A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
B2B2C in a nutshell
In the business world, the difference between B2B vs. B2C businesses often seems clear and straightforward.
However, the final aim is to build a B2C company over time.
This model is called B2B2C or business to business to consumer.
The logic is the following. If a business can’t have direct access to consumers, it will gain it via a second business.
That second business will allow the first business to gain access to its consumers, have its brand recognized, and over time expands the overall consumer base.
Now the question is why an intermediary business would become the link with its consumers for the B2B2C business?
Did you know Google was a B2B2C?
At the time, AOL was a tech giant, while Google was still in its infancy.
While the search engine from Mountain View was snowballing, it still missed the first-scaler advantage that would have given it the dominance of the search industry.
Google was already a consumer product.
However, it needed to pass first through a set of bottlenecks to gain access to consumers.
In addition, the more data Google gained over time, the more it got better.
And the more consumers knew about it; the more Google would be less reliant on distribution channels like AOL.
This is not to say that Google took advantage of AOL.
Quite the opposite, Google offered AOL a minimum guaranteed revenues, and it bought a stake in the company.
Indeed, a B2B2C business model relies on a closely tied relationship which makes the intermediary business (which connects to end consumers) position quite good.
Let’s analyze the basis of this B2B relationship, which will then trigger the B2C opportunities.
For the sake of this discussion we’ll call:
- B1: the business trying to enter the consumer market via another business
- B2: as the intermediary between B1 and consumers
- C: as the consumers in that industry
Why not go directly to consumers?
One of the first questions that come to mind in designing this kind of business model might be why not go directly after the consumers?
In reality, going after the consumers is the dream of many, but a few make it.
The consumer market seems to be biased more than any other toward the winner-take-all effect.
In short, building a successful consumer business is way harder, than building an enterprise business.
And as an entrepreneur, building a consumer business might be appealing.
You need to weigh your options. Thus, understand where the market it’s headed.
Also, in many cases, building a successful consumer business is a matter of timing and proper funding and distribution.
Factors which you can relatively control.
That is why many businesses, that in the early days, looked at consumers, eventually turn into enterprise businesses:
Source: Sapphire Ventures
In a study by Sapphire Ventures on the exits in the consumer vs. enterprise since 1995, the latter seems to have generated $825B compared to $582B in the tech consumer space.
An exit is a strategy where the venture capitalist or investor liquidates its funds in a previously invested startup, and it usually measures the ROI for the investor.
In short, from 1995-2016 there were 4,600 exits in enterprise tech and over 2,600 exits in consumer tech.
A little caveat: the numbers above are in no way to be interpreted as investment advice, instead this is just a strategic analysis of the business landscape.
This means that starting from a B2B, an enterprise business allows at least three advantages:
- Risk reduction (provided that you do not depend on one or two enterprise customers only, and therefore, your enterprise customer base is spread across various clients, none of which, makes up most of your turnover).
- A more predictable growth path.
- Easier financing as more investors can liquidate their position via an exit.
One drawback, of course,e is the lack of scalability, unless you design a B2B2C business model.
- What does a B2B2C relationship look like?
A B2B2C business model relies on a tight relationship between the B1 that wants to access consumers and B2, which instead has already access to the consumer market.
As it might not make sense for B1 to enter the consumer market, it will make sense to find the key players that can help it open it.
A partnership between B1 and B2 has – I argue – three main features:
It is not a white label
If it were a white label, final consumers would not recognize the product and brand over time.
It has direct access to consumers’ data
Many software as a service and digital tools, in general, benefit from network effects.
In short, the more data they have about the people using it, the better those tools will get for each new user.
If the business entering the consumer market via another business didn’t have access to their data, it wouldn’t be possible to benefit from network effects and scale up over time.
As it gains brand recognition
Not only the B2B2C business will have access to consumers’ data, but its brand will be pretty visible to them.
Thinking back to the Google deal with AOL, where it got powered by Google searches, more and more people could recognize Google over time, to the point that it became a verb
What are the premises of a B2B2C relationship?
A B2B2C business starts with a few key partners, which are other businesses that can help it gain access to consumers.
This relationship has to be highly beneficial to the business that has access to the consumer market.
It might look like a joint venture in practice, with a tight-knit that makes the incentives in favor of the business partner to distribute the product of the other business which doesn’t have access to consumers.
Indeed, I argue – this kind of partnership has to have a few key elements:
Willingness to offer a wider portfolio of products or services
Often customers might ask B1 for products or services that are not in its portfolio.
