Business owners are often caught wondering about what changes they could possibly make to their respective ventures in order for them to boost profit levels. It is natural for businesses to start wanting more and attempting to discover ways of taking things to the next level.
A common consideration is changing from a business to business (B2B) model, to a business to consumer (B2C) model. If you have already been operating as a B2B company, you may think that there are bigger opportunities for you to grasp on the other side of the coin.
Sometimes it is true, and you will be better off being a B2C business, but making the transition comes with its difficulties, and you need to be aware that it isn’t always a smooth process. This change would obviously have a huge effect on any business’ sales cycle.
Why would I change from B2B to B2C?
There are multiple reasons that a business may wish to change the way it trades and who it trades with, but the main reason for changing from B2B to B2C is to start selling products to many customers, rather than just a few different clients. By doing this a business could potentially make more money and how a bigger customer base than ever before. Besides, as of 2019 there were over 1.92 billion shoppers worldwide.
It will often be thanks to financial-related issues that a company would choose to change its trading model, but it can be for other reasons as well. Maybe the business owner had always had ambitions to sell to a much larger demographic, or perhaps the business has hit a bit of a ceiling trading the way it currently does and would like to experience something more. This would likely help the firm to grow and advance to the next stage.
Consider the positives to both business models
In order to find out if it is worth changing from a B2B to a B2C, it is best to look over the positive aspects of both. So, below you will find details that may help you with your decision making:
Positive aspects of B2B
There are of course many positives to being a B2B business model. Therefore, we couldn’t suggest always making the transition to B2C without knowing the finer details of your business venture. Below you will find a handful of the positives.
Higher security levels –
As contracts are a commonly found aspect of the B2B model, there is a level of security for both buyers and sellers. This is because there’s less concern that one will pay and the other will deliver goods as promised. Since sales normally get tracked digitally, it’s also more secure in that B2B sellers can track and monitor their financial results with more ease.
Large market potential –
Regardless of what the products and services are that you’re offering, B2B sellers can target a large market of companies across many different industries. At the same time, they have the flexibility of specialising in an area, such as tech or machinery to become a market leader in that particular chosen field.
This is a clear advantage to being a B2B seller, as you’ll likely have a much easier time of finding an audience and connecting to them instantaneously, whereas B2C business models may struggle to find engaging consumers in the early stages.
The convenience factor –
While B2C companies can sell via physical shops or take transactions over the phone, B2B commerce often takes place online. This is where companies advertise their products and services, allow for demonstrations and have an easy time with placing bulk orders. Sellers also often benefit from online transactions as there are no face-to-face meetings or exchanges of physical currency. Being online is easier for B2B sellers and therefore it is largely a more convenient service all around.
Positive aspects of B2C
There are a completely different set of positives to take advantage of when it comes to B2C business models, so below we will now list these for you to both highlight the differences between the two and give you a greater understanding of what works in the favour of B2C business ventures.
You take back ownership of your product –
If you’re transitioning from a B2B to more of a B2C model, you’ll suddenly have a lot more freedom on your hands. Unlike B2B selling, where your product goes through other businesses and companies, you’ll be selling directly to the consumer. This means that your products and services will be associated with your brand, rather than with the businesses that have sold and marketed your products for you in the past.
You’re in full control –
As you will now be selling directly to the consumer, rather than going through a separate entity on the way, you’ll be in control of multiple things. These include the messaging surrounding your items, as well as the entire customer experience; everything will be decided by you and everything will be done by you.
You’ll have better profit margins –
This is the main point that persuades so many B2B business ventures to make the transition to being a B2C venture. You will most likely be making a larger amount of profit existing as a B2C company than you would if you were still a B2B model. This is because you’re technically cutting out the middleman and selling straight to the customer, rather than to another business first.
Negative aspects of B2B
There are obviously negatives to the business-to-business model, which you should consider before entering the market in that way.
Limited market –
Businesses selling to other businesses enter a much smaller market than businesses that sell to consumers. You won’t be marketing your products and services to a large general audience base, but rather to other companies. These limited numbers make every lead and every existing customer more valuable and the loss of a single, large client can devastate your chances of successful dealings.
For example, if you supply tech parts to computer companies and your main client finds a cheaper alternative elsewhere in the market, they will not think twice about stopping doing business with you. This would leave you in a negative space for obvious reasons; you’d need to find new clients and consumers and market to them successfully before they jumped on board with you.
