You have already heard about B2B and B2C companies, right? But how much do you know about these types of businesses? Nowadays, a company will often be either business-to-business or business-to-consumer. What does each category stand for? And how does their inventory management differ? Let’s check it together.
What Is a B2B Company?
In Business-to-Business a company enters into a commercial transaction with another company. In other words, B2B companies are enterprises that provide products or services to other businesses in order to operate and grow. For example, a business that obtains materials from another company in order to use them for the production of a finished good. Another example could be a business that has to use the services of another business. For instance, an apparel company collaborating with a marketing agency. In addition, there are two types of B2B companies: the Vertical B2B and the Horizontal B2B type. Vertical B2B refers to every company that sells goods and services within one industry. For example, one company extracts gold and decides to sell it only to jewelry manufacturers. The Horizontal B2B is when a company creates transactions across multiple industries.
B2B companies are using ecommerce with which they can buy and sell products on online services or over the internet. Except for using ecommerce for the sale of goods and services, businesses use it to improve the efficiency and effectiveness of their efforts.
What Is a B2C Company?
In Business-to-Consumer a company creates a commercial transaction with a customer or individual consumer. In other words, B2C is a method where businesses trade and transact directly with end customers who buy the product to consume it. The B2C model of operation includes all companies that create value for consumers and individuals. There are two types of B2C companies. The Product-focussed and the Service-focussed. The Product-focused B2C deals with providing software solutions and products. The Service-focused type of company focuses on providing services to consumers.
The Inventory Management Challenges of B2B Vs B2C
Product companies are always coming up against many challenges:
- The fulfillment of large orders quickly and reliably. Although, the use of the correct e-commerce solution will improve the customer service and the online orders will be more efficient.
- The high number of buyers. The process of creating sales order depending on the complexity of the e-commerce platform or software solution involves more and more decision-makers. With the high number of buyers, the most difficult challenge is to satisfy their needs.
- Handling large size bulk orders. Since the size of orders is higher, it is possible for a logistics issue to be caused.
- Managing the perception of risk is another common challenge that mostly B2B companies are facing. Addresing risk for a B2B business will become much easier when the company can demonstrate using an inventory software. The inventory management software will enable knowing an outline of stock, orders, sales and other useful information.
What About Ecommerce?
Through ecommerce, B2C companies can sell goods to consumers and individuals. Furthermore, B2B ecommerce differentiates into two different sections: Direct sellers and online intermediaries. Direct sellers refer to consumers that purchase goods directly from the manufacturers through an ecommerce platform. Online intermediaries refer to the online ecommerce platforms that manage to bring together the buyers and the sellers.
On the other hand, ecommerce is necessary for B2B companies as well. Although ecommerce in B2B is not as widespread as in B2C, it is used for the sale of goods and services between businesses under specific conditions. Ecommerce is commonly used for orders but B2B companies usually integrate with other platforms for payment processes and accounting.
What about the inventory management on B2C and B2B companies? There are plenty of differences in how B2C companies and B2B manage their inventory.
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Inventory Management in a B2C Company
First of all, a business-to-consumer company is able to track and send a small number of items that usually have a small value. In case that a new customer is unsatisfied with its order, then the solution for a B2C company is easy; the order can be returned. On the other hand, in B2C companies it is considered difficult and rare to have a high percentage of repeat customers.
How do B2C companies communicate with their customers? As we all know, the touchpoint between a customer and a business is typically an ecommerce platform. Through that platform, the customer may create an order, track it, and of course use the live chat to ask any questions. Furthermore, B2C companies use bulk order processing. This means that companies are able to process multiple orders at a time without having to visit each order page individually. It is practically easy to create invoices, generate shipments, add tracking numbers, and change the order status.
Inventory Management in a B2B Company
On the other hand, inventory management in B2B companies works in a totally different way. First of all, the inventory management department of a B2B company has to handle large volumes of products that usually have a high value. Also, a B2B company’s inventory management includes the process of obtaining, storing, and profiting from the products. The challenge is that in case that the business that receives the order is not satisfied then the process of returning the order will be very hard to recover. Usually, B2B businesses are used to having a high percentage of repeated orders and stability to their customer’s relations while they are contacting their customers (other businesses) through email, phone, and through some main sales channels.
Furthermore, the B2B companies have to process manually the orders. Manual processing has a significant effect on the efficiency and performance of order processing of most businesses. However, there are some negative points of processing manually the orders such as the consumption of time and potentially poor customer service. Many B2B businesses are still making phone calls for sales orders. This means a lot of time working on paperwork problems instead of focusing on providing the best customer service they could.
Follow the Techniques For The Inventory Management Challenges in B2B Vs B2C
However, there are some inventory management techniques that both companies may follow for professional growth.
- Forecasting sales. Depending on your marketing initiatives, the new product trends found in the consumer behaviour and company’s growth you can estimate expected sales – and revenue.
- Bundling. As a company you can sell an out-of-season product all by combining it with a hotter product – all while reducing your stock.
- ABC inventory management. It is useful to divide your products into 3 categories; Group A, Group B, Group C. The Group A includes the high-cost products which are in low-quantity, the Group B includes the mid-cost products which are in mid-quantity. The Group C includes products in low cost and in high-quantity. This allows you to be more efficient in handling the different categories appropriately.
- If you don’t have enough warehouse space then maybe you should start thinking about Just In Time. JIT is method in which a company receives products just before they need to be shipped.
See yourself as more of a B2B or B2C company? Which of the above points is your priority?
What About Megaventory?
Did you know that Megaventory supports inventory management equally well both for B2C and B2B companies? You can find further information about creating different types of invoices for B2C and B2B companies in Megaventory’s Knowledge Base.
Do you have any questions about this?
Book a free, no strings attached chat with us to learn how the Megaventory team can help.
In a nutshell, B2B and B2C companies have multiple differences and challenges to manage. Also, inventory management processes are different for B2B and B2C companies. Both of these models are used for different purposes as well as for commercial transactions and they are related to e-commerce platforms through which B2B and B2C companies can sell goods to businesses or consumers. Both of these models have to combine the usage of E-commerce as well as manage their inventory to handle the challenges and improve the efficiency of their services.
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Stamatia Manolara is a Digital Marketer and Content Creator for Megaventory. Her passion is staying up to date with the latest digital marketing technologies as well as upgrading her skills and developing new ones.