Business to business (B2B) commerce describes transactions involving businesses as both the buyer and seller. While it may not get the same attention as business to consumer (B2C) commerce, B2B commerce is massive. Valuing $12.2 trillion in 2019, the B2B e-commerce market is over six times greater than its B2C counterpart.
Because B2B commerce involves high order values and bulk purchases, it is much more nuanced than a regular consumer shopping experience. In this guide, you'll learn all there is to know about B2B commerce, how it works, how it differs from B2C, and how digital sales channels are shaping its future.
Differences Between B2C and B2B Commerce
With the growth of e-commerce, it is a common belief that today’s B2B buyers now simply want a B2C-like experience when purchasing goods. But, this belief is misguided. While B2B buyers certainly want many of the features present in B2C (online catalogs, easy checkout), they still want (and need) the attention to detail and customization offered through traditional methods. Things like requests for quotes, purchase orders, and negotiated pricing aren’t going anywhere, no matter how much B2B e-commerce grows. In a way, this has made B2B commerce even more complex as sellers are now forced to satisfy needs on both ends of the spectrum.
Despite the steady adoption of many B2C inspired features, at their core, B2C and B2B commerce are still fundamentally different. Here are the areas with the biggest differences.
The first difference to note between B2C and B2B commerce is the products themselves as products in B2B are much more complex. For B2B, advanced product attributes are more than just a nice feature, they are essential. Unlike most B2C items, a one-size-fits-all approach doesn’t work for B2B customers. In B2B, buyers often have unique needs and therefore require products with many variants or custom configurations.
Some B2B products aren’t sold to an end-consumer but rather used as components to make another product. For these items, B2B buyers need more extensive product details and documentation containing everything there is to know about the item (specifications, alternate parts, service manuals, accessories, warranty information). This information must be available on a B2B seller’s online catalog, making B2B product pages much more detailed than B2C, especially when customized and bundled options are available.
Intent and decision making
In B2C commerce, customers are in the market for products that can be classified as “wants” and “needs”. Wants may not serve some essential purpose but are sought after for the consumer to fulfill some form of psychological desire. For these products, the consumer usually won’t make a purchase until there is an emotional compulsion to do so.
Because B2B buyers are only buying products that serve some form of need, they are more rational in their decision-making process. Purchases are made using logic as any item that is purchased needs to bring value back to the business. Decision-makers are held accountable for their choices and can face the consequences resulting from a poor choice of products. As such, impulse buying in B2B is non-existent.
The buying process in B2B is also more complex and therefore requires a more systematic approach. It can take a business several weeks to go from researching the specific item needed to issuing a purchase order. Whereas a B2C purchase typically only involves one person, B2B purchases can involve over half a dozen decision-makers. The person responsible for making the final purchase decision is often not the end-user of the product. In this sense, parties in the B2B buying process can be split between “users” and choosers”. Sellers have to know how to appeal to both groups, further complicating the sales process.
Customer life cycles in B2B commerce are much longer than those in B2C. In B2C, customers often make a one-off purchase from a seller, then proceed to not make another purchase for some time, or never return at all.
B2B customers are focused more on building long-term relationships. They want to find a reliable vendor who offers the goods they need at a reasonable price and continue doing business with them. B2B buying also involves acquiring replenishable products more often than B2C. Because of this, the ability to easily reorder items quickly is a top priority and leads to buyers sticking with the vendors they already know.
There are some inherent differences between the online storefronts of B2B and B2C e-commerce business. Because B2C customers are much more emotionally driven, the frontend design of B2C websites is more geared to stimulating these emotions. The need to create a visually stunning display or unique branded experience is crucial. Because B2B customers are much more logical and data-driven, the frontend display needs to focus on providing relevant and accurate information that users are able to access with ease.
Complex payment options
Payment options in B2C are much less complex than in B2B. In B2C commerce, the majority of consumers pay using a credit or debit card. Alternative payment methods like Paypal, Apple Pay are gaining popularity, but these methods still tend to simply use the card as the end source of funds.
For B2B businesses, payment can also be made using ACH transfers, wire transfers, lines of credit, or checks. Payments don’t necessarily take place on an e-commerce portal, as many buyers still choose to pay for goods through traditional invoices. However, transactions occurring on e-commerce platforms still need to provide the option for purchase orders, payment on trade credit, along with order approval options. As most B2B relationships involve exclusive pricing arrangements, B2B e-commerce platforms must be built to handle unique pricing for each customer.
B2B Procurement Workflow
B2B procurement consists of the entire process of finding and sourcing goods from a vendor. The traditional workflow has evolved with the emergence of online sales channels but the core process remains the same. Let’s break down how this process works for today’s B2B buyers, all the way from need to delivery and payment.
The B2B procurement workflow begins with the recognition of the need for a particular good. This could be supplies for the office, components for a manufactured item, or items to be resold to an end-consumer.
