The U.S. Census Bureau News reported that the retail ecommerce sales for the first quarter of 2022 crossed $250 billion, an increase of 2.4% from the fourth quarter of 2021. It represented 14.3% of the total retail sales. The B2B2C model is the latest addition to the ecommerce scene. Let’s learn some more about the B2B2C model.
You have seen businesses that operate on the business-to-business (B2B) model. You have also seen companies that work on the business-to-customer (BTC or B2C) model. Both the models have been successful in their own ways. Now, a new model is creating waves in the ecommerce market – business-to-business-to-customer (B2B2C). If the B2B and B2C models were successful, why should you involve another business between you and the customer? Let’s talk some more and find out about the B2B2C model.
What is a B2B2C commerce model?
A B2B2C commerce model is where one business (B1) involves another business (B2) to sell goods or services to its customers (C). If any of the involved companies use the internet to sell goods or services, it is called the B2B2C ecommerces model. In the B2B model, the businesses sell their goods or services to other companies. And in B2C, the organizations sell their wares directly to the end consumers. The B2B2C commerce model is the culmination of both these models.
So, what was the need to involve another business in the channel?
The market was limited when business was done mainly through physical channels. But with the development of ecommerce, suddenly, the markets became wider and the possibilities for business unlimited. However, it was not possible to have it all without a little bit of assistance. If one company had the product and the other company had the means to reach the consumers, they could join hands to increase the business multifold.
The following figure shows the concept of the B2B2C commerce model:
The first company provides the goods under its brand name, whereas the other company provides additional services, including lead generation, transport, credit, maintenance, and digital payment services.
In Figure 1, you can observe the following steps happening:
- The manufacturer provides goods to the network seller to sell.
- The network seller provides customer information and sales platform to the manufacturer in return for annual fees.
- The network seller uses the services of a payment gateway to receive payment securely.
- The customer buys the goods from the network seller, fully aware that the seller is not the manufacturer.
- The customer makes payment and receives goods from the network seller.
- The network seller makes the payment to the manufacturer.
This is a classic example of the B2B2C ecommerce model. You might have gone through a similar process when buying goods from sellers, including Amazon, Flipkart, or eBay.
How are B2B2C and white-labelling different?
One shouldn’t confuse B2B2C with white labelling. White-labeling is a process where the company manufactures the goods without its brand name and sells them to other businesses. These companies sell the goods under their own brand names. So, basically, the consumers are unaware of the origin of the goods. On the other hand, in B2B2C, the customers know the goods’ origins well.
For instance, some drug manufacturers provide generic medicines to other organizations. These organizations pack the drugs under their own brand name and sell them to consumers. Consumers are unaware that the drugs of two or more brand names come from the same manufacturer. They purchase goods trusting the brand name. This is called white-labelling. And in turn, the brand holder ensures the quality of the goods. On the contrary, if you are buying Nike sneakers from Amazon, you know that Nike is the manufacturer, not Amazon. This process is called B2B2C ecommerce.
Examples of real-life B2B2C commerce models
If you think that B2B2C is a concept in its initial stage, you might want to rethink it. Many organizations use B2B2C ecommerce in today’s market. Here are some of the examples:
Intel manufactures computer processors. Intel has teamed up with original equipment manufacturers (OEMs), including Dell, HP, and Lenovo, for marketing/branding purposes. The synergy brings trustworthiness among the customers and thus increases sales.
Amazon is an online platform for trading any type of goods. The sellers can retain their brand name while using the network base, logistic facilities, and payment gateways provided by Amazon. This increases their turnover. In return, Amazon gets fees for the facilities they provide.
Apple has devised a plan to help its customers download reliable applications and games from an Apple-approved space. It is called the App Store. It ultimately allows Apple to earn more revenue.
The US giant Affirm is a financial organization that facilitates the customers in buying goods at present and paying later. Affirm collaborates with men’s and women’s fashion, sports and fitness goods, jewellery, electronics, and furniture brands to assist consumers in buying.
UberEats partners with the local restaurants to deliver food to the customers. The customers can enjoy the food served by any restaurant from their homes. The restaurants make more sales than they can do remotely. Uber Eats gets a commission from every delivery they make.
What are the advantages of the B2B2C commerce model?
Many companies are morphing their businesses with others to reap the benefits of the B2B2C commerce model. Every organization has something to offer to the other and two organizations would merge depending on their strengths and weaknesses. Although the advantages of the B2B2C model vary in every synergy, here are some of the common ones:
The primary goal of any business is to maximize profits, and scalability is a way in which they can achieve their goal. Scalability represents the ability of an organization to increase the output by adding resources. Instead of trying to do everything on their own, companies can adopt the B2B2C model to achieve scalability. They can partner with an existing company already providing the given services to increase growth.