B1 can make its customers happy by having your product or service featured.
Going back to the Google deal with AOL, at the time, search was seen as a secondary service, yet it was nice to have features for consumers.
Google worked 10x better than its competitors, and it made sense to offer searches powered by Google through AOL.
Another key element is the convenience of distributing the product or service of B1.
An economic opportunity
A very important element is economic opportunities created for the business, which help access the consumer market.
Indeed, if the product or service of B1 makes B2 able to expand its offerings to consumers.
That opportunity is too good to be given up, putting B1 in a position to seal that relationship.
Also, if B2 is driven by an economic opportunity, the chances that it will distribute the service provided by B1 will be higher.
Indeed, one of the most significant pitfalls of a B2B2C business might be the lack of push and distribution from its partners.
Not interested in entering directly that industry
Another reason why B2 might want to use B1 service to its consumers it’s because it doesn’t have any interest in entering that industry.
Going back to the AOL deal example, the company didn’t have any interest in entering the search industry.
A very good deal
The last and most important ingredient is about offering a deal that is too good to refuse.
This deal is a marketing expense on the side of B1 to acquire consumers’ market share.
On the other hand, it is for B2 a great opportunity to grow the business with no costs and risks.
B2B2C marketing done right!
On the one hand, you want a structured sales force to perform account management for those businesses acting as intermediaries to the consumer market.
On the other hand, you need to invest resources in branding and marketing efforts.
This will allow your business to be recognized by consumers over time.
This way, consumers will act as a push that will make your entrance into the B2B space easier.
While this process might seem simple in theory, it is quite complex.
But in this article, we analyzed a few key ingredients, which should give you enough information to get started.
The business-to-business-to-consumer (B2B2C) manifests itself in several ways.
However, it most commonly involves a manufacturer or service provider that sells to consumers via a retailer or distributor.
In more succinct terms, B2B2C businesses sell to consumers and other businesses simultaneously.
To better understand this concept, let’s take a look at a few variations of the B2B2C model with some included examples.
Manufacturer to distributor to customer
The most common online form of the B2B2C business model is where a product manufacturer operates an eCommerce store but outsources order fulfillment to a distributor.
When an order is placed in the store, the distributor receives a notification and ships the product to the consumer from inventory stored in its own warehouse.
The distributor may take inventory from the manufacturer on consignment instead of purchasing it from them directly.
Once the product has shipped, the distributor generates an invoice which is sent to the manufacturer who, after receiving payment from the consumer, compensates the distributor with a commission.
Any food business that uses Instacart for grocery deliveries and pick-up orders operates under this variation.
Manufacturer to Amazon to B2B/B2C customer
No article on B2B and B2C would be complete without mentioning Amazon.
In this variation, the manufacturer ships a product to Amazon that then sells and ships it to an end-user.
Note that distributors also sell the same products on the Amazon platform itself.
In either case, however, the product manufacturer loses control over their brand.
To combat this issue, many brands use omnichannel eCommerce which is also SAP-enabled and integrated with Amazon.
This allows the brand to maintain a harmonious relationship with distributors since both companies sell directly to the end-user.
The manufacturer can sell to B2B and B2C customers and when an order is made, the company can choose to ship the product itself or use Amazon’s fulfillment service.
Manufacturer to bricks-and-mortar dealer to B2C customer
In this variation, the manufacturer sells a product to a bricks-and-mortar business that then sells it to the consumer face-to-face.
This is the most simple variation to understand and is common in supermarkets and most other retail businesses.
Some businesses will also create a B2B2C eCommerce platform to enable the bricks-and-mortar dealer to sell products to consumers.
When an individual visits a physical store, the dealer completes the sale in person but on the manufacturer’s website.
This enables the dealer to take a commission from the sale and the manufacturer to collect the buyer’s information.
In the event the dealer files for bankruptcy or otherwise ceases trading, the manufacturer still has access to its customers.
Manufacturer sales representatives to distributor to B2B customer
This variation is another B2B2C eCommerce model where a manufacturer with its own sales team also sells to other businesses via distributors.
Consider the example of a manufacturer that sells magnetic resonance imaging (MRI) machines to healthcare providers.
The company creates an eCommerce store that sales teams and healthcare providers can access on any device and in any location to close deals.
Members of the sales team can place orders on behalf of the customer, or the customer can place the order themselves.
Whatever the scenario, it is important to note that both do so from the same platform that is customized to their needs.
Here, the distributor plays much the same role as the distributor in the first B2B2C business model.