Once a need is recognized, the stakeholders involved must determine the specifics for the items and begin looking where to obtain them. In the past, this meant reaching out to a network of suppliers or attending trade shows. But with the internet, B2B buyers can begin their search online. Many B2B companies now have their catalog available digitally, enabling customers to complete a significant amount of research before reaching out to the vendor.
When the details have been clarified, an employee creates a purchase requisition, a formal document used to make a request for the needed materials. The document helps inform the department manager or purchasing officer of the need so that they can begin the purchasing process.
Once the purchasing department receives the requisition form, they will review the document before deciding to approve, alter, or deny the request. Some of the factors that they take into consideration include, whether the requested products are actually needed if the cost is appropriate and that the request does not violate any existing agreements. When the purchasing department approves the requisition, they then have the authority to create a purchase order.
The purchase order details what the company is requesting from the supplier and includes the following information:
- Product(s) being purchased
- Quantity of each product
- SKUs, model numbers, or specific brand name
- Price per unit
- Total price
- Delivery date
- Delivery location
- Billing address
- Agreed payment terms
In large companies, purchase orders are usually issued by a procurement or purchasing department. For smaller companies, an operations manager, finance manager, or even the business owner themselves, will issue the order. If the company creates the purchase order without first creating a requisition form, the PO will need to be approved before it is sent to the vendor.
Upon receipt of the order, the vendor will decide if they have the ability and desire to fulfill the requirements of the order. When the vendor notifies the company that they can meet the request, the purchase order becomes a legally binding contract. The vendor will then prepare the order and deliver the goods to the specified location.
Receipt and inspection
When the goods arrive at the delivery destination, the receiving staff checks the attached documents (PO number, delivery note, etc.) and acknowledges receipt of the order. They will then inspect the goods ensuring that the quantity and quality of the goods are in order. Any unsatisfactory items can be rejected and sent back to the supplier.
Invoice approval and payment
After the buyer accepts the delivered goods, the seller issues an invoice requesting payment from the buyer. Before paying the invoice, the buyer (usually the accounts payable department) will confirm that the details on the invoice match those on the purchase order and that the goods have in fact been received and accepted.
Factors impacting the procurement process
The exact nature of this process and how long it takes can vary dramatically depending on a variety of different factors including:
- The cost of a product: the more a product costs, the more stakeholders tend to be involved in the buying process and the longer it takes.
- The level of differentiation between products: when a product is complex or there is a lot of differentiation between options, the business will spend more time evaluating different options.
- Whether it is an initial purchase of a particular item: if a business needs to resupply a product from a previous purchase, they tend to stick with the current vendor. Fewer stakeholders are involved and less time is required to complete the process.
The strategic importance of the product: products that will have a greater impact on the success of the business involve more scrutiny and higher-level decision makers. Products more trivial in nature do not require as much research. For example, a company that needs pens for its office may choose to simply bulk order the least expensive option available from their preferred supplier instead of having multiple parties search to discover their preferred style of pen.
How E-Commerce Is Changing Procurement
E-commerce has changed the procurement workflow for B2B commerce, enabling both buyers and sellers to operate with greater efficiency. Before companies were able to create online catalogs that customers could browse and shop, B2B sellers would need to send sales reps directly to a potential customer with a physical catalog.
These catalogs were massive as they contained all the varied products the vendor had available. Walking customers through the catalog to find the best product to suit their needs was cumbersome. It also limited how much control the buyer had over the entire process as they were completely reliant on salespersons and could do very little product discovery on their own.
With B2B e-commerce, customers have access to a vendor’s catalog on-demand and can browse as they see fit. Modern search functions and personalization engines make it easier for buyers to surface the products that they need, without having to flip through page after page. When a customer curates the items for purchase they are able to order online at their own convenience. This has not completely removed the need for purchase orders and invoices, but instead has given customers the ability to complete a purchase and payment through an online portal as they would in a common B2C transaction.
For B2B sellers, the reduced manual order taking gives sales and service staff more time to focus on customer service, building relationships, and surfacing new and relevant products to customers. Orders are also much more accurate as data entry errors and other mistakes resulting from manual input are less of an issue.
Key Components of a Modern B2B E-Commerce Solution
When it comes to e-commerce, B2B customers need more than the simple ability to browse and add products to a shopping cart. Buyers have come to expect the same autonomy that has been a staple of B2C e-commerce for years. In order to meet customers’ desire for self-service, B2B e-commerce platforms must be flexible while providing all the features necessary for customers to manage their accounts and complete the buying process on their own. Let’s examine the essential functions expected from a modern B2B e-commerce website.
Today’s B2B buyers need the ability to manage every detail of their account straight from their dashboard. This includes:
- Payment details: when customers can save and modify payment details they are able to place orders with greater ease. This includes credit and debit cards, bank details, and integration to third-party processors like Paypal.
- Addresses: B2B companies often need to add or change shipping and billing locations. Being able to update this information manually instead of having to wait for a service rep helps ensure that orders are processed efficiently.
- Managing users: because many B2B companies have multiple users per account, they need the ability to quickly add and remove users to avoid delays when performing important tasks.
