Posted 24.01.2022
The COVID-19 pandemic has hastened an already growing shift towards ecommerce. Unable to purchase the goods they want and need in physical stores, consumers have turned their attention to the online realm. In an age where everything from groceries to consumer electronics can be bought online, it’s no surprise that ecommerce continues to take up a growing proportion of the retail market. With an annual growth rate (CAGR) of 3.5%, ecommerce has a projected market volume of £92,464 million by 2025.
While much of this growth is attributed to the business to consumer market, the business to business sector is slowly catching onto the benefits of doing business online. After all, markets are changing and B2B buyer demographics are shifting. Digitally-native millennials make up a growing proportion of the workforce. By 2025 it’s estimated that 75% of the global workforce will be made up of millennials. This generation makes many of their purchases online. So while the B2B space has typically resisted migration to the online realm, we can expect ecommerce to become a growing part of the B2B market in 2022 and beyond.
Almost 50% of companies now conduct between 50 and 74% of their business purchases online, while 23% of companies do at least 75% of their buying online. In other words, if you’re not yet doing business online, you’re at risk of falling dangerously behind the curve.
Simply put, B2B ecommerce is the practice of making business-to-business transactions online. B2B ecommerce suppliers are typically wholesalers selling to retailers, but the market is rapidly diversifying. It now encompasses manufacturers, and all kinds of digital and professional service providers. B2B ecommerce deals largely in the sale of physical goods (e.g. raw materials for manufacturing, ingredients for cafes and restaurants, office supplies, machinery and plant etc.). However, digital services such as SaaS form an increasingly important part of the B2B ecommerce landscape.
B2B ecommerce is a broad church. One that’s constantly growing and expanding. In fact, the B2B market is currently worth 6 times more than the entire B2C market. And as more and more business buyers come to realise the benefits of B2B ecommerce, this gulf will only continue to widen.
As the sector grows, diversifies and expands, our definition of B2B ecommerce gets broader. Here, we’ll take a look at the different types of B2B ecommerce, and how it can benefit both your company and your customers.
In many ways, it isn’t. And many buyers use the same online marketplaces and platforms for both their business and personal purchases. The key difference is that B2B ecommerce requires the sale of goods and services from businesses to other businesses. Even if merchants sell the same products to the consumer. However, there are a number of other key points of differentiation.
For instance:
Believe it or not, it’s quite common for businesses not to see themselves as B2B ecommerce sellers, or to underestimate the importance of the B2B market in their sales. Many online brands are, in fact, both B2B and B2C. However, given the size and growth of the B2B market, it makes sense to dedicate time and effort to nurturing this market.
Don’t worry, you don’t have to set up a whole new ecommerce website for your business customers. It’s more a case of using segmentation, a dedicated URL and customer groups to create a personalised user experience for your B2B customers.
With the right ecommerce platform, it’s much easier to customise your user experience (UX) and user interface (UI) to the needs of B2B buyers and give yourself an edge over your competitors. But before we look at the advantages of using an ecommerce platform or the benefits of B2B ecommerce store, let’s establish the different types of B2B ecommerce. This will help to remove any ambiguity as to whether or not you’re ‘doing’ B2B ecommerce, and help you to adjust your marketing strategy to capitalise on the growth of this ever-expanding market.
B2B ecommerce markets fall into two camps, depending on the nature of the products or services sold and the companies that buy them. These are vertical and horizontal markets.
Wholesaling is the most common form of B2B ecommerce, and what typically comes to mind when we think about the business model. Wholesale ecommerce is essentially an online equivalent of a cash & carry. Merchants sell supplies in bulk at a discounted rate to retailers, restaurants, bars, etc.
There was a time when this was exclusively done in huge physical stores, but more and more of this activity takes place in the online realm where customers can enjoy even better prices along with increased convenience and time-savings.
As with physical cash and carry stores, wholesale suppliers have slowly opened up to the B2C market online too. So economically-minded households can enjoy the same savings on essentials as local businesses.
The subscription model has boomed substantially over the past decade. From streaming services to Netflix to recipe boxes like Hello Fresh and nutrition supplement services like Huel. Yet, while these have proven a big hit within the B2C market, the subscription model is also important for B2B ecommerce.
The most obvious example is the Software as a Service (SaaS) business model. These cloud-based services require an ongoing subscription for software to facilitate business operations. This is a huge growth market that’s expected to grow by 21.7% globally in 2022 from 2021.
In order to achieve success in SaaS, or any subscription-based model, businesses need to keep a close eye on their churn rate. This is the number of customers that unsubscribe from or leave the service. Finding ways to keep the churn rate low while also taking active steps to engage new subscribers (e.g. incentives for customer referrals) is the key to success when running a B2B subscription-based service.
Dropshipping, or direct shipping, is one of the fastest-growing forms of e-commerce. And while it primarily focuses on the B2C market, there are also ample opportunities within the B2B space to utilise dropshipping.
Here, businesses market and sell products that are fulfilled by a third-party supplier. This means that there are no costs incurred from warehousing or transportation. As such, the barrier to entry is extremely low. And with the right B2B ecommerce platform, retailers can coordinate supplies from vendors all over the world under a single branded store page.
Dropshipping is popular for products with a fast turnover where supply is constant (e.g. sanitary products, food, drink, paper etc.). Alternatively it’s also good for large or heavy items like machinery where transportation costs would put a substantial dent in your profit margins.
