipment to other companies.

With a supplier-centric model, you may control the product pricing and inventory, which indicates you are in control.

Buyer Centric Model

A buyer-centric model revolves around product procurement, and the company operates its online marketplace where suppliers (that is, other companies) can list their offerings and price quotations so that it can evaluate them all and select the one that best suits its needs.

Walmart is an excellent example of a retailer following a customer-centric model.

Business To Business Definition, Types, & Examples

Walmart operates in numerous countries throughout the world and almost always makes purchases of enormous quantities in bulk.

Furthermore, it does not prefer importing its goods from other countries rather than purchasing them from local vendors.

Due to this, Walmart has developed criteria and an online marketplace for potential suppliers to compete for their business.

Intermediary Centric Model

In Intermediary Centric Model, an e-commerce company is typically an intermediary between buyers and sellers. When there are a lot of customers and sellers in an industry, it is possible to do this.

An e-commerce company operates a platform or marketplace to connect and facilitate business transactions between different businesses.

Alibaba, a Chinese online marketplace, is a fantastic example. The company is primarily concerned with meeting the needs of businesses, as opposed to Amazon.

Alibaba is one of the most well-known companies in the e-commerce industry. The company primarily emphasizes encouraging other companies to trade and sell their products to other companies through its online marketplace.

What Are the Advantages of the Business To Business (B2B) Model?

Market predictability and stability

The B2B sector is dominated by companies that provide services to other commercial enterprises. Sales and purchases are based on logic rather than impulse, which suggests that judgments are based on logic. This enables a greater degree of predictability.

Additionally, a buyer in a B2C transaction may or may not be a return client, while, in a B2B transaction, the arrangements and contracts tend to continue longer – at least a year or more with guaranteed pricing and conditions established between the two sides.

Improved customer loyalty

Business-to-business transactions and contracts typically continue for several years, which contributes to establishing a far more advanced supply chain management.

It fosters a cooperative mentality inside distribution networks, which, in turn, helps contribute to high levels of client loyalty.

Customers are more likely to stay loyal to a business if they receive consistent and dependable service. Business-to-business transactions tend to be time-consuming and expensive, so it is important to provide dependable service. 

The loyalty of B2B customers is virtually assured, provided that you continue to be dependable and consistent.

A Trillion Dollar Industry

The business-to-business (B2B) electronic commerce market expanded quickly in 2018, exceeding one trillion dollars in March 2019. The total revenue generated from B2B transactions barely accounts for 13 percent.

It is anticipated that business-to-business sales will continue to expand for the foreseeable future, a powerful incentive. 

B2B solutions and goods are in high demand in the industry, and emerging enterprises are well positioned to take advantage of the expanding market.

What Are the Disadvantages of the Business To Business (B2B) Model?

A smaller pool of customers

There are fewer prospective buyers and sellers in the B2B market at any given time because it primarily serves businesses rather than individual customers.

Selling products and services that are niche or specialized, as opposed to serving the general consumer market, further restricts the kind of people who could potentially become your customers.

Challenges in marketing

The process of marketing to other businesses is much more complicated than marketing to regular consumers. Businesses in the B2C sector rely on social media and content marketing to gain new clients. 

B2B businesses must plan thoroughly before implementing any marketing strategies if they want to be successful.

When businesses contact one another, those businesses tend to be more critical of the standing and brand image of the other company. This indicates that businesses that cater to other businesses need to make investments in quality people to develop marketing efforts that are polished and clear-cut.

Now that we’ve covered the positives and negatives of businesses that sell to other businesses let’s take a look at some real-world examples of B2B organizations to grasp the concept better.

Business To Business (B2B) Companies Examples

The following businesses have been cited as some of the most successful B2B examples from which to draw inspiration. Become familiar with the various eCommerce business models and develop your concept.

Amazon

Like Alibaba, Amazon is well-known across numerous countries and is well-recognized by consumers. Amazon Business exists because of its substantial presence in business-to-business eCommerce, as well as in business-to-consumer eCommerce.

Amazon reached $10 billion in sales in 2018 and reached this level of success in only four years. This corporation has established a foothold in e-commerce, artificial intelligence, cloud computing, and digital streaming.

