Should my business sell B2B or B2C?
That’s an important question that all business owners and entrepreneurs need to ask themselves, so they can make the best decisions for their business. We can help you make that decision (We'll also teach you the B2B meaning).
What Is B2B and B2C?
A B2B, or "business-to-business" company provides services or products to other businesses. A B2C, or "business-to-consumer," company sells directly to individual consumers. They’re two separate business models that serve different types of customers, one being businesses and the other direct to consumer.
What Is B2B and B2C with Examples
If the idea of B2B and B2C business models seems confusing, here is a simple example to help.
Let's say you are a farmer who grows watermelons. You've harvested this year's crop and have 1,000 watermelons to sell. You need to decide if you'll choose to go the B2B or B2C route.
If you choose the B2B route, you need to find a retailer to buy your watermelons wholesale (see what is wholesale). This could be a grocery store, restaurant, or another farmer who needs additional watermelons. You will sell in bulk for a discounted price to another party who will then sell those watermelons in some form to consumers.
If you choose the go B2C, you would instead set up a farm stand. At this farm stand you sell watermelons directly to customers as a DTC food business. This requires you to spend more of your time selling the watermelons, but you can sell them at a higher price.
B2B vs B2C: Which Is Better?
Neither the B2B nor B2C business model is inherently better, they both have their own pros and cons. Most businesses are better suited for one model or the other. The model that best fits your business is determined by your goals, infrastructure, and industry.
Run a business that makes products en masse, B2B may be the right choice. This will allow you to participate in bulk shipping and grow relationships with businesses around the globe.
You could choose to offer dropshipping and handle the shipping operations for the businesses you sell to. Profits can be higher, but only if you sell enough product.
Have smaller batches of products, or sell items with a limited shelf-life, B2C might be the answer. These businesses rely on a higher inventory turnover ratio. Individual items have higher profits, but it takes more work to sell as many products.
Difference Between B2B and B2C
The main difference between B2B and B2C businesses is their intended customers. B2B sells to businesses that resell the products while B2C sells directly to the end consumer.
However, they also tend to operate differently and offer unique benefits.
Compare and Contrast B2B and B2C E Commerce
B2B and B2C Ecommerce businesses (see what is e commerce) have many shared qualities, but they also have a number of important differences.
Here are four of the biggest differences:
- Pricing models. This is the same regardless of whether you're an ecommerce or brick-and-mortar business. B2C businesses offer a single tier of pricing for all customers that are only affected by sales or discounts. B2B businesses usually offer multiple levels of discounted prices based on the quantities and frequency of orders. B2B payments also more varied than B2C and are usually made via net 30 terms.
- Customer service vs account management. B2C ecommerce companies use customer support representatives to respond to common questions and issues. B2C businesses use account managers who bring in new wholesale customers and are regularly in contact with them to increase eCommerce sales and assist.
- Website structure. B2C sites need to have compelling landing pages built to attract customers and convert. This requires investment and dedicated employees to keep the site up-to-date. They can also choose to use an online marketplace to avoid the costs of a headless eCommerce site. B2B sites are mainly used as dashboards for the businesses to easily access the products they want to purchase or access account information. These differences are the same if the company uses an B2B online marketplace. You're unlikely to find a line sheet on a B2C site.
- Checkout structure. Even the steps in the checkout process are different between B2C and B2B ecommerce platforms. In B2C, the checkout process is streamlined to avoid customers abandoning their carts. In B2B, the checkout often has additional steps including injecting human interaction options, adding multiple shipping addresses, or setting up an automatic reorder point. You can check out our eCommerce business guide for more tips.
Both the B2B and B2C Buying Processes Begin with ...
Both the B2B and B2C buying processes begin with need recognition. This means that, regardless of the business you run, you first have to establish what your target customers need.
This can be done through surveys, research, or by looking at B2B sales leads ( see what is B2B sales). If you aren't meeting consumer needs, you can quickly run into issues with a backorder, dead stock (see what is dead stock), or even risk business failure.
B2B vs B2C Buying Process
B2B and B2C consumers behave very differently and their buying processes reflect this.
Here are a few ways they differ:
- Buying cycle time. B2B consumers act more slowly and are better informed about their purchases. This is because their purchases are of a much larger quantity and their own business is greatly affected by their purchases. B2C consumers convert more quickly and are often less informed about product differences.
- Emotional investment. B2C consumers often make emotionally-driven purchasing decisions. They may be moved by advertising to associate your product with happiness, or they may be trying to alleviate some frustration. B2B consumers are much more calculating and driven by numbers. This means B2B marketing (see what is B2B marketing) is much more informational and DTC marketing is more entertaining.
- Parties involved. B2C consumers are individuals or a small group. They can easily communicate their wants and needs and are much easier to build a relationship with as a business. B2B consumers often involve multiple people and teams in their purchasing decisions. Rapport can still be built, but it will take longer and requires more investment by all parties.
B2B or Not B2B, That Is Your Question
Now that you know the main differences between B2B and B2C business models, you can make the right decisions for your business. Remember, both models are capable of providing a business with a large volume of sales and push product.
Your next move should be to look at the various inventory control methods available. This will help you keep costs low as you continue to grow your business.