B2B 101: A Quick Guide to B2B
Global business-to-business (B2B) ecommerce transactions totaled US $12.2 trillion in 2019, according to a Statista report. One of the most prominent trends in B2B ecommerce is the rise of the B2B marketplace. The impact of this online marketplace model cannot be understated, as it redefined the business relationship between B2B buyers and sellers and acts as a networking point. As the trend continues to grow, it represents a huge opportunity for traditional B2B wholesalers and distributors to embrace the online marketplace model in order to get ahead of their competition.
While we use the term B2B often in our industry, it’s not always clear what we mean by B2B. At the end of the day, business owners and innovators new and old could use a refresher course.
What is B2B?
B2B is an acronym for business-to-business. A B2B company sells products (or services) to other businesses, not individual consumers. These products and services go into the operations of “buying” businesses. These could be component parts for manufacturing, goods that get resold, or management and advisory services. This is different from B2C, which stands for business-to-consumer. B2C companies only sell products (or services) to customers for their personal use.
“B2B trade” can be viewed as wholesale transactions. A typical order in the B2B industry is much larger than in B2C — think thousands of apples instead of one. This is because B2B buyers need larger quantities to grow their companies. It’s not for personal use but to create their own finished product, to resell, or to operate their businesses.
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An easy example to visualize: a B2C company will sell one pair of socks, ready to wear, to one person. A B2B company will sell a shipping container full of plain white socks to another company to customize and resell.
When you buy a pair of socks from a retailer, it is the very end — that’s the “B2C” part — of the value chain. But before the pair of socks is ready for the retailer to sell, it goes through a long and complicated journey — from the farmer who grew the cotton, all the way to the manufacturer of socks, to when the socks arrive on the shelves.
This is why the B2B global market opportunity is 6x that of B2C.
The B2B Value Chain
Companies in the B2B trade space fall into two straightforward categories: sellers and buyers.
What is a B2B Seller?
B2B sellers provide finished or unfinished products to other companies to use in their own products or to resell. B2B sellers may manufacture and sell thousands of tires to an automobile company. Or they may supply customized, ready-to-sell mugs to a retailer.
What is a B2B Buyer?
In the examples above, a B2B buyer is the company purchasing the tires. Buyers may need individual parts to incorporate in their own final product. Other buyers may give precise order specifications to get customized, finished products.
The relationship between B2B buyers and sellers has traditionally been conducted “offline.” This means they attended trade shows, met face to face, or spoke over the phone to make a business deal. But COVID-19 has presented quite a challenge for many companies, forcing them to go digital.
Online Adoption Among B2B Companies Buying or Selling Goods
According to a recent Alibaba.com US Small and Medium Business (SMB) Survey, 93% of the 5,000 B2B companies we surveyed are now conducting some portion of their business online. Not only have they gone digital, but 80% of respondents reported maintaining or growing online B2B transactions in the past six months.
The survey also shows B2B companies turning to digital technologies like mobile apps and ecommerce marketplaces like Alibaba.com. They believe ecommerce marketplaces are more impactful on B2B trade than ever before. And they’re right.
As one of the world’s largest B2B ecommerce marketplaces, Alibaba.com helps sellers grow their margins with a suite of tools built for B2B trade. The marketplace creates a new way for buyers and sellers to meet one another and find new business. Over the years, we’ve seen this digital migration firsthand. In December 2020, the total value of goods and products sold (GMV) on Alibaba.com saw a 111% year-over-year growth, up from a 67% year-over-year growth in December 2019.
Using a B2B ecommerce marketplace means the chance to connect with an entire world of small business owners in the B2B space. Getting digital is no longer a nice-to-have, but a must-have. Simply put, a B2B ecommerce marketplace allows B2B buyers and sellers to grow their businesses, expand into new markets, and take the next step into the digital age.