The sales process –
The typical sales process in B2B requires much more face to face time than in any other type of market. Normally multiple meetings will be required, and it all gets driven by quantifiable factors, rather than the qualitative and emotional factors that lead to sales in B2C. This largely comes from the high costs involved in B2B sales from the purchase of thousands of units of a product, a small number of very expensive machines or software that impacts the performance of hundreds to thousands of employees.
This type of sales process often depends on the salesperson’s ability to demonstrate what the product does or allows modifications that solve the very specific problem the buyer faces and can deliver a solid return on investment. This all adds up to make the entire sales process of B2B business ventures much more challenging than it often is in a B2C marketplace.
Extended buyer decision time –
The vast majority of consumer purchase decisions involve only a couple of decision makers, and the total time for a purchase decision tends to usually be on the shorter side of things. The B2B sales cycle has multiple factors that are often highly complex, involving multiple stakeholders and decision-makers, with total decision times that can stretch out for months. Because of these reasons B2B sellers cannot depend on a fast turnaround with new clients for an influx of cash or a sudden sales boost and must maintain the financial solvency to operate with long gaps between sales.
This means that if your company is ever desperate for cash at any single one point in time, you’ll likely find yourself in danger, as there will be no easy cash grab to take advantage of. Sales just simply do not process fast enough for this sort of thing.
The journey for consumers can be difficult –
Though the B2B business model has opened the doors of sales opportunities, many merchants still prefer to sit on the fence. It makes the B2B customer’s journey way more complicated than B2C business.
This follows the suit of the point we have made in regard to having a limited market to enter into and appeal to. It is highly confusing from a consumer point of view when dealing with a B2B venture, due to the way these types of companies are set up, etc.
Discounted orders –
Another disadvantage of this kind of business model is that the company has to give a discount on orders made by other companies as their orders are in bulk and they have some bargaining power as compared to normal customers who purchase in small quantities and therefore, they are price takers and have no bargaining power.
You as a leader of the business itself will always have a greater level of bargaining power with the customer or consumer when you’re a B2C, as you set the rules of your own transactions; you often won’t be quite as desperate to land large sales and big-money partnerships for instance.
Negative aspects of B2C
There are negative points to running a company within a B2C environment, so be sure to consider them before making any finalised decisions.
Survival of the fittest –
It can be hard enough to simply survive as a B2C business, never mind being successful as one. You’ll have a huge amount of competition from other businesses and you will without doubt be entering a crowded marketplace. You’ll be entering a cut-throat race and starting in last position, so it’ll be you that is tasked with quickly finding an audience and connecting with them to the point where they agree to buy products and services from you with a high level of regularity.
You’ll need a great website –
Your business’ website will need to be capable of handling many orders at once; if it can’t perform in this way, you’ll struggle to see sales of any real value adding up. You need to be able to push your profit margins to the maximum and sales are not always easy to come by, so while you are able to get a lot through the door, ensure that your website can manage to push them over the line in bulk-like fashion.
Selling products online is always going to be a more convenient method for the customer themselves, than it is when visiting a physical store. They don’t have to actually leave their homes, as your shop will be on their laptop screen, or in the hands via a mobile phone; an eCommerce store can be visited from any device with an internet connection, at any time or place. However, if you cannot provide a suitable service through the use of your website, this convenience will obviously be lost.
Orders are generally of low value –
If you are comparing a B2C business with a B2B business venture, the B2B will always receive orders that are of much higher value than the B2C will ever get. This is because as a B2B you would likely be selling items in bulk and it would also often be expensive equipment of technology. This means that as a B2C you will unfortunately have to find many more customers than any B2B will ever have to, in order to keep your profits respectable and your venture afloat.
You’ll need to market more than a B2B –
The harsh but truthful reality of running a B2C business venture means that you will have to market yourself a lot more than any B2B would ever be required to. You simply won’t get as many repeat customers, so the word will need to be spread more about your business and what it is that it actually offers.
B2B firms that work successfully with clients will often continue to work with them once again and begin to develop some sort of partnership and brand loyalty towards each other; that does not normally happen with B2Cs as they are reliant on the general public to be their audience, rather than large corporations.
How do I make the decision?
If you’re currently the owner of a B2B business and you aren’t sure whether or not to make the transition to becoming a B2C model, it is probably best that you don’t go ahead and take that leap of faith. It is simply too much of a risk without first doing the proper research, finding out how it would help your company to grow in the future and not just make a quick buck over the short term.
Look into how it’ll help you as a brand and be sure that there is an audience which you’ll be able to instantly connect with; do not move from B2B to B2C without knowing where the sales are going to come from, it can be very difficult to generate them after all.