When we speak of ecommerce, we often refer to B2C (Business-to-Consumer), where a business sell their goods or services to the final consumer. In reality, there's another model called B2B (Business-to-Business) where a business sells to another business, typically a manufacturer to a wholesaler or a wholesaler to a retailer.
The digitalization of B2B has traditionally been slower than that of B2C. Today, many merchants manage B2B orders manually, using spreadsheets or even pen and paper. However, B2B ecommerce has grown in popularity in recent years. As more and more people shop online, they expect the same selling or shopping experience when their business is involved.
Due to some peculiarities of the B2B model, the majority of B2C ecommerce platforms, particularly monolithic platforms, are inadequate to support that type of business model. In this article, I will list some of the most common business requirements that are specific to B2B transactions. Each title would deserve its own deep dive, so I won't get too into it. However, I hope this will help provide a high level understanding of how B2B works and how it differs from B2C.
A B2B customer is a business entity, as the name implies. This means that it's a group of people who can place orders on behalf of their company, not a single person. To become a business customer, you are typically required to register with the merchant. It is not possible to place an order as a guest and if you register an account, your account must be approved before you can place one. It is usually the merchant who populates the list of registered accounts, and the B2B website only provides an inquiry form.
B2B customers can be grouped into groups with similar business settings, like product assortments, price lists, payment methods, and delivery options. It is necessary for the customer to log in before making a purchase, so that all their business settings are automatically associated with their purchase. Some customers have hierarchical structures, with some users able to place orders of any value and others who require approval from other users before placing orders over a certain amount.
In some B2B models, sales agents act as intermediaries between buyers and sellers. A sales agent can place orders for one or more assigned customers. Every time an agent makes a sale, the system calculates a commission.
B2B portals usually have a sales agent login that allows cross-customer functionality. A sales agent is able to place orders on behalf of customers from a list they have access to. According to the order history, they also have a report of their earned commissions in their private area.
Business between the two legal entities is governed by a contract. It is generally the case that one company sends a request for quotation (RFQ) to another company with a list of products, the quantities needed, reorder frequency, payment terms, and other details that can affect the quote. Other times, the agent can propose a specific contract.
Once the two parties agree, the RFQ becomes a contract that is typically multi-year in nature. All subsequent transactions between the two companies will be covered by that contract. At every purchase, the ecommerce platform must be able to honor the contract, controlling pricing, quantities, thresholds, and limits.
According to the contract, each customer or customer group may have a dedicated price list. Pricing can include minimum purchase commitments and has a validity period. Generally, there is a tiered pricing system that includes discounts for volume purchases.
B2B shopping carts and checkout applications must support this level of flexibility. There are times when the pricing model is so sophisticated that it deserves its own microservice. In such a scenario, the commerce engine should be able to connect to that external pricing service and handle the other functionality without managing prices.
Average order value
A B2B business is characterized by fewer but larger orders than a B2C business. While a B2C shopping cart can have up to ten items, a B2B order can have tens or hundreds of items and an average order value of tens or hundreds of thousands of dollars. It is for this reason that a tiered pricing model is often necessary.
For platform fees, it is clear that businesses will not be willing to pay hundreds or thousands of dollars for a single order on ecommerce platforms charging a percentage of revenue. The same applies to payment gateways that charge based on a B2C model. To be effective, commerce engines and payment gateways must both offer a pricing model that is specifically tailored to B2B, one that takes this model’s business peculiarities into account.
Considering the size of orders, B2B ideal customer experiences require bulk actions, which can produce multiple orders during a single shopping session. For a sales agent, the experience begins with the selection of the customer (or customers) for which the order is being created. A customer who places an order autonomously skips this step.
The product catalog usually contains more basic product information and less editorial content (if any) than a B2C website. In order to add multiple line items to your cart in bulk, you insert the desired quantity per product, and then click a single add to cart button. Based on the contract, all other checkout information, including addresses, delivery methods, and payment methods, are already configured.
In cases of high business volumes, orders are imported in bulk, based on a predefined template, or via an automatic replenishment workflow that is tied to customer stock levels.
When compared to B2C purchases, B2B orders typically use offline and asynchronous payment methods. Generally, there is a balance between the two companies that can go up or down depending on business transactions, and payments happen at a defined cadence.
Though invoice payments are the most common method of payment for B2B transactions, more and more credit cards and digital payments are being accepted as well. Increasingly, both models are convergent in this respect.
There is a big difference between shipping a single parcel to a customer and delivering a pallet of hundreds of products. Because of this, B2B and B2C businesses have very different logistical systems, and this is one of the reasons why traditional B2B businesses struggle when trying to run a B2C business (and vice versa.)
Shipping costs are an important aspect of the business. It is essential for a B2B commerce engine to be able to operate on sophisticated shipping cost calculations. In some cases, it is worthwhile to create or integrate a microservice dedicated to this job.
Deliveries are also slower than in B2C models. Businesses often have predefined timeframes for shipping orders, so a purchase can also be made by booking the stock for delivery in the future.
B2B generally has fewer promotions than B2C, since the sales price is already discounted compared to the retail price. Contracts already stipulate the discount that will be applied to a specific customer, and this can be reviewed yearly based on the volume of orders.
A business may want to offer an additional discount on promotions based on remaining stock. In contrast, free shipping is very unlikely to be offered given the size of orders. Instead, it's the B2C model that borrows more logic from B2B when it comes to offering promotions to their clients. Rather than issuing a coupon for a holiday season, loyalty programs and private sales are examples of promotions that are based on a customer's profile and spending behavior. This is one of the aspects where the two models converge, and I do not doubt that this trend will continue in the future.