The only caveat with dropshipping is that you have no control over the fulfillment process. So if an item arrives late, damaged, or not as advertised, it may impact negatively on your brand even though the logistical blame does not lie with you.
White label is a term for when you apply your name and brand to a product that is generic in nature. This means that you do not manufacture it, nor is it manufactured for you. Instead, it is supplied by a third party and sold by you.
Dropshipping is a good example of a while label B2B ecommerce business model. White labelling is a good way to keep your product design and production costs low, while responding quickly to changes in consumer demand. However, white label B2B companies have no real control over the quality of the products they sell, and so have to choose their suppliers extremely carefully.
Private labelling is where an online or physical retailer commissions a manufacturer to make a product that is unique to them. Unlike while labelling, this provides businesses with an opportunity to exert a greater degree of control over the product. However, it still enables them to keep production and design costs low by outsourcing them to a third party.
As we can see, most of the B2B ecommerce market is geared towards the sale of products. Even if those products are not tangible e.g. SaaS. But there’s also substantial room for professional services within this B2B ecommerce market. Businesses are often as reliant on professional services as they are on products to facilitate business operations. Outsourced accounting, HR support, bookkeeping, IT services and legal support are all common examples of the services that SMEs rely on to keep their operations running optimally.
Wherever these services are bought and sold through an online store, this falls under the umbrella of B2B ecommerce.
As previously stated, many online brands cater to both the B2B and the B2C market. Indeed, many brands do business exclusively through hybrid marketplaces with which their customers are already familiar. Ubiquitous names like Amazon and eBay are commonly used by B2B buyers in their personal lives. Naturally they’re among the first names that spring to mind when they need something for work. As well as servicing both the B2B and B2C markets, these marketplaces also facilitate Customer To Customer (C2C) transactions.
Although the B2B ecommerce market has a much higher value than its B2C counterpart, the B2B sector has been slow to embrace ecommerce. There are a number of potential reasons for this:
However, when B2B merchants let go of their preconceptions, they come to realise that B2B ecommerce can have a host of benefits. These include:
Your ecommerce site has the potential to outshine even your best sales professional. Zendesk suggests that 67% of buyers prefer to use self-service tools to make online purchases rather than talking to a sales rep. B2B ecommerce platforms allow customers to help themselves based on rates that are tailored to them either from previous quotes or rates that your team has negotiated with them. Automation can make reordering effortless, and can even help with upselling, cross-selling and making product recommendations. As such, you can not only reach more customers but improve retention and improve your transaction value. With a B2B platform such as Evolve Trader, you can also deliver each of your customers their own personalised online sales portal.
As more and more millennial buyers become key decision makers, we can expect to see a greater demand for self-service business to business ecommerce tools.
As great as your sales team are, they can only make so many calls and chase up so many leads in a day. With a little investment in Search Engine Optimisation (SEO) and responsive web design, your ecommerce website can engage a much broader range of highly motivated business buyers.
Your B2B ecommerce website can also create fantastic opportunities for lead generation. By using lead magnets you can generate highly motivated leads from prospective buyers even if they don’t buy from you right away. These are opportunities that your physical teams can capitalise upon.
By delivering an omnichannel customer experience, prospects can engage with you from their favourite social platforms with conversion optimisation strategies tailored to each.
2022 is predicted to be a lean year for businesses and households alike. So now may be the perfect time to look at ways to reduce operational spending. The good news is that embracing B2B ecommerce can help you keep overheads low.
The AI, automation and machine learning offered by ecommerce platforms enables B2B companies to streamline procedures, increase efficiency and reduce personnel needs.
By allowing businesses to automate many of their processes, B2B ecommerce doesn’t just enable businesses to keep their personnel costs low. It also enables their teams to be more productive by reducing their administrative burden.
Automated processes and a suite of self-service capabilities mean that teams spend less time on administration and correcting mistakes. This leaves your team with more time to do more of the stuff that can’t be done by software. Like answering more complex queries and providing the personal touch to leads and clients that you built your brand upon.
The business to business landscape is changing rapidly. In order to stand a fighting chance for sustainable growth, businesses need to be able to scale their operations seamlessly as demand increases. Without the right infrastructure in place, this can take a great toll on teams. The automation afforded by B2B ecommerce platforms can allow businesses to scale their operations in line with demand without needing to invest in a larger team or more physical overheads.
What’s more, platforms provide ecommerce businesses with access to detailed analytics that can be mined for actionable insights. When paired with your existing IT infrastructure, like your CRM, ERP and PIM software, you can get a clear idea of which products customers may be most interested in, figure out whether they’re using desktop or mobile devices, identify potential bottleneck issues, and employ cross-selling to help liquidate stock that’s selling slowly.
Hopefully this post has illustrated the scope, scale and diversity of the B2B ecommerce market. Whether you’re just now considering taking your B2B company online or are already operating online but looking to optimise conversions, the right platform makes all the difference.
The right B2B ecommerce platforms integrate seamlessly with your existing infrastructure and help you to engage more new customers while also selling more to those you already have. They can provide you with analytics that are detailed enough to keep your operations agile without being so convoluted that they cause paralysis. They can also leverage sophisticated automation and machine learning to make running your business easier.
Sound good? See how Evolve Trader’s B2B ecommerce platform can help your business. Get in touch and request a demo today!
