What it is: Business-to-consumer (B2C) refers to a business model in which a company sells directly to individual consumers or end-consumers. This term is usually associated with selling via online or eCommerce channels. When a buyer is a company, we refer to it as business-to-business (B2B).
AliBaba.com is a well – known example of a business-to-consumer. Amazon, E-Bay and the kind, are also examples of B2C business models we find in internet.
Why is business to consumer important
B2C started to develop since the late 1990’s. For the US market, one of the pioneers was Amazon, which was founded by Jeff Bezos in 1994. Four years later, Amazon posted sales of more than $ 1 billion for the first time. And, in 2019, the company posted revenues of USD280.522 billion. The company’s success led to its owner becoming the world’s richest person in 2019, according to Forbes.
The existence of this business model has destroyed much of conventional retail. It has changed the way we interact with sellers. Conventional retailers are losing sales as many consumers switch to online channels.
To deal with this, some retailers then entered the online business in order to remain competitive and survive in the industry. Some combine online shops with traditional shops. This shift has created more benefits for consumers, who can now enjoy the convenience of online ordering while saving costs.
Indeed, in essence, eCommerce is simply moving market locations to online sites. All transactions are done online, from advertising, ordering, payment, to delivery (for digital products).
However, eCommerce offers more quality and price options, and offers greater flexibility. You only need to use a smartphone to shop. And for companies, it allows them to develop various business models to generate income.
The future of B2C still looks bright. This type of sale is still in its infancy and will continue to grow. According to Grand View Research, the size of the global B2C e-commerce market is estimated to grow with a compound annual growth rate (CAGR) of 7.9% during 2020-2017. Meanwhile, in 2019, the market size has reached USD3.35 trillion. Increasing internet users, disposable income and the convenience offered are the driving factors for future growth.
Business to consumer benefits
B2C offers a number of advantages. First advantage, companies can reach a wider range of consumers, not only domestically but also abroad.
Second advantage, the company benefits from a richer database of customer profiles and transactions. Such information makes it easier for them to adjust their marketing strategy or product strategy.
Third advantage, B2C also saves costs. Companies don’t need to build or rent retail space to sell their products. In addition, online channels have the potential to bypass distribution and retail chains. In conventional channels, the product may go through multiple channels to reach the end consumer. Through online, they can serve customers directly.
Fourth advantage, for consumers, online transactions save costs. You don’t have to come to the shop. You can shop and transact anywhere, at home or on the go, and anytime. After the transaction is complete, all you have to do is wait for the goods to arrive at your doorstep.
Five types of Business To Consumer business models
There are different types of business-to-consumers sales models and here are five of the most popular ones:
- Direct sales (direct selling)
- Model perantara online (online intermediaries)
- Model-based advertising (advertising-based model)
- Based community (community-based model)
- Subscription model (fee-based model)
1. Direct sales (direct selling)
Retailers sell their products directly to consumers through their own websites. Retailers can come from small to large businesses and offer a wide variety of products. Some traditional retail stores have also adopted this business model.
Building this business model is also relatively easy. Simply by creating a website and a payment system, you can build your online store. Alternatively, you can take advantage of social media such as Instagram and Facebook to sell your products.
2. Online intermediaries
In this model, the site owner does not sell the product directly. They only facilitate transactions between buyers and sellers. In other words, the site owner is an online market maker.
Owner’s income can come from various sources, depending on the feasibility of the site. Some may charge producers and consumers commissions, while others rely on revenue from advertising.
3. Advertising-based model
The site only takes advantage of high traffic volume to sell ads. The owner uses high quality free content to attract site visitors. This business model differs from online intermediaries in that it does not facilitate interaction between buyers and sellers.
The site owner displays advertisements from several product sellers. When a visitor clicks, the visitor will be redirected to the seller’s site. If a visitor buys a product, the seller then shares a certain percentage of the sale with the site owner. Thus, the higher the site traffic, the greater the chance for visitors to click on ads and make transactions, and the higher the site owner’s income.
4. Community-based model
This model uses online communities with specific interests to help advertisers market their products directly to site users. This could be an online forum for photography enthusiasts, gadgets, etc.
Site owner revenue works in the same way as an ad-based model. It’s just that, both of them have a different focus.
5. Subscription model ( fee-based model)
This site charges a subscription fee for access to content. Site owners usually offer some free and paid content. Online media sites usually adopt this business model.
There are several variations of this model. On some sites such as the Harvard Business Review, you can access free articles per day. After reaching the maximum quota limit, the owner will direct you to subscribe.
Meanwhile, other sites, owners have divided some articles as free and others as premium. How many free articles, it depends on the strategy of each site. The Wall Street Journal, for example, charges a fee for most of its content.