Business-to-business (B2B) and business-to-commerce (B2C) are useful but deceptively simple categories.
They make sense on the surface: one sells to businesses and the other to consumers.
However, they do raise some questions, including:
- Don’t many B2Cs also trade with other businesses?
- Aren’t businesses just another type of customer?
- Are the terms even useful with so many different kinds of B2B and B2C businesses?
Let’s answer these questions and more.
What is B2B?
Business to business (B2B) is the term that describes sales of goods and services between businesses. This especially (but not exclusively) applies to retailers, wholesalers, and manufacturers.
It’s a category rather than an industry because B2B transactions occur across different business sectors.
After all, many products and their components pass through multi-stage manufacturing processes before being sold to customers.
This helps us understand why B2B is such a large category.
But how large is it?
Here are some key figures:
In other words, it’s not a niche component of the world’s economy by any stretch of the imagination.
IBM (which stands for International Business Machines) is one of the world’s largest companies and perhaps the world’s largest B2B company. It was founded in 1911 and primarily sells software, hardware, hosting, and consulting to businesses in 171 countries.
What is B2C?
Business-to-consumer (B2C) is the term for describing the sales of goods and services directly to consumers.
It is also more of a category than a sector. B2C transactions include everything from groceries to high-end luxury fashion.
Most of us can probably list many B2C brands that we’ve purchased from. In many cases, we can even probably recall more than one of their products, advertisements, CEOs, or brand ambassadors. We wear branded clothes, drive branded vehicles, eat food from branded packaging, and much more.
In short, most of us interact with B2C businesses a lot – even when we’re not buying from them.
Rolex has been selling watches since 1908. Today, it has an estimated annual revenue of $13 billion, is an official retailer in more than 100 countries, and is the most valuable luxury watch brand in the world.
Can companies be B2B and B2C?
Many companies have both B2B and B2C components. But they vary in how much they engage in both markets and how clearly they distinguish between them.
So, getting exact figures on the precise split of B2B vs. B2C within companies and across economies can be challenging. But by one estimate, 80% of UK companies gain some of their profits from B2B sales.
Companies considered primarily B2B and B2C are sometimes known as business-to-many (B2M). However, this term is rarely used outside of niche B2B or B2C marketing discussions.
B2B and B2C examples
Microsoft is perhaps one of the largest and most well-known companies on earth.
Its revenue comes in almost equal part from cloud services, personal computing, and business productivity tools. This last category, for example, includes sales of Microsoft Office products to businesses and consumers.
What are the differences between B2B and B2C?
The following differences are broad but practical generalizations rather than iron-clad rules for distinction.
1. B2B vs B2C channels
B2B and B2C sales usually take place on different platforms.
This was true long before the digital age. Previously, wholesalers and manufacturers rarely opened their doors directly to individual customers (as opposed to business buyers).
B2B and B2C businesses also often market their products and services through different channels.
For example, LinkedIn is a great social media platform for B2B businesses to reach their target audiences. But not so much for a B2C company.
And industry-specific events are also a big part of B2B marketing and sales strategies. Companies can participate in several ways, including sponsorships, speaking, or simply attending.
B2C businesses have a different set of events and channels that can be targeted. Still, they also have the option to target consumers in specific demographics with location-based marketing, such as pop-up shops.
In some ways, it can even be argued that B2B is a subset of B2C as all B2B buyers are also consumers in their own right. Therefore, trends in B2C sales often eventually cross over into B2B.
B2B vs B2C marketplaces
Digital marketplaces are third-party platforms where sellers offer their products or services to buyers online.
Amazon is the most famous example of this (in the Western world). In China, Taobao and JD are similar platforms.
Besides its B2C platform, Amazon also has a separate B2B marketplace, Amazon Business, which serves over half of FTSE 100 companies.
And China’s Alibaba is the world’s largest B2B marketplace. Its IPO in 2014 at USD 25 billion was the largest ever up until that date, and the company has grown steadily ever since. Alibaba Group also owns the world’s largest B2C marketplace: Tmall.
There are some similarities between B2C and B2B marketplaces nowadays. But there are also differences, such as B2B marketplaces being more likely to feature more financing options and bulk discounts than B2C ones.
2. B2B vs B2C marketing and sales
There is generally a different approach to marketing and sales in B2B and B2C companies.
In B2B sales, the time between engaging a prospect and them purchasing a product can be weeks or months. Marketing strategies, therefore, often focus on longer-term lead nurturing and relationship building.
As a result, a lot of B2B marketing is product-led and information-heavy. According to research by the B2B institute, 77% of B2B ads score only one on the institute’s 5-point creative effectiveness scale.
By contrast, only 53% of B2C ads score this low. B2C-focused companies are known for their creative marketing approach. They often even create adverts that don’t have much to do with their product and instead build their brand positioning.
For example, Nike’s ‘Just Do It‘ slogan is frequently cited as one of the most successful. Research by the CFAR (now taken offline) estimates that the brand’s global sales grew from $877 million to $9 billion in the decade after this campaign was launched.
