As the term suggests B2B or business-to-business refers to a process of selling products or services directly between two business entities. Unlike the B2C model where businesses sell directly to end-users, B2B involves a transaction between a manufacturer and a wholesaler or a wholesaler and retailers through an online channel.
According to a leading market research company Fact and Factors, the global B2B market is expected to grow at a CAGR of 18.70% to reach USD 18.57 trillion by the end of the year 2026. Some of the major players dominating the global B2B market players are Amazon business, Alibaba, Walmart, Indiamart, Global sources etc.
How to start a B2B e-commerce business
Starting a B2B e-commerce business is a real challenge for any entrepreneur or an organization trying to expand its activities. To secure a successful outcome you need systematic planning and careful implementation. Right from analysing the market to securing capital investment, to developing a business model, to creating a website, to implementing digital marketing, you need to have a B2B e-commerce business plan in place that will ensure smooth and seamless execution of all these functions.
Market analysis: This is the first and foremost step in starting your B2B e-commerce business. Analysing the market will let you know whether or not B2B buyers will buy what you are selling. It involves both quantitative and qualitative analysis of the market.
Market analysis can be fragmented into three main sections:
- Audience segmentation: Audience segmentation is the key activity in the market analysis process. It involves the process of dividing your entire audience into groups and sub-groups based on shared interests, behaviour or attributes. As a business owner, audience segmentation empowers you to get better insights into your B2B buyer, understand what is required, when and in what quantity. Also, you can design your product and services, as well as marketing campaigns to satisfy a particular group of buyers.
- Industry analysis: Industry analysis is a market assessment tool that gives B2B business owners a complete insight into their industry. It helps them to get a sense of demand and supply of a particular product or service, level of competition within a particular industry, what is the right time to enter the market and future prospects of the industry taking into account both internal and external factors. In short, industry analysis helps B2B business owners to identify both threats and opportunities coming their way.
- Competitive analysis: Competitive analysis allows you to gauge and understand your competitor’s strengths and weaknesses in relation to yours. By identifying your competitor’s strengths and weaknesses you can develop a sound marketing strategy to outshine the competition and add value to your product or services. Besides this, you can also spot industry trends and set benchmarks for your future growth.
Business model: Next step after market analysis is to develop an effective business model for your B2B business idea. A business model is a framework for how your business is going to make money with its product or services. Business models are equally important for both new and established companies. They help B2B businesses attract investors, recruit a talented workforce and motivate management and employees to work towards achieving the company’s goal.
A good business model should have the following components:
- Value proposition: It is the value that you promise to deliver to your customer after the purchase of a product or service
- Target market: It refers to a particular group of consumers at which your product or service is aimed at
- Competitive advantage: It refers to factors and attribute that gives your offering an upper hand in the marketplace
- Revenue model: It is a framework or outlines that show how your B2B business is going to generate revenue and sustain in the market
- Resources: It should have details regarding your company’s physical, financial and intellectual resources and assets
- Start-up cost: It should include projected start-up cost and an explanation of where and how the company is going to raise the capital
- Cost structure: It should include a list of the fixed and variable costs that a business needs to operate its day-to-day activities
- Profit margin: Profit margin shows how efficiently the business is running. It is the ratio of company’s profit (sales minus all expenditure) divided by its revenue
In addition to this, your business model should also include operating costs that are required for running a business. This includes rent, equipment inventory costs, expenses paid for hiring freelancers, videographers and maintaining back-office staff and in-house HR team.
Securing capital investment- Once you are done with market analysis and business model the next step is to secure investment for building a warehouse, buying inventory, developing a top-notch website, running marketing campaigns and maintaining backend staff. Capital investments are also made to increase operational capacity, penetrate into a new market segment, and generate more revenues. A new company may raise capital investment from several sources such as:
- Business loans
- Angel investment
- Personal contacts
- Venture capitalist
It can also go public and issue bonds and stocks in order to finance capital investment.
Developing a website and an app
The next step in the journey of setting up a B2B e-commerce business is to develop a personalized fully functional website and a mobile app for your business. A well-designed and user-friendly website with a responsive navigation menu provides a better opportunity for your business. Besides, also make sure to make a mobile app for your business that can run on any operating system. With more and more people using mobile devices for shopping, as a B2B e-commerce business owner you need to build your app with CRM functionality to manage orders, inventory, and customer queries from a single dashboard.
Implementing a digital marketing strategy
No matter how good your website or app is, if your business doesn’t have a robust digital marketing strategy in place, all your efforts will go in vain. Digital marketing strategy is a crucial part of your B2B e-commerce business. A well-planned digital marketing strategy can go a long way in establishing your brand’s name in the marketplace. As per Statista, a leading statistics company, over 57% of B2B buyers show their willingness to buy products online.
So, it is imperative for you to implement the best marketing strategy that will enhance your online presence and entice potential B2B buyers to do business with you. Some of the best digital marketing techniques include:
- Content marketing: It involves the creation and sharing of online materials such as articles, advertorials, on-site blogs, videos to drive traffic to your products or services
- Search engine optimization: SEO in simple terms means the process of improving your website ranking on all search engines. SEO targets organic traffic (unpaid traffic) rather than direct traffic or paid traffic by incorporating “keywords” in images, videos and textual contents.
- Affiliate marketing: In this type of marketing businesses pay commissions to third-party publishers or influencers for advertising their product or services on their platform, thereby generating leads for the business.
- Pay-per-click (PPC) advertising: PPC is the digital marketing model in which the advertisers run campaigns on a platform such as Google or Bing and pay a fixed amount to the hosting platform each time their ads get clicked by the user.
- Social media marketing: This involves creating and sharing content on social media networks to market and promote the company’s product or service. It is an excellent way to build rapport with your target customer, increase sales and derive more traffic to your website.
- Customer loyalty program: Customer loyalty programs are a great way to engage customers beyond just the point of sale. These are designed to incentivize loyal customers by providing them discounts, unique offers, free passes to VIP events and many more. If implemented properly customer loyalty programs boost retention rate and sales manifold.
Marketing costs can vary from business to business, but on average B2B e-commerce business spends between 7% to 12% of their total revenue on digital marketing activities
As a B2B e-commerce entrepreneur you are not required to do this all alone, you can collaborate with an experienced e-commerce management consulting firm like YRC and exploit their expertise in this domain. Right from analysing the market, to creating a business model, to developing a marketing strategy, to creating SOPs and making your business go live, YRC’s in-house e-commerce consultants are there to steer you through your entire B2B e-commerce project.