Do you have a great business idea but are unsure about which business model to work with? Having an ecommerce store itself is a big advantage for your business, but which one is best? B2B or B2C?
Take a look at B2B vs B2C models advantages and disadvantages from the perspective of eCommerce. Decide if selling to customers is right for you or you prefer to sell directly to other businesses.
Let’s start with: B2C Business model
Advantages Of B2C Ecommerce Website
Large potential market
Once you factor in international sales, the market’s potential for B2C is huge, you can reach audiences worldwide.
Simplicity of operations
You can easily set up an online e-commerce site using platforms like Shopify and Magento. Besides, the business administration is easier to record: inventory, shipment, and transactions. These aspects are calculated automatically with utmost accuracy and in real-time.
You have the liberty to readjust your catalog whenever you like, including adding new products or making amendments on descriptions and prices. Although this is a process you need to make manually it consumes less amount of time.
Also, once you have your B2C e-commerce, it’s easier to expand in other services and products, increasing diversification opportunities.
Short sales process cycle
In B2C commerce, there is no need to make an excessive amount of phone calls and descriptive e-mail messages. The process is quick as it just requires research from the buyer and online payment that can be completed in a manner of minutes. Also, third-party clients and stakeholders are removed, shortening and simplifying the process.
Lower Cost of Doing Business
The B2C reduces components such as employees, purchasing costs, and opening costs.
Disadvantages Of B2C ECommerce Website
Compared to B2B, in B2C you’ll need a specific department in charge of pre and post-sale service to answer queries and attend to any concerns. But the relation with customers is different, as it is not needed to create a full bond for them to purchase, it’s just part of the service offering that comes afterward.
Small quantities sold at a time
Unlike B2B, in B2C each of your products will sell individually in small amounts. This isn’t necessarily bad, because it is part of the model, but it can be more difficult for your business. Because aspects like shipping and production take more time as they are customized and need to be supervised for each purchase.
There are so many e-commerce B2C businesses already operating in all industries that it can be difficult to position when opening a new business. You must be able to compete in price, quality, strategies, and operations, finding a way to attract customers and stand out.
Here also comes high conversion costs, because you need to pay significant amounts of money on marketing to find and attract customers.
This might interest you: How B2C Companies Can Get More Customers
The earnings margin is lower
Even though the price and features of a product depend on you, in B2C you need to benchmark and see the average price to make sure your product is competitive. In addition to this, platforms will charge a small commission per every transaction and tax. Each small payment ends up affecting your final revenue, decreasing your earnings margin.
Limited Product Exposure
Due to the limits websites allow, you can’t display your product images and descriptions in a glamorous way. Have you ever found an online store with amazing features for displaying products? Most of them are just a plain image with closeups. This is because most of the time if you own a B2C e-commerce, you need to follow the standards of product catalogs.
This can be harmful especially if you own very unique products that need more specific shoots to show their full potential. So make sure to be transparent about what you offer so your clients don’t get disappointed when they receive your product because it didn’t meet your expectations.
B2B Business model
Advantages of B2B
In B2B, one of the advantages is that automation gets rid of errors and unforeseen expenditures, and the use of technology reduces the cost of labor.
New market acquisition
While B2C can reach more audiences thanks to globalization, B2B commerce can reach a wider market, as they can sell to both consumers and resellers. For example, finding a B2C company that constantly requires your products or services so it can deliver theirs is a great opportunity for selling in the long term.
Also, B2B models have a more stable market, so it becomes easier to predict behavior in the future based on sales records. Clients are more specific and directed, thereby easier to reach and target with the right strategies.
Higher volume of sales or revenues
Depending on what you sell, B2B commerce often requires large volumes delivered on a set date. While this brings more revenue and earnings, due dates have to be taken into consideration as well as the capability of the workforce to produce those services or products in the established time.
Disadvantages of B2B
Requires a long-term relationship
As a B2B purchase is carefully thought of, one of the disadvantage is that it involves months of deep research and thinking to find the best provider. B2B products need customized quotes and multiple configurations in a fairly visible manner.
The decision-making process becomes lengthier, as more people are involved in the buying decision and process. Here relies on the importance of establishing good relationships with the potential customers, so you can earn their trust and they can see you’re the best option to suit their needs.
Payments aren’t immediate
As B2B purchases represent a bigger quantity of money, most of the time B2B commerce offers payment facilities so clients can start paying in small amounts or after the service is delivered.
Even though this isn’t necessarily bad, is an aspect that needs to be taken into consideration in metrics like return on investment, to establish proper inversion strategies and make sure the company can still run without having a liquid cash flow.
In B2B models, the buyers have more power in determining the price and features of a product. This is because sellers want to retain their customers; hence they must maintain flexibility in product development.
Most B2B commerce work on a customized price model, where depending on what the client needs, is the service adjustment they make to fit their time and budget. This is unlike B2C commerce, where the price and features of a product heavily depend on the seller.
B2B vs B2C, which one to choose?
B2B vs B2C are two completely different models. And both have great potential to scale and generate profit. If you own a small to medium business, it can be easier to scale and grow with B2C, because you can focus on building a massive customer base.
But on the other hand, if you already own the connections and possess valuable skills and knowledge, B2B is for you. As their market is businesses with more money to spend than an average B2C consumer.
To sum up, choosing the right model depends on what you have to offer but also your background, expertise, and knowledge. Having read the advantages and disadvantages of B2B and B2C, which one do you think is best for your business?
Remember to always think big and what your main goals and strategies are, this will help you have a clear vision on how you want your business model to be in the long-term and invest in what will make you grow and sell.