Find Out Your Own Essence Through Knowing B2B E-commerce

Find Out Your Own Essence Through Knowing B2B E-commerce

You may think that what you're doing is irrelevant to B2B, but thinking that way could put you at a disadvantage to your competitors.

Have a quick look of these essential information of roles in B2B E-commerce and their profit formula:

RolesHow It WorksProfitability (formula)
Manufacturer/SupplierProduce goods or provide raw materials to other businesses. They make a profit by selling products at a price higher than the cost of production. They focus on the scale.Profit = Revenue - Operating Cost - Selling Expenses - Labor Cost

Tips: Operating Cost = Equipment Overhead + Equipment Cost + other utilities.
Distributor/ WholesalerPurchase goods from manufacturers in bulk quantities and sell them to retailers or other businesses. They make a profit by marking up the price. They focus on operating.Profit = Retail Price - Cost Price - Operating Cost- Customer Acquisition Cost
Service ProviderOffer consulting, IT support, marketing, and logistics services to businesses through ecommerce platforms. They focus on user experience(UE).Profit = Number of Customers * (Subscription Price - Variable Cost)- Fixed Cost
Profit = Sales Revenue - Labor Cost - Technical Cost

Tips: variable cost: cloud platform, cloud facility operation and maintenance cost, etc.
Fixed cost: customer acquisition cost, customer retention cost, etc.
AVG gross margin = 70%~85%
Marketplace OperatorHost ecommerce platforms where buyers and sellers can connect and transact with each other. They make a profit by charging fees on transactions, or subscription fees and advertising revenue.AVG Gross Margin = 20%
logistics ProviderSame as it in B2C, but the point is it's point-to-point, reduces the cost of each one single transaction on the logistics side.Profit = Total Shipping Revenue - Labor Cost - Equipment Cost

Tips: Equipment Cost includes all expenses on land vehicle, aircraft carrier, sea vehicle.
Warehouse serviceSame as it in B2C, charging a fee for storage, picking, packing, but the number of products in one single transaction can be huge.Profit = Total Storage Fee + Total Packing Fee - Labor Cost - Space Expenses - Material Cost
Payment Providercharging transaction fees, processing fees or monthly fees. Transaction frequency is low but the amount is large.Roughly Profit= ∑(1, n) Transaction Amount * Transaction Rate - Labor Cost - Technical Cost

Tips: AVG transaction rate is 1.25%.

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It can be seen that we discussed this B2B profit calculation formula with dropshippers as the main body. Cause there’s a new model "B2B2C" even haven’t been identified by various platforms.

In next articles I will give out essential information of "B2B2C" like before, make sure you have subscribed.

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