Definitive Guide to Starting with B2B Ecommerce in 2021 (Part 1)
Let’s get right down to business. First things first, some existential questions… or, well… definitions, so we’re all on the same page:
What is a business?
A business usually falls under one or more of the following categories:
- Manufacturer (a smartphone manufacturer)
- Distributor (distributor of a certain phone brand in a certain country)
- Wholesaler (a company that imports phone cases in bulk and sells to retailers)
- Retailer (a retail shop that sells phones and phone cases to consumers)
- Service Provider (a shop that repairs phones)
- B2B Reseller (a company that sells repair equipment to phone repair shops)
These categories are not strictly mutually exclusive and lines can sometimes get blurry. One business can assume multiple roles under the same roof or split one of the roles and assume only a part of it or go with a combination. We’ll give a few examples in a bit. However, it is important to understand where you stand in order to get started with ecommerce and develop an online marketing and sales strategy.
A product usually falls under one of the following categories:
- Consumer goods
- For personal use, e.g. food, appliances, furniture, cars
- Industrial goods
- Used for producing other goods. E.g. raw materials, tools and machines used in manufacturing, components of final consumer products.
It is also a good idea to acknowledge the classification of the products you’re selling. This determines your target market and the potential online sales channels to reach that market.
What is B2B and B2C?
Business-to-business. This is when one business sells products or services to another business. The product being sold and bought can be either a consumer or industrial good, as long as the buying side is a business.
E.g. a tire manufacturer selling tires to a car manufacturer, or a toaster wholesaler, selling toasters to a retail store.
Business-to-consumer. This is when a business sells products or services to consumers. These businesses are usually retailers. The product being sold and bought is almost always a consumer product. Because, well… consumers buy consumer goods.
E.g. a supermarket selling food, an apparel store selling clothes, a retail shop selling tires. All to consumers.
Buying and selling goods online.
Businesses selling goods to other businesses online. The seller can be a manufacturer, distributor, wholesaler or B2B reseller selling to other businesses on their own online store or they may be selling on a B2B marketplace like Alibaba.
Businesses selling goods to consumers on the internet. The seller can be an online retailer with their own online shop or a business selling products on a marketplace like Amazon.
Is Nike a Retailer or Manufacturer?
Many global brands in fashion and footwear don’t have their own manufacturing facilities to make the actual physical goods. Some major examples are H&M from Sweden and Nike from the US. Such companies own the brand and the design process and outsource the physical manufacturing to independent suppliers. Nonetheless, owning the brand the design, representing the main intellectual property, is enough to qualify such companies as manufacturers.
In contrast, Zara from Spain, a direct competitor to H&M, does own factories for manufacturing garments. So we can go ahead and call it a full-fledged manufacturer. Both companies run their own retail stores selling their own brands. That makes both of them retailers.
Nike on the other hand sells its products not only at their company-run stores but also through various other retailers alongside competitors’ products. Sometimes it can be less than obvious how to classify a company like Nike, which sells through a variety of channels. Thus, a popular Google search goes: “Is Nike a retailer or manufacturer?” Let’s just say both. But probably less of a retailer than H&M, and less of a manufacturer than Zara.
Companies have different strategies with varying degrees of control over their supply chain, but they all have one thing in common: Willingness to invest in ecommerce. While building up online sales channels have been in the making for quite some time now, lockdowns going on and off around the world have caused already growing online sales to explode. H&M’s online sales increased by 38% in 2020, making up 28% of the company’s total sales. That’s a respectable share for online, considering they have over 5.000 physical retail stores.
Here are two other business models worth mentioning:
Businesses with a franchising model like McDonald’s and Pizza Hut, own and control their brand and the marketing process but they don’t run the actual retail outlets. Entrepreneurs, in this case the franchisees, own the business running the actual fast food store.
They don’t own the brand or deal with developing menu items and advertising. Instead they run the retail stores where they serve consumers with a right to use the brand and everything else that comes with the franchising agreement in exchange for franchising fees.
This is when a retailer sells and invoices a product and the supplier (manufacturer or distributor) directly ships the order to the end customer. This way the retailer doesn’t carry stock and can work with lower margins and focus on the sales process. From the supplier’s perspective, offering dropshipping opens up another sales channel without the cost of building a retail sales team.
However, it does come with a slight additional cost in the form of administering and shipping a higher quantity of lower value orders. This model isn’t exclusive to online retailers, however it has proved to be especially popular in online form.
How do I get started?
Your company’s future may depend on your ability to be present online and do business online. And in the next part we’ll share with you tried-and-true methods for SEO, online lead generation, converting leads to sales and automating the lead generation, quotation and sales processes for B2B product companies, i.e. manufacturers, distributors, wholesalers and B2B resellers.