Ordering and payments
The following features help provide B2B customers a streamlined buying experience:
- Quick order tools: quick order lists enable buyers who already know what they need to complete orders faster. A great example of this is Fabric customer MSC. Their quick order tool allows customers to add multiple products to the cart at a time using the Part #.
- Reordering tools: many B2B companies repurchase the same products frequently. With a reorder tool, customers can quickly repurchase items without needing to find and add them to the cart again.
- Order history: with a consolidated order history, customers can easily see details for any order such as which are paid or which are out for delivery. The order history also eliminates the reliance on service reps to get important information.
Managing invoices online: When B2B customers can access their outstanding invoices directly from their online account, payments are made faster and sellers are less likely to have to chase down payments.
B2B Personalization and Pricing
With personalization, B2B companies can customize communications, offers, and more to match the needs and preferences of each individual customer. Unlike B2C, which often uses personalization to build an emotional connection with a customer, personalization in B2B is more about improving efficiencies. When a seller customizes the buying experience for a B2B customer by providing easy access to relevant information and suggestions, they make the buyer’s job easier. Below are the areas where personalization plays a major role in B2B commerce.
To buyers, the ability to easily find the specific products that meet their needs is essential when choosing a vendor. This presents some challenges to B2B sellers as B2B product catalogs are large and complex, much more so than B2C catalogs. Sales reps may be able to navigate the complex catalog without much trouble but B2B customers are not able to do the same.
Giving buyers an online catalog that they can actually make use of means finding a way to overcome multiple identifiers like SKUs, part numbers, UPC codes, and other data that can make finding relevant products a challenge. With personalization, B2B sellers can create a unique product display for every customer. For example, a seller could create custom mini catalogs based on specific interests or different role types. Personalizing B2B catalogs also helps sales teams and customer service reps as they are able to assist customers much more efficiently with a refined selection of products.
Because time is often the main influencer of a B2B purchase, the ability to streamline the order process is critical to retaining loyal customers. Personalizing order lists can help buyers place orders more efficiently by providing easy access to relevant and previously purchased products. These lists can be customized further based on user role and approval level.
Sales teams require complete transparency into a customer's order history to be able to provide buyers a highly personalized experience. This can be tricky as customers' buying preferences can vary between purchases, even when acquiring the same items. They could place the order through a sales rep on one occasion and then through the vendor's website on another.
Cross-selling in B2B commerce typically involves offering add-ons, accessories, or other essential components instead of simply showing complementary products. Merchandising is highly personalized so that every touchpoint involves presenting all the goods and services needed for the buyer to perform the job at hand, even if the buyer is unaware of those needs when searching for products.
Unlike B2C, where all customers receive a fixed price, pricing in B2B commerce is flexible and varies based on the customer, the quantity purchased, or the contract agreement.
Contract pricing is still the norm in B2B commerce as it gives buyers the best prices and sellers a loyal customer that will bring continual business. B2B companies negotiate contract pricing and terms based on each customer’s particular needs. How often they will make orders, how large their orders are, and who will pay for shipping all play a part in the negotiated contract price. A customer who places weekly orders will see a lower cost than one who only orders once a month.
Customers who don’t enter a contract can still receive personalized pricing. Many B2B companies will offer custom quotes for one-off orders or exclusive per-unit pricing for bulk purchases.
B2B's Advantage over Marketplaces (Amazon)
Given the catalog depth of major B2C marketplaces like Amazon, you may think that B2B buyers could simply order the goods for their business, in the same manner, they would for personal products. This approach can provide a degree of convenience but there are distinct advantages to purchasing directly from a B2B vendor or a dedicated B2B marketplace.
Convenience for low consideration products is important but B2B buyers also need access to flexible product options and dedicated support for more nuanced purchases that require more consideration. When you buy from a retail marketplace you do not have access to the custom configurations or extensive documentation that you find when buying directly from a supplier. Support is also limited as Amazon essentially treats buyers on the marketplace as their customers, not the sellers, by standing between any contact between the seller and the end-consumer.
Engaging with a B2B vendor directly through their online portal benefits both buyer and seller as they are able to build strong, long-lasting relationships. Vendors can assign dedicated service reps to each customer account to be able to provide a more personalized experience. By negotiating pricing and entering into contracts, buyers are able to get better prices than they would when paying retail. Purchasing from a B2B company also provides the flexible payment options that are vital to many businesses’ operations. When you buy from Amazon or eBay, paying an invoice at a later date isn't an option. Payment is made upfront and you are unable to verify the quality and condition of the goods beforehand.
Also, businesses can’t just buy from anyone, making vendor vetting a critical part of the B2B purchase process. When companies take the time to research and find the most trustworthy suppliers instead of using unvetted third-party sellers, they can forge relationships that the business can rely on.
B2B commerce will continue to evolve as customers increase their expectations for a seamless buying journey. With e-commerce services like Fabric, B2B companies can meet this expectation by providing everything desired in the modern buying experience. Sellers can personalize every detail of the buying journey while offering the seamless browsing and ordering afforded in B2C.