Expanding overseas markets: B2B or B2C?

Differences in comparative advantages such as resources and capabilities of different countries and regions constitute the basis for the continued prosperity of international trade. With the improvement of international trade infrastructure such as logistics, finance, and the Internet and the emergence of new technologies, the form of international trade is also evolving. One of the significant changes is that the channels of products from factories to consumers are becoming more and more diversified, and the business model of cross-border B2C is gradually being valued by enterprises, forming an effective complementary collaboration with the B2B business module.

Interactive topic: What is the most difficult thing about cross-border B2C?

B2B, B2C, the essence behind the concept

As the concept of the division of international trade, "B2B" and "B2C" only provide a rough description. Specifically, there is often a "B2B2C" business model between the two, that is, intermediaries and distributors are still needed; secondly, whether it is B2B or B2C, in the Internet age, both marketing and sales are "online". The distinction between ” and “offline”, for B2B, is whether the order receiving channel is through the Internet or offline exhibitions, and for B2C, that is, whether the sales channel is through online retail channels such as Amazon or offline retailers such as Wal-Mart; , In terms of channel function positioning, B2B is often positioned in large-volume OEM and ODM production, while B2C is more focused on small-order, branded product production and sales; moreover, B2B and B2C are different due to the size of business units. There are also completely different forms in supply chain, logistics, finance, etc.; finally, due to the different attributes such as volume and weight of products in different industries, some products may be more suitable for B2B, while others are suitable for B2C.

B2B is undoubtedly still the most mainstream mode in international trade, and it contributes most of the international trade volume. China's foreign trade export enterprises basically take foreign trade B2B as their main business. As a cross-border B2C business that has emerged in recent years, according to the statistics of the Ministry of Commerce of China, the total cross-border B2C retail sales of Chinese enterprises in 2012 was only about 20 billion US dollars, which is still a huge gap compared with the trillion-level Chinese export volume. The reason is that it cannot compete with large-value B2B trade in logistics, customs, taxation, exchange and other aspects. At the same time, the small volume and high frequency of B2C orders also hinder many enterprises that are good at large-scale production but lack retail experience. participate.

But it is undeniable that with the continuous development of logistics and the Internet, some factors that hindered the development of cross-border B2C are being reduced. At the same time, Chinese companies that have gradually established competitive advantages in manufacturing, R&D, etc. are no longer satisfied with simply doing OEMs, but directly facing end consumers and building their own brands have become the strategic demands of these companies. In this case, it becomes a feasible choice for enterprises to form a pattern of "walking on two legs" between B2B and B2C.

For most Chinese export-oriented manufacturing enterprises, OEM is what they are good at, but how to turn to OEM and own brands in parallel, how to change from facing big customers to facing one by one For consumers, how to balance the relationship between B2B and B2C business, and how to transform their own capability structure to adapt to the new model is not a simple matter.

"Walking on two legs", the concept must be changed first

"B2B business is mainly based on large orders, and manufacturers often need to rely on buyers' consumer demand information in the local market Design, packaging and production. The B2C channel directly faces the end consumer market, of course, it also faces more responsibilities and risks. The most important difference is that B2C needs to face consumers for marketing and promotion, these Often they are not within the core competitiveness of traditional manufacturing companies." commented Global Sources CIO Peter Zapf, who has extensive experience in overseas B2B and B2C fields. Therefore, traditional enterprises consider both B2B and B2C, and what is needed is the reengineering of enterprise competitiveness, which undoubtedly requires reconsideration from strategic concepts to practical operations.

The first is the need to change the corporate strategic concept. "It's like two personalities, one is static and the other is moving. The leaders of B2B companies are like combat staff, commanding on the chessboard, strategizing, and patiently cultivating customers through emails, exhibitions, etc.; B2C leaders need to be like field army brigade commanders , lead the team to charge, and always make adjustments according to the latest market trends." Feng Zhaohui, chairman of Dongguan Hewang Electric Co., Ltd., said when he talked about the difference between his B2B and B2C business.

His company started as a B2B business of hardware accessories supply for Fortune 500 companies. After nearly ten years of development, it has become the world's leading hardware accessories supplier. In 2013, Feng Chaohui chose electronic products, the advantageous industry of the Pearl River Delta, and began to get involved in cross-border B2C business. In his view, B2B and B2C are two completely different modes of overseas market development, and a high degree of flexibility is required for enterprises between static and dynamic.

The talent pool is of fundamental importance

In addition to the change of strategic concept, the adjustment of the talent pool structure is also of fundamental importance. Although they are all foreign trade, B2B focuses on having production and engineering R&D personnel at the front end that can meet the requirements of large buyers, and marketing personnel at the back end who can effectively achieve long-term communication and relationship maintenance; B2C needs more at the front end. The R&D engineers and designers who have insight into the trends of the consumer market have personnel in the back end who are familiar with the marketing laws of B2C platforms and have a strong sense of service.

At this stage, many traditional manufacturing and export enterprises "touch the Internet" often operate by building their own B2C divisions. But according to the observation of Huang Huigu, chairman of Guangzhou Jinshengsi Leather Products Co., Ltd., this model is often unsuccessful. "The cost of recruiting outstanding talents in the B2C industry is too high, and it is impossible to recruit the right people at low cost." He believes.

His company focuses on the production of leather bags, also started from the B2B OEM business, and entered the B2C business after 2008. The "Kingsons" brand has been successful in the consumer market in dozens of countries and regions around the world. According to his experience, the best talent model for B2B companies to carry out B2C business is to form project companies with relevant talents, and through equity sharing, they will not only have the motivation to operate their own B2C business, but also reduce costs. And the company itself still focuses on the research and development, design and production that it is good at.

