So you're thinking about selling B2B? Here's what you need to know…
Business-to-consumer e-commerce, a $3.67 trillion global industry showing no signs of slowing down. Quite honestly though, the B2C e-commerce market is B2B’s little brother…
Yup. B2B e-commerce is worth a whopping $17.9 trillion, nearly 5 times the size. ??
If like many B2C businesses you’re thinking about expanding into the world of B2B, you're in the right place!
In today's newsletter, we'll explore the key aspects of B2B sales, the main differences, and why having a robust B2B payment solution like Two is essential for success.
The difference between B2C and B2B sales
As we’ve established, the B2B market is a vast landscape. In fact, it dwarfs the B2C market in terms of size and revenue generation. Which is probably why you’re thinking about venturing into it.?
But it’s not wise to have a one-size-fits-all approach. There are some key differences between B2B and B2C sales that you need to be aware of…
Higher average order value: B2B purchases involve larger quantities and higher prices due to bulk buying and higher-priced products/services.
Longer sales cycle: As a result of larger purchases, B2B buyers take more time to make purchasing decisions, conducting research, comparing options, and justifying expenses.
More stakeholders: B2B sales involve multiple decision-makers from different departments, each with their own priorities and needs. B2C sales usually involve only one person.
Technical expertise: B2B sales often require customized solutions and specialized knowledge to meet buyer requirements. B2C sales are often simpler and don't require technical expertise.
Highly educated buyers: B2B buyers are well-educated and informed about the products/services they need due to making significant investments for their companies. B2C buyers may not require the same level of knowledge.
With that being said, more recently B2B buyers have started expecting a purchasing experience akin to B2C.?
Changes in B2B purchasing behaviour
While COVID-19 put the world on pause for 2 years, some positive advances in the B2B space emerged. The BNPL B2C model has made its way over to B2B and now, more and more business customers are expecting that same level of flexibility and accessibility when it comes to purchasing.
This can be partly explained by how familiar B2B buyers are with financial technology. Given 73% of all professional B2B purchasing decisions are made by millennials, the increasing assumption is that B2B companies will offer the same seamless purchasing experience as B2C.
And that includes offering net terms. For example, a study by McKinsey found that 96% of B2B buyers might make a purchase in a fully end-to-end, digital self-serve model.
Offering trade credit becomes not just preferable but expected by B2B buyers and one of the leading reasons you should offer B2B trade credit solutions.
How the B2B sales process works
Because of the differences between B2B and B2C, the sales cycle is also different. Below, you’ll find a handy image showing a typical B2B sales process in 8 steps, from start to finish.
For a full rundown of this process, you should check out this article we wrote a while back. ??
B2B payments aren’t as simple as B2C…
The nature of B2B sales introduces complexities and unique challenges when it comes to payment processes. Unlike B2C payments, which are typically immediate and straightforward, B2B payments involve longer payment terms, higher transaction volumes, and a greater focus on credit and risk management.
One of the reasons B2B payments are more intricate is because of trade credit. In the B2B world, it's common for buyers to receive goods or services upfront and pay for them later, often within a specified period of time.?
This trade credit allows businesses to manage cash flow, invest in inventory or equipment, and maintain financial flexibility. However, as a seller, there are drawbacks that have a massive impact on your day to day operations:
Managing cash flow: With trade credit, you’re effectively postponing when you get paid, leading to cash flow issues. The reality is you’ll have to run your business without that income until you receive payment.
This means it’s super important to record accounts receivables as an asset on your balance sheet, helping you keep track of what you’re owed.
To reconcile these issues, many B2B companies turn to a few different solutions. For example, you could:
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Managing credit and fraud risk: As a seller, you take on the credit and fraud risk for trade credit purchases. Any B2B sale on trade credit runs the risk of non-payments which can have dire consequences for your cash flow and business as a whole.
Fortunately, there are trade credit insurers. This will help cover any non-payments from your buyers and protect your business.
You’ll also need to establish the buyer’s creditworthiness. Less formal operations often make that assessment internally based on existing relationships, but it can be risky. There are credit risk management companies out there too to help you manage this more comprehensively.
Managing invoices and more paperwork: Managing invoices in-house requires time and effort and unless you have a dedicated team to deal with this, you’ll find a lot of your time can be spent organising paperwork.?
This means manually filling out invoices, sending them to your buyers, and reconciling payments. All of which can be an operational struggle.
How Two can help
So with all these additional things to contend with, where do you start?
This is where the power of Two comes in!
Two offers a range of B2B payment solutions that allow you to offer interest-free trade credit for both online and offline customers.
For a full run down of these B2B payment solutions, be sure to check out the links above or take a look at this article for more detail!
So how do these solutions help you start selling B2B?
Finally fix cash flow
As we’ve established, a major drawback of traditional trade credit is the cash flow problems it creates. In fact, in the UK alone, 58% of SMEs experienced late invoice payments from customers. For medium-sized enterprises with 50 to 249 staff, the number waiting on late payments soared to 94%.
But with Two, you get paid upfront! That means no waiting around until your customer pays their invoice. Having access to this previously tied up capital allows you to grow your business, build and maintain long-lasting buyer relationships, and ensure the financial health of your company.?
Don’t just take our word for it though. Check out how we helped Kandidate unlock their tied up working capital here!
Offset credit and fraud risk
One of the major challenges with offering trade credit is establishing how likely a customer is to pay you on time. Performing these checks yourself can be extremely time consuming. And working with 3rd parties just adds yet another layer of complexity you don’t need.
Using a B2B BNPL provider like Two speeds up the checkout experience considerably. With instant credit decisioning, what would usually take a couple of days can now be done there and then.
Any B2B BNPL provider worth their salt offers integrated ID-verification and credit/fraud assessment. By integrating this process directly into the checkout experience, buyers simply choose what they need, plug in their details, and are given the option to check out with terms if they’re approved.
Of course, the added benefit of a smoother checkout experience is higher B2B sales and conversion rates!
Take Purple Planet Packaging for example - a happy customer of Two who saw a 400% increase in average order value!
Read more about their success here.
Eliminate admin
When you offer Two as a B2B payment method, Two handles all the admin. Instead of spending hours, days, or weeks chasing individual customers down for what you’re owed, Two manages this for you.
This amounts to a huge amount of potential time saved. For example, RiktigHandel was able to save 20 hours a month after using Two’s B2B payment solution!
Two also reconciles all payments so you can say goodbye to chasing late invoices.
To learn more about Two can help you start selling B2B, make sure to speak to one of our experts!