Though this phrase resonated with consumers, it doesn’t detail any information about Nike’s products. It wasn’t even originally inspired by sports but by the final words of a death row inmate before his execution!
These different approaches to creativity by B2B and B2C companies in part reflect their different audiences (see below, ‘3. B2B vs. B2C purchase decisions’).
However, B2B marketing can still learn a lot from its B2C counterpart to gain a larger market share by making themselves more memorable.
3. B2B vs B2C purchase decisions and cycles
Unlike B2C companies, B2B companies generally focus on providing value for entities (businesses) rather than individuals (consumers).
On average, B2B purchasing decisions require 6 – 10 decision-makers. Each of these individual purchasers might have different motivations or budgets.
Some might be driven by increasing their department’s sales, others by saving costs; some may favor a familiar supplier, others not, etc. These competing factions contribute to the longer purchase cycle for B2B payments.
Conversely, B2C purchasing decisions and cycles are frequently concise and straightforward. Research shows that impulse buying makes up between 40 – 80% (depending on category) of all purchases, and 87% of American adults admit to doing it on occasion.
Despite these differences, both categories often favor making the most convenient purchase relative to their competitors.
4. B2B vs B2C payments
Most B2C payments take place on debit or credit cards. A contactless in-store checkout process and one-click online payments are a must for most retailers.
In B2B, the majority of payments are still made by check. This method suits the relatively slower payments process in B2B due to more complex decision-making processes and higher typical values of goods or services.
These values are so high that it’s the norm in many B2B transactions for suppliers to offer their customers net terms and financing options.
One of the most significant differences between B2B and B2C is payment terms. Extending payment terms is the norm in B2B but a rare exception in B2C.
Business purchases are different in many ways from those in B2C. One of these is scale. The larger scale needed for B2B payments means that B2B buyers must be careful in managing their cash flow.
As a result, it is an industry norm for B2B suppliers to offer net 30, 60, or 90 terms to buyers. This is rarely the case in B2C, as the nature of purchases differs. Consumer purchases are often one-off, but B2B can be an ongoing relationship.
As with payments, financing options are relatively common in B2B but rare in B2c.
Consumer Buy Now, Pay Later (BNPL) solutions like Klarna have recently gained popularity. However, controversy and regulation have impacted its growth, which some argue is unsustainable.
B2B financing works differently due to the types of purchases and terms involved. It includes things like invoice financing and credit lines, which don’t apply to consumers, as well as B2B-specific BNPL.
In B2C, there isn’t often a collections process per se. The only exception is in instances where financing has been used.
Collections in B2C could even be a positive for companies in a way that is not positive for its customers…
In 2013, Klarna co-founder Niklas Adalberth controversially stated: “the best customer is the one that doesn’t pay directly but actually gets a reminder and then also debt collection because we can add the legal fees.”
Unlike in B2C, late collections in B2B are rarely a good thing. They can damage B2B companies’ credit management and important client relationships.
They are also more complicated to carry out and often even require a platform that specialises in B2B retail. Firstly, collections in general (i.e., not just late ones) involve issuing and processing invoices (and steps in between, such as dunning). These are interlinked with payment terms and financing, which lengthens the time involved.
Secondly, many businesses pay late. This means businesses need to follow B2B collections best practices that balance maintaining a good working relationship with their clients while also supporting their cash flow.
What are the similarities between B2B and B2C?
Despite their differences, B2B and B2C have several things in common.
Although not all B2C customers are B2B customers, all B2B customers are also B2C customers.
Of course, they may wear different hats, so to speak, when they are making purchases in each domain. However, the person wearing that hat is the same.
B2B and B2C consumers considering a purchase are unlikely to complete it if they believe your competitor offers a superior product or service.
There are fewer competitors in the B2B space than in B2C (as there are far more consumers than companies to sell to). However, competition in both B2B and B2C markets can be fierce.
Convenience is an important consideration for most B2B and B2C purchasing decisions. It applies to accessibility of information about products and services and the purchasing process.
A slow purchasing process is more likely result higher abandoned basket rates.
In both B2B and B2C, customers will switch to competitors if the latter makes purchasing more convenient (while still providing a high-quality product or service).
B2C still leads in this front. This is partly because of the head start it has had with mass adoption. However, trends in B2B eCommerce indicate that business world is learning from the consumer market.
B2B stands for business-to-business, and B2C stands for business-to-consumer. Each category contains a wide range of different types and sizes of businesses.
There is also a lot of crossover between them. Some B2B or B2C businesses may even address both markets. Sometimes a company starts in one market and then expands into the other.
In general, the key differences between B2B and B2C lie in a few areas:
- Channels they rely on
- Use of sales and marketing
- Purchase decisions and cycles
- Payments processes
Complexity and length of time it takes to make a purchase are key differences between B2B vs. B2C in most of these categories.
However, the typical B2B buyer is also a B2C buyer in their personal time.
As purchasing as a consumer becomes more flexible and convenient, those individuals will likely favor convenient solutions that stand out from competitors when purchasing as a B2B buyer.