Business-to-Business is a term used to describe the transactions made between businesses. When both the buyer and seller are businesses, it’s considered to be a business-to-business transaction. These transactions are mainly in large quantities because the buyer is seeking to make profits by reselling the products to regular consumers. Consider local supermarkets who sell groceries and household needs, the products they have in their stores are all a result of a business-to-business transaction. They purchase large quantities from manufacturers and then redistribute them to local folks to make a profit. Another example of a business-to-business transaction would be Costco purchasing its merchandise from large manufacturers and then reselling it to consumers. In addition to business-to-business, there are also business-to-consumer and business-to-government. The simplest would be business-to-consumer, where any activities exchanged by the business and a customer would be considered as Business-to-consumer relationship. Business-to-government is translated to be business stationed in the public to assist the government in their marketing and servicing needs.
Now a day, since the internet has made it so easy to connect everyone all around the world, businesses are beginning to conduct their business online as well. Business-to-business e-commerce refers to the transactions made between businesses over the internet. Because of the terrific worldwide connection, people have the ability to find the resources they need at the desiring price. Thus, e-commerce has been growing alongside with the internet’s popularity. The e-commerce for businesses, especially, has been growing because companies are constantly looking for better and cheaper resources that can help boost their profit margin. E-commerce has given businesses the ability to have access to endless resources that include supplies, labor, and everything that they need for their production. As mention earlier, Costco is considered to be doing business-to-business transactions because they buy from manufactures and then reselling it to the consumers; but, they considered to be doing business-to-business e-commerce as well because some of the factories that they buy from may only operating online. In addition, since the internet has made it extremely easy to operate online, some businesses who mainly distribute to other businesses may established their entire store online, which means their point of sale as well as communication with their customers are all done through the internet.
With the growing the technology, everything is beginning to transition over to computerize data base. Businesses who get establish online, give their customers the convenience of complete access at any given time and knowledgeable facts that can help customers finalize their decisions. Companies are constantly looking for cheaper and better resources, without the internet they would not be able to discover what other companies all around the world have to offer.
Advantages of Business-to-Business
- Expense reduction
o Since business-to-business activities tend to be quite large in quantity, manufactures lower their expenses by not distributing to individuals but rather entities that have the storage space to redistribute them to consumers
- Flexibility with labor and material related costs
Disadvantage of Business-to-Business
- Profit is a main factor in these transactions so loyalty is rarely present
- Less likelihood of vertical integration