When you want to start a business, there are two types of business models you can use. One of them is direct to consumer and the second one that you can go with is business to the business model. Now, many things make both of these things completely different.
We will see the complete comparison where we will see B2B vs D2C.
What is Direct to Consumer?
We will first begin with what is direct to the consumer. Direct to Consumer is where you can easily start the business.
Here, the business sells the products directly to customers. You are selling all the products to the retailers. In simpler words, there are no wholesalers or any third-party sellers that are in the middle. If there is no middle man, the profit margin will be higher. However, the sales will decrease as you are selling all the things all alone.
What is Business to Business?
The next model is where you use the business to business.
This is where you are selling the items directly to the businesses instead of selling them to retail.
There are many types of deals you can make here. You can either allow a seller to resale your item or you can add a wholesaler as your customer. It can also be a brand where you are selling the items to them without worrying about how they will sell those items.
In simpler words, when you are selling items to any of the businesses, it is called business to business dealings.
Number of Sales
We will first start the comparison of B2B vs D2C by the number of sales.
When you are selling an item with the D2C model, you are selling it directly to the customers. Of course, one customer will only buy 1 product. If the product is popular, they might buy more products. Therefore, you will have to wait for all the items to sell.
On the other hand, B2B is where you can make a single sale and the quantity will be a lot more. When you are selling to the business, the quantity is more as they will buy more things at once. It doesn’t matter whether the business is a wholesaler or it is a business selling items to the retailers, your order will be higher and you will make more profit when it comes to the number of sales.
If you are selling any service, you will make high ticket sales when you are selling to a business. In simpler words, the price of the service is a lot more than the retail one. Therefore, you will make more profit in a single sale when it comes to wholesale. A simple reason can be because business has more money than retail. Hence, they can surely spend more money at once.
Therefore, B2B is better when it comes to several sales in the comparison of B2B vs D2C. You will make more sales there. If it’s not the quantity, you will surely make more profit in a single sale.
Customer Support
The next thing that you need to consider is customer support and the service. Running an eCommerce website is not easy. It takes a lot of effort to run an eCommerce website. You will have to consider many things when you are running a business.
Customer support is extremely important and you will have to hire more people in the support and the service team if you are doing business with the D2C model. When you are selling to retail customers, you will surely have a huge customer base if you are profitable enough.
Let’s take an example. If you want to make $100k in sales, you will need at least 1000 active customers, right? Depending n the price of the product, this might change a lot. If you are selling the products for a low price such as $5 or $10, you will surely need a lot more customers.
Now, when there are more customers, you will also have to provide better services for them. You can’t simply sell the products and count the money. You will also have to make sure that you are giving them support.
This will surely increase the workload. You will have to make sure that each of the customers is satisfied and gets what they want. If the product is not right, you will have to initiate the refund and complete the process.
On the other hand, B2B requires less amount of customer support as you only have to talk to few businesses. In most cases, the businesses are understandable and won’t argue with you on small things.
Therefore, you will have to work more when it comes to business to consumer or direct to consumer product whereas you will have to work less when it comes to business to business products.
Service/Work and Delivery Cost
Now, let’s talk about the work and the delivery cost. We will see what is the workload and which of these techniques will cost you more.
This doesn’t require more description, right? Most of you might have already guessed here. In the battle of B2B vs D2C, business to the consumer will always take more work, right? The simple reason is because of the deliveries and the support. It’s always better to do a single delivery of 100 items than to do 100 deliveries of 100 items.
So, if you talk about the delivery cost and the work required to run a business, you will surely have to spend more time in the retail one rather than the business one.
In very rare cases, the cost will be the same. For example, if you are selling such an item that is only sellable in a single quantity, you will incur the same charges. However, if you see a bigger picture, it will cost you the same.
For example, if you are selling a printer, you will make a single sale. However, if you are selling to businesses, there are good chances that the company will order more quantity depending on the business you are targeting. So, it will cost you less.
Even though in some cases, both of them will incur the same cost, you shouldn’t forget the number of sales you make. The printer requires more will be a home printer but a business will require a bigger printer.
Production Capability
This is the part where things shift the gear to the next level. Till now, you might be surely thinking that the B2B or business or business is the best business model you can go with, right? This section might change your mind.
In a B2B business, you will need a larger production capability. If you are selling things directly to the business, they will surely order more quantity. In this way, you will have to be sure that you have enough capacity to produce all of them.
This will also make it harder to scale up. You can’t simply scale up if you don’t have the cash flow. We will surely talk about cash flow as we move on to the next one. However, this is something that you need to keep in mind.
Here, there is one more thing that matters along with the production capability and that is the speed required to make it. In the retail market, you can surely take your time in making the products. However, the same thing is not possible when it comes to the wholesaling market.
When you get an order, you will have to deliver it fast. If you have more customers, there are good chances that you might get more than 2 orders at once. IN case that happens, you will have to increase the speed. This is the exact reason why most people go with the D2C model instead of going with B2B.
If you are capable of manufacturing a lot of products and even storing them until the final quantity is reached, you can surely go with the B2B business model. However, for other people, you can start with the D2C model.
Cash flow
One of the next important things to keep in mind is the cash flow. You will have to make sure that you are maintaining a proper cash flow. Cash flow is nothing but the cash you need to run the business.
Now, this is an important thing that you need to see. Most people ignore this one and their business fails because of the same. You can’t simply ignore this.
There are good chances that once you start doing business with another business, they will not pay you the complete amount in advance. They will simply pay a percentage of it until the order is completed.
You will need a huge amount of cash to manufacture the items. Here, you are doing business with a company. As a result, the orders will be more. If you don’t have enough cash, it will be hard to get the raw materials from which you will make the final product.
Therefore, you will have to make sure that you are having enough cash flow here. Once you have the cash flow, you can surely think about going with the business-to-business model.
Marketing and Customer Acquisition
One of the core things you will need in the business is the sales and marketing part. You will have to make sure that you are doing the right marketing and have the right sales team to pitch your company details.
It’s hard to acquire business clients directly. It will be very hard even to fix the meeting with them.
In most cases, they will simply say that they already have a supplier and they are not planning to change it. Therefore, it is surely hard to get the client in this way.
Whereas if you talk about the retail world, it’s quite easy to acquire clients here. You can simply advertise and you will start getting the visitors who will eventually get converted to customers. Therefore, it won’t be that hard.
Profits and Revenue
Now, let’s talk about the profit and the revenue in the B2B vs D2C. You will make the most revenue if you do both of them at the same time.
You can always start with the retail business and then you can scale up your business and start selling the products to the businesses. In this way, you can maintain the cash flow as well as you will get all the advantages that a B2B business is getting. Therefore, you are always in the profit in such a case. You can get started with the retail business and then shift to B2B too.
Which is better: B2B vs D2C
Now, there are good chances that you might be looking for a perfect answer on which is better in the battle of B2B vs D2C, right? The short answer is both.
There is no specific thing better here. In the end, both of these are business models. It depends on which model you can work with. Some people can work under pressure and can complete all the deliveries in less amount of time whereas some of the people can only work in a calmer place.
Therefore, depending on your risk appetite, investment, cash flow, and your marketing/sales team, you can take the steps accordingly.
Depending on the business type, you can choose the best model that is suitable for you.
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