If you stopped for coffee today, you experienced a business-to-consumer transfer of money. In short,it is called a B2C transaction, which is natural when going about our everyday lives. On the other hand, business-to-business, a.k.a. B2B transactions involve the transfer of money from one business to another. In 2019, B2B ecommerce was worth $12 trillion globally and Forrester expects that B2B sales will surpass $1.2 trillion by the end of 2021.
B2B transactions are the norm when running a business, but they are not much like stopping at the local café. It can be a simple purchase but, there are often many components involved such as B2B loans, wholesale orders, and more. But what do B2B transactions look like, and what is the best way to manage them? Keep reading to learn the benefits and challenges of B2B sales, and how B2B wholesale platforms work.
What Can B2b Wholesale Transactions Look Like?
The relationships and transactions between two businesses are referred to as B2B. When it comes to B2B wholesale transactions, two businesses will interact with each other, and buy or sell products in bulk. These wholesale transactions tend to happen between wholesalers and retailers or wholesalers and manufacturers. People usually use the term, ‘business-to-business,’ to contrast with the term, ‘business-to-consumer.’ Generally, B2B transactions are considered wholesale transactions but not every business-to-business transaction has to be a purchase. A B2B transaction can be a line of credit, a revenue-sharing and loan agreement, a promissory note, or anything related to a fund transfer.
B2B Wholesale Transactions – Benefits
As B2B wholesale transactions are conducted between two businesses, the seller and buyer will both benefit. Here are some key benefits of B2B wholesale transactions:
Boost Average Order Value And Order Volume
B2B wholesale transactions boost average order value (AOV). The purpose of the B2B wholesale is to purchase products in bulk, with the seller earning a profit margin. This way, it will not only boost AOV but also the volume of orders over time.
Yield Discounts
As a buyer, you may get a volume discount when you purchase goods from a wholesaler. If you are an individual customer, you may have seen the benefits of a B2B wholesale transaction when you buy products from a wholesaler and get bulk discounts.
Maintain A Fixed Margin Of Profit
Another benefit of B2B wholesale transactions is that they help the wholesaler maintain a fixed margin of profit of about 3 to 10%. A fixed profit margin makes wholesalers less worried about business because the amount of profit they get after selling goods can be calculated in no time.
Lower Operating Costs
The best thing about B2B wholesale transactions is that they help to lower operating costs. To get the word out, billboards or TV ads and printed flyers can be used, and digital marketing campaigns are run from desktops. This affordable marketing helps to reach more business customers, which come with high streams of sales. Websites have become more interactive these days to provide the customers with detailed information about a product, decreasing the need for sales representatives. Customers can even try the product on virtually before purchasing it. These lower operational costs and, coupled with chances of more sales, are a win-win situation.
Challenges For B2B Wholesale Transaction Platforms
B2C shoppers experience the ease of use and efficiency that motivates the B2B buyers, but have different needs. The long-term contracts in B2B ecommerce come with more stability, but there are still challenges of B2B ecommerce sales.
Global Competition
There is no doubt that the world has become a global marketplace. Global competition comes with web exploration, which increases pressure on price and hurts the low margin of profit of wholesalers the most. But if wholesalers expand their footprints across the globe while selling their products at affordable rates, they can boost more profit margin and sales.
Retail Consolidation
The number of wholesaler supermarkets, retailers, office suppliers, DIY suppliers, and home electronic stores has dropped. Now, there are two kinds of wholesalers who are possibly changing the face of the B2B industry: those who will focus on specific niches and excel in them and those who will accommodate diverse businesses to keep growing.
Improve Efficiency
As the B2B wholesale transaction market across the globe is valued $12 trillion and B2B e-commerce sales are expected to reach $1.8 trillion in the USA alone by 2023, the improvement to your organization’s efficiency can give it a great competitive edge.
How B2B Wholesale Transaction Platforms Work
As B2B ecommerce faces multiple challenges, many wholesalers look to other B2B wholesale platforms for optimal efficiency. But how do these platforms work? They have some key features stated below:
Volume Orders And Online Payments
In B2B wholesale, a volume discount is included when you place large quantity orders. These platforms take into account that discounting large volume orders causes businesses to purchase more, increasing sales. When it comes to managing online payments, bulk ordering makes sense.
Availability Of Inventory
In the B2B wholesale industry, the availability of inventory is the main issue. These platforms need to consider the inventory available when logging in new orders. Generally, B2B e-commerce platforms have a map of the available inventory. To maintain efficiency, it is essential to keep track of your inventory in real-time.
Account Management
It is true that business-to-business wholesale transactions can be easily executed. An accountant can help manage company accounts, look at company history to view prices you paid for goods, view how many orders you have received, and much more. Knowing this information leads to increases in the average order value, and helps with future planning to reach the desired customers with the help of B2B wholesale transaction platforms.
Bottom Line
The market share of B2B wholesale transactions is increasing day by day. The value these sales bring over time is huge. At first, doing business in this B2B e-commerce industry seems challenging, but with these tips, you will be a B2B professional in no time.