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What is B2B?

b2b, business-to-business
Credit: Rafal Olechowski | Shutterstock

B2B, or business-to-business, is a type of commerce transaction that is based on the exchange of products and services from business to business, rather than business to consumer. A typical supply chain often involves multiple B2B transactions, as companies need to purchase components and raw materials for its manufacturing processes.

An example of a traditional B2B would be automobile manufacturing. A vehicle's components are generally manufactured by different companies, and the auto manufacturer purchases these parts independently. The tires, the hoses, the batteries, and electronics may be manufactured by separate companies, and then sold directly to the automobile manufacturer. The products themselves do not end up in the hands of consumers, though often, the end product of the purchasing business does.

B2B e-commerce

B2B e-commerce, or e-biz, is a slightly more evolved version of commerce. This type of e-commerce is the electronic exchange of business documents between businesses for the purpose of conducting commerce. This began with the Electronic Data Interchange (EDI), which started in the 1960s. Trading partners within supply chain networks are the most primary participants, as they exchange electronic documents in support of the purchasing of goods and services. B2B e-commerce is used for contract manufacturing, customs declarations, global trade compliance, order management, and supply-chain logistics. Using B2B e-commerce, companies can improve communications between partners and enhance the purchasing experience from business to business.

When applied to e-commerce specifically, B2B can be broken down into a number of categories. The first category is company websites, as many companies need to reach other companies and their employees specifically. A company website can serve as the entrance to an exclusive extranet for customers or registered site users, or as an intranet for internal use only. Companies can also sell directly from this site, e-tailing to other businesses. Some B2B companies provide software for building B2B websites, thus becoming a B2B for B2Bs. This software includes site building tools and templates, database features, and methodologies for best practices, plus transaction software.

The second category is product supply and procurement exchanges, otherwise known as e-procurement sites. These sites serve a range of industries and often focus on a niche market. A company purchasing agent can shop for supplies from vendors, request proposals, and even make bids for purchases at specific prices. These B2B websites enable the exchange of product supplies and procurement.

Specialized or vertical industry portals provide a subweb of information for a specific industry or vertical. This can mean healthcare, construction, or other vertical markets, and these sites provide product listings, discussion groups, and other features. Vertical portal sites have a broader purpose than procurement sites, though they may also support purchasing.

Brokering sites act as an intermediary between service providers and a potential business customer. For example, a construction company may need to lease equipment. A broker site can help the construction company find an equipment manufacturer who is willing to lease out the needed equipment. The final category is information sites, or infomediaries, which provide specialized information sites on specific industries for companies and their employees. These specialized search sites are often used as trade and industry standards organization sites.

While this may sound complicated, there are a number of companies you already know that are B2Bs. Dropbox is a storage service that many consumers use, but so do businesses. GE makes a number of consumer goods, but they also provide parts for enterprise companies. Perhaps you've worked at a company where the paychecks were stamped by ADP. This is a company that provides payroll and financial services for businesses. Xerox is a household name, but makes billions on providing paper and print services to businesses.