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Also known as B2B, business-to-business commerce is a term that is used to identify business transactions that take place between companies. This is in contrast to transactions that involve the sale of goods or services to a private consumer or to a government agency. With this particular application, one company purchases the products of a different company, with the recipient functioning as a retailer or a wholesaler.
In a business-to-business commerce transaction, the recipient may also use the purchased items as components in products that the buyer offers to customers for sale. The case of an auto manufacturer is a classic example of B2B activity. Car and truck manufacturers purchase windshields, tires, hoses, and other components that are used in the assembly of a new vehicle. Those vehicles are then sold to consumers, resulting in what is known as a business-to-consumer or B2C transaction.
The same general approach can be taken with the purchase of services offered by one company by another business. For instance, a teleconference bureau may choose to allow another teleconference company to resell their services under their own brand. In this instance, the buyer of the services functions as a wholesaler. The recipient company is buying services from the provider at a specified rate, branding those services with their own company name, and selling the services at a profit.
A wide range of industries make use of business-to-business commerce in order to function. Within the food industry, supermarket chains rely on purchasing goods from manufacturers at competitive pricing that allows them to resell food items to consumers. Auto repair firms use volume purchasing with manufactures to secure tires, batteries and various engine components at lower prices than individual consumers could manage, making it possible to charge prices that consumers consider fair and still turn a profit. Retail stores also buy in volume from manufacturers of different goods that can be sold in their stores at a profit.
As with any type of situation involving a buyer and a seller, the process of business-to-business commerce relies heavily on the establishment of a strong working relationship between the two entities. The buyer must be convinced that the goods or services offered by the seller are acceptable in quality, available at an equitable price, and ultimately are of use. At the same time, the seller must be convinced that the buyer is willing to abide by all terms related to the sale, and has the capability to pay for the purchases within a reasonable period of time. If these essentials are not present, then the business-to-business commerce cycle will not be complete and the relationship between the two companies will cease to exist.