Related Terms: Business-to-Consumer
"Business-to-business," as a phrase—together with abbreviations like "B-to-B" and "B2B"—arose in the 1990s in the context of the Internet to divide web-based commerce into two categories. The second category was business-to-consumer, abbreviated B-to-C or B2C. Most people associate electronic commerce with the latter, with consumer purchasing on the Internet. Amazon.com, initially a book seller, and E-bay, the auction house, are almost emblematic of e-commerce in general, although they take a business-to-consumer form. Most people do not know, however, that the overwhelming majority of commercial electronic transactions on the Web—and the money-flows that they represent—are business-to-business transactions. In fact, electronic sales predate the appearance of the Internet by decades. They were based, and to some extent continue to be based, on large computers and leased high-speed, proprietary cable connections. A typical old-fashioned electronic connection between businesses was that between a manufacturer and a distributor (or dealer) with a proprietary computer linkage used to order product and replacement parts, the credits and debits thus created leading to account adjustments or billings. With the rise and speed-improvements of the Internet, business rapidly embraced the new medium well ahead of consumers.
The expansion of the Internet had—and still to some extent retains—a heady sense of excitement. The new phrase therefore "developed legs." Needless to say, business-to-business relationships are as old as business itself but once went by such boring tags as "industrial sales" or "industry-to-industry." In current practice B-to-B has come to be applied to any and all transactions between corporations, even if the Internet does not play a significant or, indeed, any role. This seems somewhat to irk the people who first coined and deployed the phrase to designate a newly evolving phase of business communications—new because the visual interface of the Web provided additional resources for business. Formal definitions of B-to-B thus strongly underline and emphasize the electronic aspects of the interactions and the sophistication of these. But the genie is out of the bottle, and the phrase now serves a much more general purpose.
Narrowly conceived, B-to-B involves one or more of the following:
- Formal, contractual arrangements to do business over the Internet. An example of this might be an electronic relationship between a bank and several of its industrial customers in which all manner of financial transactions take place in automated form.
- Software and systems specifically designed to serve such business relationships. For full-fledged B2B, data transfer must be safe and private and such systems therefore feature WAC (for Web Authorization and Control), and have features that enable parties to exchange technical information and to conduct online negotiations.
- Electronic catalogs and displays access to which is restricted to qualifying industrial shoppers. An example of this is a supplier of sophisticated components who gives access to the catalog to established customers who, using the displays, can get very detailed technical data far transcending simple descriptions. Amazon.com, which is B-to-C, provides an analog here by allowing customers to "look inside" a book and examine some of its content and index.
- Systems that automate the actual distribution function so that the buyer can trigger shipments automatically to designated locations based on automatic inventory levels; and the automated ordering then, in turn, triggers automatic payment orders based on similarly automated price look-ups and discount calculations. And,
- Advanced computerized lead generation by Web searches based on customer profiles sometimes involving Web crawlers—software routines that "crawl" the Web and automatically collect information on site contents. Using one such technique, for example, as reported by Brian Quinton in Direct, a marketer ordered a crawling survey looking for "the presence of Secure Socket Layer (SSL) transaction security." SSL is only present when a site uses credit cards and thus sells to customers. The marketer's crawlers, therefore, were identifying potential business customers—the target of the marketer's search.
More broadly conceived, B-to-B is simply a category identifying both electronic and conventional interactions between commercial/industrial buyers and business sellers. Typical B2B news stories are apt to feature marketing techniques that mix lead generation by electronic means, direct mail, Web site and trade journal advertising, and telephone contact. Other stories deal with the growth of B-to-B as contrasted to that of "dot-coms," the latter viewed as ordinary business-to-consumer commerce. B-to-B is also used to headline or to discuss traditional industrial sales transactions and relationships. Here, for instance, is a quote from a story in Marketing headlined "B2B: Business practice": "Direct mail is at the heart of many B2B campaigns, but it should not work in isolation. With direct mail, if you do the planning, you can get your message across in a more succinct and relevant way than you can with broadcast advertising. Well-targeted direct mail is still the best route to catching these decision-makers when they are at work and very busy. The combination of direct mail with follow-up telemarketing can also drive conversion and make the campaign work harder." The article does mention Internet-based methods but is largely about ordinary industrial sales approaches.
B-TO-B DOMINATES E
The new phrase, evidently, is here to stay. The U.S. Census Bureau has adopted both B-to-B and B-to-C as terms under which it collects data. The Bureau uses the traditional meaning but highlights those portions of business taking place by electronic and other forms of commerce.
As reported by the Census Bureau for 2003, the total value of shipments, sales, or revenues for B-to-B and B-to-C were almost equal, $8,296 billion for the first, $8,352 for the second. But the electroniccomponent of this number greatly favored B-to-B. In 2003, business-to-business electronic commerce was $1,573 billion (19 percent of total B-to-B) and electronic business-to-consumer sales were $106 billion (1.3 percent of B-to-C). The dominance of B-to-B may be put another way: it represented 93.7 percent of all e-commerce transactions.