This idea is similar to Feng Zhaohui's business model. Although Hewang Electric has always been focusing on hardware accessories, Feng Zhaohui has consciously reduced the scale of its own manufacturing since 2008, and instead vigorously built the competitiveness of its own procurement engineering and marketing team, and transformed into a manufacturing service. type company. Therefore, his company can quickly develop a product line suitable for the B2C market after switching to B2B and B2C in parallel, and adapt to the B2C business with higher requirements for pre-sales and after-sales service, so as to achieve a balanced development of B2B and B2C "two legs". In terms of B2C business, Hewang Electric has positioned itself as the "overseas B2C business department" of other manufacturing companies. Through its e-commerce team, it redesigns, packs and sells the products of these companies to overseas consumers to achieve a win-win situation.

The front end of the supply chain needs to be more "flexible"

The characteristics of B2B large batches and B2C small batches and high frequency determine that the R&D and manufacturing parts of the front end of the supply chain also need to have different strategies. "B2B production tends to be 'inventory-defined,' while B2C production is 'sales-defined,'" noted Peter Zapf. This means that B2B production focuses more on reducing production costs through economies of scale, while B2C production takes terminal sales and profits as more important considerations.

On the other hand, B2B production is often dominated by the buyer's design, while B2C requires the manufacturer to determine whether the function and design meet the needs of the end consumer market. In order to adapt to this change, Huang Huigu put a considerable amount of R&D energy into B2C, and isolated the product styles between B2B and B2C to prevent conflicts between the two in the end market.

Feng Zhaohui took advantage of his strong purchasing engineering team to purchase finished products from high-quality manufacturers, and guided them to optimize functions and quality according to the needs of terminal consumption. At the same time, his team also R&D and design of LED lights and other products with invention patents to the market, and strive to achieve a virtuous circle of product R&D and B2C business.

The back-end of the supply chain needs to be more "closer to the market"

The most significant difference between B2B and B2C is undoubtedly the difference between the back-end customers being "B" or "C". For B-end customers, enterprises need to have the patience to fight for a long time. First of all, in order to obtain orders from customers, it is necessary to obtain customer information through a series of channels such as B2B network platforms such as Global Sources, exhibitions at home and abroad, establish contact with customers, and then through frequent communication and contact in the later period, and finally reach an order agreement.

This feature has given birth to the strategy of some companies to set up overseas offices to shorten the distance with buyers.

Feng Zhaohui started the layout of overseas offices earlier. Overseas offices allow companies to respond to buyers’ needs faster and solve buyers’ problems face-to-face. In this way, Feng Zhaohui's hardware accessories products have successfully won the trust of ABB and other Fortune 500 companies, the return rate has been greatly reduced, and customer satisfaction has been greatly improved. This B2B model also helped Feng Zhaohui develop cross-border B2C business. One of the biggest obstacles to cross-border B2C is the poor timeliness and reliability of cross-border logistics, which in turn leads to poor consumer experience, and ultimately leads to the inability of B2C business to grow bigger and stronger. The advantages of overseas offices have allowed Feng Zhaohui's B2C business to quickly jump out of this rut. Through overseas employees, it can build warehouses overseas and deliver goods locally. "The key factors of B2C are the timeliness of responding to orders, and the second is a strong awareness of serving consumers, both of which require overseas warehousing as support." Feng Zhaohui pointed out.

Branding, B2B or B2C

For some, the difference between B2B and B2C is the difference between foundry and branding. But in fact, for traditional export manufacturing enterprises that are interested in building a brand, building a brand cannot be accomplished overnight simply through the B2C model. Often, building a brand by itself means forming a certain degree of competition with the original OEM customers. Therefore, enterprises should choose the brand promotion model carefully and avoid the conflict between B2B and B2C channels.

Huang Huigu's brand strategy follows this. Although he has registered the "Kingsons" brand in major countries around the world, he does not operate it himself. The exhibition for B2B OEM has gradually transformed into a channel for global brand investment, forming a "B2B2C" pattern. At the same time, in exhibitions such as the Canton Fair, it continues to promote the development of OEM and ODM business. And online, he also copied the transformation strategy of offline exhibitions, looking for online agents | agents in different countries, and realizing the landing of B2C brands through these big online sellers.

Feng Zhaohui also has his own brand ambitions. In order not to conflict with the original B2B business, he chose consumer electronics and other finished products to carry out the B2C business, turning himself into a brand owner, and using the "HLC" brand applied by the company globally as the main brand of the B2C product line. On the other hand, he also avoids the B2B business in the research and development of his own B2C products, and develops products with the "HLC" brand in new fields such as LED lights.

The development of cross-border B2C has undoubtedly provided new possibilities for Chinese manufacturing export enterprises to expand new business. However, due to its long overall chain and small size, there are still many problems that hinder the cultivation of this market. According to the analysis of the global e-commerce development report by the Swedish National Board of Trade, cross-border B2C is still imperfect in customs clearance, local consumer protection laws, taxation, patent protection, etc., and there are huge differences between different countries. This undoubtedly increases the cost of cross-border B2C business.

With Chinese made and Chinese brands more and more recognized by global consumers, Chinese products will undoubtedly continue to be marketed globally. As the mainstream of global trade, B2B will still be the most important mode for Chinese companies to explore overseas markets in the foreseeable future; and B2C, as an effective means to shorten the distance with consumers, will build brands for Chinese companies and achieve overtaking in corners. will have a very important position. B2B and B2C are two different and related business models, and their complementarity is far greater than their competition. Therefore, if used properly, both can become powerful tools for developing overseas markets.