What Does B2B Mean?

06/10/2018 08:00 | Start a business

what does b2b mean

What does B2B mean in business?

Though it’s a commonly used term, we’re still regularly asked the question, “what does B2B mean?" While it has various connotations outside of the business world, in corporate culture B2B stands for "business to business" and refers to transactions or exchanges of products, services, or information between two businesses.

Whereas most commercial transactions take place between a business and a customer, B2B transactions differ in that they involve two business. B2B companies are those businesses who service the needs of other businesses exclusively. They play an essential role in all modern economic systems and have been integral to most historic models, too. Though the term "B2B" may be relatively new, large markets have always depended on companies who solely service the needs of other businesses.

What does B2B sales mean?

When talking about B2B sales, we're usually referencing the purchase of supplies and/or services by one business from another. For instance, a large computer manufacturer may well buy specific components from a supplier to complete their product. Likewise, a car manufacturer may purchase tyres from a separate manufacturer and have them fitted before the vehicle is sold.

Typically, this occurs because specialist businesses offer a higher quality product or can provide their product at a lower cost than if the buyer were to manufacture it themselves. Often, B2B services are necessary because the buyer doesn't have the in-house expertise to design and produce all of the components required to complete their own product.

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B2B online

While B2B businesses have existed for a considerable amount of time, the internet has radically altered the way they organise and establish themselves. The digital realm has facilitated quicker and easier communication of information, while also opening up global markets. This has resulted in the greater commodification of data and a growing demand for businesses that can collect, organise, and efficiently distribute this data.

B2B online services have also had a significant impact on the franchising system. Due to the way in which franchising involves developing a replicable business model and using it to expand in numerous different locations, it has proven particularly adaptable to certain types of online business. For instance, a website development franchise can build software that's used to design bespoke web pages and then distribute it to franchisees. The software can then be used to run a web-development business from the comfort of your own home.

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Five types of B2B online business

Though there is an incredible array of online B2B companies, the vast majority can be organised into one of the five following categories.

1. Supply and procurement

These sites specialise in supplying other business with the goods and materials they need to carry out their own business. These procurement specialists build extensive networks of suppliers, distributors, and customers, linking them up by acting as the middleman and connecting various interests through a single online portal.

Many procurement specialists also operate exchanges, in which businesses can search for specific supplies, request additions to the stock list, or bid on certain purchases in an attempt to get the best price possible. Usually, this type of exchange is targeted at a niche market, though there are some that cater to the needs of a diverse array of businesses.

2. Industry-specific "portals"

These industry-specific webpages cater to the needs of an industry or market in a more general way than supply and procurement sites. While they may include a “shop” or exchange, they’ll also boast discussion groups, contact information, and industry resources, amongst other things.

3. Brokerages

Brokerages are a type of exchange that matches buyers to sellers. Essentially, they facilitate commerce by providing a digital marketplace in which trade is regulated, safe, and publicised. While the most popular online brokerages today generally connect individuals rather than businesses (think eBay or Gumtree), they are also commonly used to carry out B2B transactions.

While many brokerages specialise in extremely specific services, such as equipment hire, others cover a wide range of products and services and become hubs for certain parts of the business community. As a brokerage grows in popularity, so too does its ability to generate revenue for its owners.

4. Infomediaries

Infomediaries provide business with vast swathes of information concerning a particular industry or market. They are likely to collect and organise resources that are relevant to companies looking to grow and expand in that market. This may include details for industry watchdogs, standards organisations, brokerages, suppliers, and regulators, amongst other things.

The increasing importance of the digital realm and big data has proved once and for all that information is power. Consequently, these infomediaries often boast a considerable amount of influence within their respective niches. This allows them to generate substantial profits through the intelligent control of information and the inclusion of paid advertising on their sites.

5. Online construction tools

Finally, online construction tools are proving to be an increasingly popular form of online B2B business. Ranging from site-building companies who help others create attractive and effective websites to companies who build transaction technologies to facilitate safer e-commerce, these companies offer essential web services to those who need them.

Since having a website has become essential for most businesses, there's been a dramatic increase in the number of companies offering web-development or online marketing services. This type of business has proven especially popular in the franchising sector.

Examples of B2B franchises

In terms of a non-digital, B2B franchise, ActionCOACH is an excellent example. Offering business coaching and mentoring services to professionals around the country, the franchise is recognised as one of the most attractive investment opportunities around.

Driver Hire is also a B2B franchise that has seen a great deal of success in recent years. Specialising in supplying businesses with qualified drivers and logistics staff, the franchise won the British Franchise Association's (bfa) Franchisor of the Year Award in 2018.

When it comes to online B2B franchises, Activ Net Marketing is one of the most renowned franchises on the market. All Activ Net work can be conducted remotely and typically involves helping business to develop their websites and gain greater exposure.

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