Digitalization is the way to scale your business. You can widen your customer base by taking your business online. However, going online needs additional setup and management capabilities that are not available to everyone. Partnering with other companies specializing in these fields is a way to go forward. For example, instead of selling on your website, you can start selling on ecommerce platforms like Amazon or eBay to test whether you receive a good response. They can give you access to a client base you didn’t have before.
In the B2B2C commerce model, you can sell your goods with your brand name. As your customer base grows, your brand image grows too. More and more people will recognize your products, and their reviews can bring in more customers. You can take on any competition when your brand value increases.
Scaling begs for massive investment. Instead of starting an in-house unit, if you collaborate with another team to provide the facilities you require, you can save on setup and maintenance costs. Moreover, the cost of consumer data collection can be shared by all the relevant parties. Start-up costs, marketing costs, distribution costs, and customer acquisition costs can be controlled drastically by employing the B2B2C model.
When the manufacturers team up with the maintenance companies, the customers can get faster services. This will encourage the customers to buy from a company that provides faster after-sale services. The same principle applies to the companies that can deliver the products faster.
The customers benefit significantly from the B2B2C models financially and otherwise. The companies can transfer some of the cost-saving to the customers as discounts. The customers also get the facility of dealing with just one company for their multiple needs. So, it becomes more accessible and more straightforward for them. For example, if a customer buys a television from a store and gets the facility of paying in installments from the same store, they would prefer it. Some banks and financial companies provide such facilities to customers in association with the stores or manufacturing companies.
What are the challenges to set up a B2B2C commerce model?
If you are a B2B business or a B2C business transitioning to the B2B2C model might take some time and effort. However, once you are done, the benefits are numerous. Marc Benioff, the chairman, and CEO of Salesforce.com Inc. said, “We really see every B2B company and every B2C company becoming a B2B2C company.” Some of the challenges faced by the businesses in setting up B2B2C commerce or B2B2C ecommerce model are as follows:
Identification of area for B2B2C partnership
As a business owner, you should know whether you can benefit from the B2B2C model. Some products are not suited for such models. Secondly, you should determine whether you can cope with increased demand. If you cannot produce more to keep up with the increased demand, you might face embarrassment in your business circle.
There are mainly two types of business integrations – horizontal and vertical integrations. Horizontal integrations mean increasing the capacity of the pre-existing unit and producing more of what you are already manufacturing. On the other hand, vertical integrations involve taking up one or more stages of the supply chain in addition to the existing one.
One of the significant decisions you should be making is the area where the other business can help you. You should identify the area in which your organization needs support. For instance, if you can sell your product with an extra warranty, or you can sell more if you have a logistic partner, or if you need access to customer databases to identify your customers. By identifying a particular niche, you can narrow down on potential organizations that can help you achieve your goals.
Management of inventory
When you sell on multiple channels, it becomes cumbersome to manage inventory in real-time. Imagine a scenario where you have a brick-and-mortar store and sell your goods on multiple ecommerce platforms. If you run out of stock while simultaneously operating on all, and the stock on ecommerce platforms is not updated, you might find yourself in some soup. You might actually sell more goods than you have on hand. Therefore, inventory management is one of the crucial challenge areas of the B2B2C ecommerce model.
The solution – adopt a reliable inventory management software that will help you maintain real-time inventory of all your products. An inventory management software can help you keep real-time stock of all your goods in your locations.
Sharing the advantages always comes with sharing the limitations. When you adopt the brand name, it might also lead to the issues it faces. And, you don’t want yourself marked ‘guilty by association.’ It is advisable to check every aspect of the company before entering into a contract for B2B2C. If the company’s goals are not in sync with yours, you might want to reconsider the association as your brand image is online.
When two businesses merge, they both must have IT systems compatible with each other to transition without any hindrance. If not, you should hire an IT expert who can assist you in morphing the two systems seamlessly.
Both the companies should agree on and lay out clear boundaries of contributions towards the achievement of the common goal. The agreements should be reached with mutual consent and followed by all the parties involved.
In the case of B2B2C commerce, the businesses involved getting access to private information about the other business. There should be clearly defined legal agreements to protect the stakeholders’ privacy and sensitive information. Legal teams representing both parties can work out solutions that are to be adopted for more robust security.
Final thoughts on B2B2C commerce model
B2B2C commerce models are the way forward in today’s economy. If the businesses want to tackle competition by expanding their prowess, B2B2C models are the perfect solutions. These models provide customer satisfaction akin to B2C models and growth like B2B models. B2B2C ecommerce models can help you elevate your profitability and margins by combining the best of both worlds.
Automating the B2B2C ecommerce model on Cin7 can help you maneuver the process in a simple way. You can click here to know more about the Cin7 software.