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B2B distribution is the heart of how products move from manufacturing to the hands of businesses worldwide. However, crafting a B2B distribution strategy isn't a simple matter. There are challenges, such as ensuring timely deliveries and adapting to the ever-shifting demands of the market. With that said, understanding the basics can make the complex world of B2B distribution much simpler.
Per the American Production and Inventory Control Society, B2B distribution is a vital process that ensures products are delivered efficiently to companies across multiple business sectors. B2B distribution companies contribute to the flow of commerce and the market’s ability to promptly meet demands.
Ready to learn more about this important link in the retail supply chain? If so, read on as we examine the facets of B2B distribution.
Note: much of the information contained in this article comes from my own five years of experience in B2B auto parts distribution, both as a driver and a commercial manager.
Simply put, it's the process through which products and services are distributed from manufacturers or providers to businesses. These businesses can include retailers, wholesalers, or even other manufacturers. Products can include anything from raw materials to finished goods.
Imagine a world where every business had to directly deal with each manufacturer to get their goods. Realistically, this solution isn’t feasible with diverse inventories. B2B distribution is specially designed to handle these transactions.
To provide further clarity about this process, we’ll define some important terms related to it.
There are many words and phrases that apply to B2B distribution. Understanding them will provide greater insight into the process.
Some of the most important terms to understand are:
With these terms defined, let’s clear up some points of confusion that often pop up in conversations about B2B sales.
The short answer is that B2B distribution goes from one business to another, while B2C (business to consumer) distribution goes to the end user. The terms ‘consumer’ and “end user’ are deliberate here, so some explanation is needed.
Not every customer is a consumer: after all, if you ran a business and bought in bulk from a wholesaler, you’d be the wholesaler’s customer. However, if you resold those items at a profit, you wouldn’t be the consumer/end user.
Basically, end users/consumers are always customers, but not vice versa.
While these terms are sometimes used interchangeably, B2B and wholesale aren’t exactly the same thing. B2B distributors can often deliver small orders that don’t qualify for wholesale pricing. To illustrate the key differences, consider these scenarios.
B2B Distribution Center: A professional mechanic diagnoses a customer’s vehicle and finds out it needs new brake rotors. They order the brakes from a local auto parts store, who sends them to the mechanic within an hour via a pickup truck or small van.
The key here is that one business (the mechanic) purchased a small amount of items from another business (the parts store). This would not be considered wholesale, as it was not a bulk order. The rotors were moved almost immediately to the end user, the vehicle’s owner.
Wholesale Distributors: The same auto parts store purchases 100 brake rotors to replenish its stock. It buys the rotors from an auto parts B2B wholesale business, which allows the store to enjoy a significant bulk discount. The retailer marks the price of the rotors up to make a profit when they’re sold.
In this circumstance, one business buys a large amount of goods at a discount for resale. Eventually, the rotor inventory will be depleted, and the purchase cycle begins again.
Technically, these are both examples of B2B distribution because one business sold something to another business, and distribution channels were needed to complete the transaction. However, only the second transaction counts as wholesale.
There are three main differences between these sales that we can observe.
Think of it this way: while almost all wholesale transactions are B2B, not all B2B transactions are wholesale. They both play an important role in the chain of commerce, but they are distinct.
B2B buyers and distributors all become active participants within the supply channel. This has several advantages, such as:
In the next sections, we’ll go into greater detail about these advantages and provide a simple example of the steps in this channel.
There are many opportunities in B2B distribution for businesses to optimize shipping, storage, and other aspects of logistics.
Here’s how B2B distribution channels benefit businesses of all shapes and sizes.
These are just some of the advantages a B2B business channel provides. It creates a closed loop of logistics, from manufacturing to the final sale.
Let's put these channels into a real-world context with a straightforward example. We'll start with a company that specializes in producing high-quality, durable office furniture.
Here's how their products might make the journey from factory floor to a retailer.
Each of the purchases in the steps listed above qualify as B2B: manufacturer to wholesaler, wholesaler to retailer. End users buying from the retailer are examples of B2C distribution.
Within this chain, we’ll see difference price points for each sale. The greater the quantity purchased, the lower the margins and per-unit prices of the goods.
Let’s go back to our office chair example. Assume the chairs cost $30.00 a piece to make. The following table provides examples of how prices and margins go up as they get closer to the consumer.
| Source | Quantity Sold | Margin | Price Per Unit |
| Manufacturer | 100 to a wholesaler | 20 percent | $37.50 |
| Wholesaler | 20 to a retailer | 25 percent | $50.00 |
| Retailer | One to an end user | 45 percent | $90.91 |
Note that each margin is calculated based on the price paid by the purchaser, not the original manufacturing cost.
Each of those steps need a shipping strategy. Without one, the process can never get off the ground. The nuances of this B2B distribution strategy will vary based on business needs, but there are some general steps that can be followed as a framework. Let’s take a look at them.
For business owners who want to sell products to other businesses, crafting a distribution strategy is crucial to a successful venture.
The following guidelines are a good template for building this strategy.
If shipping products from one business to another seems more complicated than you expected, you’re not wrong. Building a scalable distribution model requires extensive resources and knowledge of logistics. If only there was a company focused on assisting businesses with product distribution.
Hang on a minute…
Building a B2B distribution network is no small task. One weak link in the chain can have disastrous results, especially for small, growing businesses. That’s why we’re here to help.
Product Distribution Strategy has the two most important ingredients for successful B2B shipping: infrastructure and experience. With a fleet of trucks plus warehouses and cross-docking facilities located across the USA, we can meet your B2B needs.
Our services include:
B2B distribution is crucial for retailers, wholesalers, and manufacturers alike. Let our expert team help. Call us at (855) 863-7672 or contact us online today. We can handle all your logistics needs like nobody’s business.
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