Amazon’s success has been its ability to deliver an improved user experience and comprehensive customer assistance through winning actions. Amazon is quickly becoming the B2B industry’s model of choice for new business owners.

WeWork

WeWork is a real estate, community management, and software company that assists in providing workspaces for enterprises and individuals starting their businesses.

Business To Business Definition, Types, & Examples

WeWork is a fantastic illustration of a B2B company since, at its core, it is a company that provides office space temporarily to other businesses.

Top WeWork Competitors & Alternatives

Alibaba

Alibaba, often known as Alibaba Group, is a renowned international business-to-business (B2B) eCommerce enterprise headquartered in Hangzhou, China. This business specializes in cloud computing, digital media, and entertainment, in addition to its main commerce operations.

Alibaba’s commercial brand encompasses a variety of verticals, including Taobao, TMall, Alimama, 1688, Alibaba Cloud, and Alibaba.com, amongst others.

Alibaba, now a global leader in the eCommerce and mobile commerce industries, has developed from its humble beginnings as a website catering to small Chinese manufacturers and exporters interested in expanding their business overseas.

Alibaba is an evergreen example of the business-to-business (B2B) e-commerce industry because the company went through several highs and lows before settling into its typical position in these B2B industries.

 General Electric

General Electric, usually known simply as GE, is another well-known B2B corporation that operates an eCommerce business in New York. Its headquarters are located in Boston, in the United States.

The company operates in a variety of industry verticals, including the financial sector, the lighting industry, aviation, the healthcare sector, the renewable energy industry, and the digital industry. 

Marketing Management Philosophies

The fact that two GE employees were honored with the Nobel Prize is a fascinating aspect of the company. These employees were Irving Langmuir and Ivar Giaever.

GE is not only popular among electrical and electronic equipment suppliers, but it is also a good example of a B2B company alongside Alibaba.

Slack

Slack is an internet platform that works like a chat room but also includes features that enable users to share messages and content easily. The slack stands for “Searchable Log of All Conversation and Knowledge.”

Slack is a company that offers other companies the opportunity to utilize its communication platform as a service.

AutoGlobalTrade

AutoGlobalTrade, sometimes known as AG, is one of the worldwide business-to-business organizations based in Switzerland that entered the automotive trade industry. The business will trade high-quality motor vehicles with ninety nations worldwide.

They are the most successful dealer of Ford, Chevrolet, Lincoln, and GMC automobiles on three of the world’s most important continents, including America, Europe, and Asia.

The sales team of this company is bilingual, as it is the link between this company and its target market.

This is an advantage for this company because it allows them to gain traffic from all over the world and to understand their customers more easily.

LinkedIn

LinkedIn is a business-to-business platform that also functions as a social networking platform. It is common knowledge that social media have a role.

However, LinkedIn also serves as the central location for most firms to gather information regarding the latest occurrences in the business world.

Through LinkedIn, other firms can learn about current market concerns and digitally connect with others working in the same sectors as them.

eWorldTrade

eWorldTrade, which gets its name from the concept of an online market, is one of the most successful business-to-business enterprises in the United States. It provides its producers, customers, and suppliers worldwide with high-quality services.

eWorldTrade was recognized for providing excellent service, earning the company an ISO certification. Minerals, machinery, polymers, and various other consumer goods are among the products produced.

In addition to working toward an increase in the GDP of each trader’s country, their primary objective is to inspire their business partners to engage in unrestricted free trade. This aim will enable their team to succeed in this B2B venture step-by-step.

IBM

The International Business Machines Corporation (IBM) is a multinational technology and software corporation that serves other businesses by supplying them with hardware, software, and cloud-based services.

It is one of the largest and oldest business-to-business (B2B) organizations on our list, even though the company has dabbled in the consumer market. The company’s principal operations have always been providing services for other businesses.

Kekselias

The word “Kekselias” means “complete manifestation of creativity,” and the company that bears that name is one of the most successful B2B online retailers concentrating on the financial sector. 

The Kekselias team ensured that their website had an engaging user interface and user experience design, much like the company name suggests.

Mass Marketing – Definition, Pros, Cons & Examples

The interactive web page of this organization enables its consumers to perform their duties more easily on the website, without the need to create a dull financial website. 

The company provides its B2B traders with various finance-related services, including interest rates, investment research, and monetary policy analysis.

You May Also Like