Why B2B logistics is more profitable than B2C
Bulk economics.
The logistics industry has always fascinated me.
Why? It’s one of those industries that are so essential yet so operationally complex. From the outside, logistics may seem like a simple operation: moving products from one location to another. But in reality, it’s a complex machine. Whether it’s weighing stuff, pricing, managing vehicles, planning routes, or using space efficiently, it’s trickier than you think.
So while digging into this industry, I found an interesting insight: B2B (business to business) logistics companies are more profitable than B2C (business to consumer ones.
Example: Maersk, a B2B logistics company, reported a net margin of 11% in 2024. FedEx, a B2C-focused logistics company, reported a net margin of 4.94% for the same year.
I’m sure if you’re not into international shipping, you may not have heard of Maersk. It’s a company with 100,000 employees, though.
Now, the question is: why is the profit margin higher with B2B logistics?
That’s primarily because B2B logistics companies deal with bulk consignments. So, bulk economics comes into play.
Imagine a B2B truck with 500 boxes of 1 SKU. Since there’s 1 SKU, the sizes of these boxes are standard. So, the space utilization is better. That results in lower shipping costs for the B2B company.
Now imagine a B2C truck with 500 boxes of 50 SKUs. Of course, all boxes will be of different sizes. So, the space utilization is going to suffer. That results in higher shipping costs.
Also, B2B consignments face few touchpoints. One can deliver a full B2B truck directly to the client’s warehouse. On the other side, a B2C truck has consignments that need to be delivered to 50 last-mile clients. Yes, the fulfillment costs go up.
Makes sense?
If those aren’t enough reasons, there’re more.
To deliver B2C parcels, there’re many steps involved like scanning, sorting, etc. Imagine doing this for each parcel.
Also, in B2C the parcel return and retry rates are high. That means if the recipient isn’t available, you may need to retry delivering the parcel again at an additional cost. Returns? More cost burden. You need to send the parcel back to its origin.
In B2B, orders rarely get returned. Also note that with B2B, there’s no pressure to deliver orders same-day or next-day.
Last, in B2B the contracts are long term. That helps to optimize costs much better.