You may have come across two terms which are often confused – Business-to-Business (B2B) retail and Business-to-Consumer (B2C) retail. In this article, we outline the key features of each model so that you know the differences between the two.
The B2C model is possibly the business model most widely understood by the general public. The B2C model sells finished products and services directly to consumers, while B2B models sell products to other businesses.
The Purchasing Process
There are a few fundamental differences between the two models when it comes to purchasing products. Consumers buy products or services for personal use, whereas business buyers purchase products or services for use in their companies, whether as a component to help them produce their finished piece or even for use in the office.
Additionally, the B2B purchasing process can be much more complicated than the B2C purchasing process. For example, decision making groups in B2B purchasing can include members from anywhere from technical, business, financial and operational departments, depending on the type of purchase. Moreover, the person selecting a product may not have responsibility for making the final purchasing decision. A large capital purchase, for example, may require authorisation at board level.
In contrast, the B2C purchasing process involves just the buyer. For example, when people go to the convenience store to pick up a drink, it’s a straightforward process involving only the buyer.
Payment and Prices
In B2C models, each consumer will likely pay the same price for a product as every other consumer. However, in B2B purchasing some customers may be charged at a different rate for the same product. This may occur, for example, if some customers agree to place large orders or negotiate special terms in order to get a reduced price to other customers.
Payment methods between the two models can also differ radically. For instance, B2C buyers traditionally select products and pay for them at the point of sales using payment mechanisms such as credit or debit cards, or cash. In B2B transactions, buyers select products, place an order and arrange delivery through an agreed logistics channel. Customers do not pay at the time of the order but receive an invoice which they settle within agreed payment terms.
Breadth of Audience
The final difference between B2B and B2C models is the types and size of consumer audiences that each model aims to target. For example, B2C retailers often strive to reach a broadly defined group of people – anyone from sports fans to millennials who are into music or kids in general. B2C retailers have a larger target audience as a whole.
By comparison, B2B retailers have a much narrower target audience – there are usually a set number of buyers, with a pretty straightforward profile. For example, a B2B retailer might only target ad agency owners or finance VPs at tech start-ups.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.