Whether you are fulfilling orders for a single end customers or for a retail store, it may seem on the surface there won’t need to be much difference between the two. An order is an order, right? Wrong. B2C (business-to-consumer) and B2B (business-to-business) each require very different operations and processes. Each order delivery, whether to one single consumer or to a business, needs to reflect your brand, otherwise you might lose customers. Working with a third-party logistics provider (3PL) that aligns with your brand will help you navigate the differences between fulfillment services, supply chain logistics, warehousing and inventory management for B2C orders and the complexities of B2B orders.
B2C Order Fulfillment Defined
As the acronym indicates, B2C orders will go directly to the end customer. B2C generally has a lower average order value than B2B does, and the process of order fulfillment for B2C is also often simpler since there aren’t as many regulations and specific requirements to follow when fulfilling single orders. B2C typically has set pricing and will display the same price for all customers, excluding seasonal or promotional activities that might occur. B2C payment processing is also more streamlined, typically because online checkout process has been made easy for payment transactions.
With B2C customers you are generally fulfilling one-off purchases from individual end users. This type of order fulfillment has relatively low barrier of entry because customers are typically buying direct from your website, and at this point many people are very comfortable with online shopping.
If you work with a 3PL to outsource your B2C order fulfillment, their role is to ensure that all orders are delivered damage-free, on time, and with accurate documentation—some also handle returns and refunds. Partnering with a 3PL can bolster your company’s ability to deliver ordered products to customers faster—sometimes on the same day. Mismanagement, delays or errors on the part of a 3PL can lead to bad reviews for the manufacturer and additional costs in terms of refunds and returns.
B2B Fulfillment Defined
In B2B ecommerce fulfillment, products are shipped directly to a business or other retailer (sometimes called B2R). Orders are generally large so that the receiving business will have enough inventory to sell from. When businesses place orders, it’s usually more efficient for them to do so in advance, and to order in bulk, so they don’t have to make purchases for more orders frequently.
Accuracy is extremely important with B2B order fulfillment services. Businesses may have compliance requirements, such as tax rules, product restrictions, SKU codes, parcel labels, barcodes or specific invoicing structure. Because orders are bigger and in bulk, shipments can be expected to cost more and have longer delivery lead times. Expect to get more familiar with carrier information that you’ll need to ship your products far and wide, like sea freight or air freight, and international trade barriers like taxes, tariffs, and subsidies.
If you choose to have your B2B orders fulfilled by a 3PL they should focus on providing fast and reliable delivery. Since businesses deal with other companies, they expect these fulfillment providers to be optimized for cost-cutting and increased efficiency. They also play a crucial role in the ability to meet orders in time. Delays and mismanagement on the part of a 3PL can harm the reputation of the company they represent, as well as incur penalty fees and refund losses that they might have to provide.
Main Differentiators Between B2C and B2B Order Fulfillment
There are three stages in order fulfillment, that always occur: :
In each of these stages there are differences in the way order fulfillment functions for B2B versus B2C.
B2B orders are priced based on the needs and requirements of the end business, this can vary greatly depending on the size of an order, recurring orders, payment terms, and duration of the contracted relationship. Often times, brands selling to retailers establish a set wholesale price which is 30% to 50% of the retail price since the retailers are buying in bulk and marketing the product through their own channels. With B2C on the other hand, orders are more straightforward; the price per unit is set by the product company and that price rarely varies.
Revenue per customer
B2B shipments mostly involve large-scale, bulk orders of raw materials and parts while B2C order fulfillment handles smaller items like personal electronics or appliances. Because of this, B2B orders can be in the millions of dollars and be recurring, while B2C orders are usually in the tens or hundreds and are usually a one-off purchase.
There is often an account manager or sales coordinator who helps facilitate the B2B exchange of goods. This lends itself to having more service and support around B2B order fulfillment, there are just more people ushering this interaction. In B2C there is usually little or no sales assistance necessary since orders are often placed by the end consumer, directly through an ecommerce platform.
The sales process for B2B often takes longer as it involves requests for quotes, department approval, negotiation, etc. Most retailers have a team of “buyers” who are responsible for identifying products they feel will drive revenue and margin for their company, negotiating bulk discounts from the seller, and managing the ongoing relationship with the seller. For B2C, the customer can shop around at a few places if they like, or just buy whatever they want the first place they see it.
B2B shipments are generally large-scale volume, but purchased in fewer orders. The products will be sold individually through the retailer’s store front or online store, so the retailer will order more only when they need to restock their own fulfillment center inventory. B2C purchases are much smaller orders, and are often handled in a single transaction.
B2B payments usually occur over an agreed upon period of time using traditional payment methods such as credit, purchase orders or CODs (cash on delivery). For B2C, they are paid immediately at the time of purchase via credit card, check or cash.
Order fulfillment and shipping
Since B2B transactions involve larger shipments, the shipping processes take longer, cost more, and require sophisticated handling equipment for loading and unloading pallets of products. Most big box retailers, like Walmart and Target, have very specific requirements with when and how they receive their product, also known as “routing guides”. Deviating from these routing guides can lead to retailer penalties that can be in the form of chargebacks, smaller future buys, and severing the relationship. It’s critical that the seller or 3PL they have partnered with to ensure they understand and abide by the contracted requirements. In contrast, B2C order fulfillment offers low-cost (because parcels are light, or sometimes free shipping can be included), and the single order fulfillment can be a much faster placement time, usually in just a few days.
Personal relationships are essential to form with retailers who are selling your products. Most B2B contracts involve large, recurring shipments and close partnerships which are negotiated over extended periods of time, and require constant follow up and monitoring. Those good personal relationships aren’t to be confused with the type of customer satisfaction that is required to cultivate for B2C orders. Customer satisfaction is front-loaded, with marketing, customer service, clear product displays and information, plus on-time delivery and accurate order fulfillment that enhance the customer experience.
All businesses must have a system in place for the return and exchange of products, regardless if it is B2B or B2C. B2C transactions usually involve clear return and refund policies that are possible in the more transparent retail market. The reverse logistics process gets more complicated in B2B orders due to the larger order size, contract type and obligations that are negotiated.
B2B EDI is simply the use of electronic data interchange for the purposes of exchanging documents between trading companies. Using B2B EDI, a vendor might send exchange purchase orders and invoices with its customers in place of paper methods. B2B EDI has been in use in some form or other for a number of decades and has made the exchange of transaction information significantly faster and more efficient in a number of industries. Through B2B EDI small and large organizations alike can benefit from improved efficiency, reduced costs and greater throughput
Depending on the type of business you run, you may have to deal with B2B order fulfillment, B2C order fulfillment, and likely both. Navigating the differences between each can be challenging, but hopefully now that you are more familiar with the terminology and concepts that make each one unique you are better equipped to make the right decisions for your brand.
If you are looking for a fulfillment partner we’d love to hear from you. Send us a note to connect about how we can help your company grow. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support.