What is meant by B2B?
The term B2B is used for Business-to-Business transactions. A company in the B2B business is a company that is selling finished or unfinished goods or services to other companies that sell them or use them as input for producing other products or to operate their business. B2B companies normally don’t sell to individual consumers.
In B2B transactions, goods are usually being bought in bulk and much larger quantities than in B2C. For this reason, it is also referred to as B2B-wholesale. Businesses buy in bulk because these products and services help them to produce more, grow, become more profitable or simply be able to operate. The pricing in B2B-wholesale also differs from the B2C market. Normally it works like this: the larger the quantities, the lower the individual price for each product. In B2B business there are usually minimum quantities, that companies have to order, while in B2C business there are usually limits on the maximum quantity.
The value chain of products
Products that end consumers buy from a retailer normally run through a number of B2B transactions before they end up with the retailer and being sold individually in B2C business. From being produced or grown to being designed, manufactured, edited or customized, to being sold via wholesaler to retailers, goods are running through a value chain that mostly consists of B2B businesses. This is an indicator of why the global B2B market is almost six times larger than the global B2C market.
The South African B2B market
African companies spent €2.13 Trillion on the B2B market in 2015 – 40% of which was in South Africa and Nigeria alone. According to McKinsey, half of this amount was spent on inputs, 16% on capital goods and the rest on a wide range of services, including business and financial services, transport, and information technology and telecommunications services. The African B2B market is forecasted to grow by €1 Trillion to reach ca. €3.13 Trillion in 2025. Spending is predicted to grow by ca. 3,5% annually.
The South African B2B market is the largest in Africa with a total size of ca. €500 Billion in 2015.
The B2B market in South Africa is changing. Many South African B2B companies have found ways to positively influence sales during more challenging times like during the Covid-19 pandemic. These strategies include:
- Embedding value into offerings and client messaging.
- Winning edge – being a little bit better than the competition in critical areas can translate to major advantages.
- Planning strategically – differentiating from competition through addressing weaknesses and leveraging strengths.
- Strategic market decisions – protecting business by focussing on keeping current market share and market share gains while also trying to expand and enter new markets.
- E-Commerce – improving E-Commerce functionality and boosting online sales.
- Obtaining referrals as trust signs to keep existing clients and convert potential clients to actual clients.
How to benefit from the B2B market
In the current B2B market climate it is important for companies to plan strategically, in which areas they need to invest more and focus on. One of the clear growth markets in South Africa as well as worldwide is the E-Commerce sector. More B2B companies are shifting their focus on online sales. Especially since the pandemic, this is a sector with great potential.
In B2B marketing, it has become more important over the last years, to implement online marketing strategies. This can be done in a lot of different ways and on many different platforms. It is important to plan strategically and know, which way is showing the most promising results.
Many B2B companies believe that E-Commerce marketplaces and communication technologies are now having a greater impact on B2B business than the traditional methods of contacting new potential clients, such as email and face-to-face trade shows. Therefore, they are increasingly relying on digital technologies such as websites, mobile apps and B2B-E-Commerce marketplaces like Enter-Africa.com.
Some of the main reasons for B2B sellers to shift towards digital solutions are access to customers, higher profits, less travel and entering international markets. Among the advantages for B2B buyers in the digital space are finding suppliers faster, reducing the need to travel, greater purchasing power and higher profit margins.
While in B2C markets, customers focus a lot on the pricing of products, B2B buyers are often looking for education, credibility and reliability before committing to invest in a new product or solution for their organisation. In B2B marketing it is not enough to advertise to someone, who is interested in the products or solutions, it should be someone who has a position of influence or is responsible for purchasing and has decision-making power in a company.
This is a good reason for B2B companies to do marketing on LinkedIn. The platform does not only differentiate between interests, education and demographic of the users but also the workplace, industry and Job Title. This way, companies can target specific groups of decision-makers in the relevant industries and do not have to waste money by targeting people that likely don’t have the decision-making power or don’t work in the targeted industries.
LinkedIn is the largest professional social network in the world. In South Africa it currently consists of about 7 Million users and is continuing to grow. Many professionals use it as their online CV, which makes the information on profiles widely accurate. This does not mean that other social media platforms can’t be used for marketing. It could well be beneficial to companies to market on personal, less professional platforms such as Facebook, in order to keep brand awareness high.
Conclusion
In Africa, B2B revenues have been increasing annually and are expected to increase further. Especially South Africa provides good opportunities for B2B companies of any size. It is a larger market than most African B2B markets and at the same time still has great potential for growth.
Additionally, the B2B E-Commerce market is growing rapidly and should be seen by B2B companies as a necessity rather than just being nice to have. Small and medium-sized B2B companies should digitalise to stay competitive and use online marketplaces to grow their business and expand into new markets.
For local and global companies looking to capitalise on B2B opportunities in Africa in the coming years, customised offerings that appeal to different customers on the continent are essential if they want to see profitable growth. For B2B exporters, South Africa is the ideal place to start the expansion into African markets.