In other words, the distributor sells the MRI machine on consignment and receives a commission from the manufacturer.
It also has access to a specific area of the eCommerce platform where it can access the required information to fulfill the order.
Definition: B2B2C (Business to Business to Consumer) is a business model where a company accesses the consumer market indirectly through another business, while the end consumers recognize the brand/service.
Intermediary Role: B2B2C involves an intermediary business (B2) connecting B1 (company seeking consumer access) to end consumers, expanding the consumer base over time.
Data Access: B1 gains direct access to consumer data through B2, enabling scaling and improvement based on user insights.
Brand Recognition: The B1 brand becomes familiar to consumers over time due to the partnership with B2.
- Risk Reduction: B2B2C models often have more predictable growth and lower risk compared to pure B2C approaches.
- Predictable Growth: The involvement of an intermediary contributes to steady growth.
- Easier Financing: The presence of multiple parties enhances financing opportunities.
Variations of Relationships:
- Manufacturer to Distributor to Customer: Manufacturers sell via eCommerce and outsource fulfillment to distributors.
- Manufacturer to Amazon to B2B/B2C Customer: Manufacturers sell to Amazon, which sells to consumers, also available to distributors.
- Manufacturer to Bricks-and-Mortar Dealer to B2C Customer: Manufacturers supply physical stores that sell to consumers, sometimes via eCommerce.
- Manufacturer Sales Reps to Distributor to B2B Customer: Manufacturers offer products through an eCommerce platform accessed by sales teams and B2B clients.
Examples of B2B2C Models:
- Affirm: Offers pay-later solutions through merchants, earning from fees and consumer loans.
- Instacart: Facilitates grocery delivery with service fees, memberships, and ads.
- OpenTable: Reservations platform with subscription plans and referral fees.
- LinkedIn: Two-sided platform connecting businesses and professionals.
- Udemy: E-learning platform with both B2C and B2B offerings.
B2B2C Business Model Case Studies
- The business-to-business-to-consumer (B2B2C) manifests itself in several ways. However, it most commonly involves a manufacturer or service provider that sells to consumers via a retailer or distributor.
- The most common online form of the B2B2C business model is where a product manufacturer operates an eCommerce store but outsources order fulfillment to a distributor who holds inventory on consignment and collects a commission.
- Another example of the B2B2C model involves a manufacturer, brick-and-mortar dealer, and B2C customer. The most simple form of this variation is a traditional supermarket, but in some cases, the brick-and-mortar dealer will complete the sale in a physical retail store but on the manufacturer’s website.
Related Business Concepts And Case Studies
What is the difference between B2B B2C and B2B2C?
The key stands in the profile of the key customers and how they make the purchasing decision. Opposed to a B2C, in a B2B, the customer is usually an organization. Thus, a group of people makes the purchasing decision. In a B2B2C model, the product is delivered by another company.
What is B2C2B?
In a B2B2B model, a company will target employees within the desired organization, as an alternative to existing products. In some cases, the basic service is offered for free, so that those corporates within the desired business will promote the service within the company. Think of how Slack offers a free basic version that can be upgraded for morse users. In this case, Slack provides a valid alternative to the internal company’s chats.
What is a B2C example?
In a B2C model, a business deals with consumers. Examples of B2C include companies like Apple and Amazon, which usually sell to consumers. The B2C model offers a product or service which is wired toward a broader market compared to B2B, and it has different structures and characteristics.
What is a B2B example?
In a B2C model, a business deals with other companies. Examples of B2B include companies like Salesforce and Dropbox, which usually sell to other businesses. The B2B model offers a product or service which is wired toward a smaller set of customers compared to B2B which has different features.
Is Amazon a B2B or B2C or B2B2C?
Amazon’s business model is a great example of B2B2C. On the one hand, with its e-commerce store, Amazon is one of the most known consumer brands in the world. On the other hand, Amazon is also a B2B platform, as it enables third-party stores to be built on top of Amazon’s infrastructure. Amazon’s B2B hosting platform comprises thousand of third-party e-commerce companies. Other companies like Thras.io have built a small empire on the Amazon B2B e-commerce platforms.
What is a B2B2C strategy?
A B2B2C strategy entails that a business leverage the distribution of another business while, at the same time, it has wide access to consumers. The main difference between B2B2C and simply white labeling is the ability of the B2B2C player to get privileged access to a distribution network and have its product recognized at the consumer level. Thus, the B2B2C player has a strong business distribution while building brand awareness with consumers.
Connected Business Model Types And Frameworks
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