When businesses buy from each other, the transactions don’t look like the everyday purchases most of us recognize. B2B wholesale transactions often include massive order values and the economics of scale.
B2B transactions encompass so much business, in fact, that B2B eCommerce alone has surpassed $12 trillion. But what exactly is a B2B wholesale transaction, and how can you improve your ability to handle them? Read on to learn how a B2B wholesale platform can help you build a solid foundation for your business and strengthen relationships with wholesale buyers.
What is a B2B Wholesale Transaction?
In this context, a B2B wholesale transaction is the purchase/sale of products in bulk between two commercial entities. Typically, these transactions come between manufacturers and wholesalers, or wholesalers and retailers.
Though the ultimate goal is to provide products to a retail market, B2B wholesale transactions help move and distribute these products. Typically, wholesale transactions like these move a large volume of products at one time. Ideally, doing so will increase efficiency and average order value (AOV).
What Are The Benefits of B2B Wholesale Transactions?
B2B wholesale transactions should benefit both the buyer and the seller—and they do. But those benefits manifest themselves in different ways:
- For the seller, wholesale transactions increase the AOV. This provides them with a more stable source of business. With low AOV, sellers often lose money due to different costs. These include labor costs, transaction fees, and other expenses associated with “cost of goods sold.” The more products a seller can move in a single transaction, however, the more efficient they’ll be.
- For the buyer, buying wholesale from another business can yield discounts. As an individual customer, you’ve probably seen volume discounts when you shop at places like restaurant supply stores. This is a glimpse of life in the B2B world. Since sellers want to motivate buyers to increase their wholesale orders, they incentivize these transactions through bulk discounts.
There are a few other benefits to B2B wholesale that can help a range of companies. A fixed margin of profit, improving the control they have over their inflows and outflows, and creating fixed budgets all create incentives for sellers to offer bulk wholesale orders when possible.
What Sorts of Challenges Are There in B2B Wholesale Transactions?
When a wholesaler arranges long-term contracts with other businesses, it provides stability to their bottom line. But that doesn’t mean the B2B wholesale world is without its challenges:
- Efficiency. Given that the eCommerce wholesale market has exploded to trillions of dollars in transactions every year, even the slightest improvement to one company’s efficiency can give it a tremendous competitive edge.
- DTC and retail. With the rise of popular consumer sellers like Amazon and Alibaba, many wholesale businesses can reach out to consumers directly. While individual customers can’t possibly swing the AOVs other businesses can, it does throw a wrench into how many companies do things. However, there are some positive effects DTC has on B2B wholesale that are worth reviewing.
- Increased competition. Given that eCommerce has “shrunk” the globe, just about any wholesaler with efficient shipping processes can compete. This means wholesale businesses have to be cognizant of their markets. Inefficiencies and costs can quickly add up to a disadvantage relative to competition halfway across the globe.
B2B Wholesale Platforms: How They Work
To tackle those challenges, B2Bs wholesalers look to different platforms to maximize efficiency. But what does a platform look like? How does it work? Typically, software platforms have to have the following features:
Bulk ordering and pricing. Since B2B wholesale transactions often include discounts as the order gets larger, your platform needs to take this into account. This is especially true when managing online payments.
Inventory. Inventory availability is a key issue here; does your B2B platform take inventory into account when it logs in new orders? Do you have an accurate map of your current inventory? For many B2B wholesalers, keeping a “live” look at inventory is integral to maintaining efficiency.
Account management. A B2B wholesale transaction can be an easy thing to execute. But it always helps professionals to look at the entire history of an account to get a sense of the prices they paid, the orders they placed, and more. This helps create reference points for AOV, as well as helping with future planning.
Why work with a platform?
B2B wholesale brands are moving sales online and adopt eCommerce sales technology. That means the entire payment process should be seamless. For any B2B wholesaler, the competitive advantages come through your sales and logistics processes. Are you more efficient than the next business? Easier to order from? If not, a platform designed for B2B wholesale transactions can help.
Efficiency in B2B wholesale isn’t just about your business approach—relevant though that may be. It’s about the systems you put in place to manage B2B wholesale transactions with minimum muss and fuss.