Before you purchase a product off a shelf at a Texas store, chances are that there have been several business-to-business transactions. These transactions occur when one business buys products, including raw materials, from another business.
Examples of business-to-business transactions
Imagine that you go to the store to buy a can of soda. That is a business-to-consumer transaction, but before it occurs, the soda manufacturer has purchased aluminum from another business to make the can, sugar and other raw materials to make the soda and space to display their products in the store. They have also bought machinery and other equipment. Those are all business-to-business transactions. Not all business-to-business transactions occur before the sale. For example, the store may hire a maintenance company to keep their store tidy or an accounting firm to do their books. If the store employs employees to do these tasks, it is not a business-to-business relationship.
Types of business-to-business buyers
There are many types of business-to-business buyers. They can be either for-profit or non-profit organizations.
These companies purchase goods and services that they sell to other businesses. For instance, in our soda example, the company making the aluminum can is a producer. Even if the soda company purchased aluminum and made the can, the company providing the aluminum would be a producer.
If the store where you purchased the soda purchased it from the company, it is a reseller. In other words, these companies sell products that they buy through business transactions without making or substantially altering them. A company can be both business-to-business and a business-to-consumer because they fall into the latter category when they sell the product to you.
Wholesalers buy products from other companies and mark them up before selling them to another business is another type of business-to-business model. Other companies often trust these businesses to supply the products they need at the lowest cost.
Many types of business-to-business companies help make up the supply chain. See if you can identify them the next time you buy a product at the store.