B2B – WHAT DOES IT MEAN?
An acronym for business to business, B2B involves the sale of goods/services exclusively between legal entities. Thus, business to business (B2B) does not mean selling products/services to individuals, but only to companies.
In a B2B context, companies sell products, services or solutions targeted at other companies with the purpose of supporting operations or providing resources for resale. Thus B2B companies are support businesses that provide the goods or services that other companies need to grow.
Today, the B2B market is mainly conducted online, a process known as e-commerce. When this happens online, we are talking about a B2B platform. This way of selling has improved the trading of products and services in the B2B marketplace, as manufacturers can sell directly to other companies using the same B2B platform.
In this marketplace, manufacturers offer their business partners various offers on prices, stocks and other goods and services. This B2B platform is in fact a way for importers, manufacturers or distributors to communicate with other customers (legal entities).
Among the most well-known advantages of using the B2B concept are:
- High sales – transactions of this type involve high volumes of products, which implicitly can generate higher revenues;
- Long-term stability – long-term relationships between companies generate customers loyal to the brand sold;
- Customized offers – in B2B markets, the entities involved can sell their goods or services to their partners while also offering them customized offers; these offers often involve price discounts so that both parties involved are satisfied with the deal;
WHAT ARE B2B CONTRACTS?
Business-to-business contracts are agreements between two or more companies, on the basis of which transactions are carried out between them. Because B2B is a collaboration between legal entities, not a method of competition, B2B contracts are in fact partnerships based on long-term business relationships.
WHAT IS A B2B TRANSACTION?
As already mentioned, B2B transactions take place between two legal entities, i.e. one legal entity will purchase various raw materials from another legal entity for further use in the production process. B2B transactions are as a rule complex, larger in volume and involve negotiated prices. It is important to distinguish between B2B and B2C transactions.
While B2B means all transactions that take place between businesses, B2C, translated as “business to consumer”, refers to transactions that take place from business to customer, i.e. in this case, companies sell directly to their customers, individuals.
Some major differences between B2B and B2C transactions are given by:
- Market size – the B2B market is much larger than the B2C market, purchasing power is much higher in the B2B market and sales are constant in this market;
- Pricing policy – this refers to decisions regarding the pricing of the products and services provided; the B2B market is much more complex when it comes to pricing, as entities operating in this sector can very easily change prices, through mark-ups or discounts; in contrast, although mark-ups or discounts can also be made in the B2C market, they can be made on a stock basis;
- Decision making – here B2B involves complex contracts compared to B2C, where decisions are made more quickly.
