b2b2c

What Is A B2B2C Business Model? B2B2C Business Model In A Nutshell

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

b2b-vs-b2c
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.

In the business world, the difference between B2B vs. B2C businesses often seems clear and straightforward.

However, there is a third kind of business model, primarily based on what might seem like a B2B strategy.

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? 

RelatedB2B Vs. B2C Business Models In Nutshell

Did you know Google was a B2B2C?

One of the deals that made Google the tech giant it is today was the deal with AOL.

At the time, AOL was a tech giant, while Google was still in its infancy.

history-of-aol

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.

direct-to-consumer
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.

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: S&P Capital IQ, Pitchbook

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. 

white-labeling
The white label business model is a business-to-business (B2B) approach involving a manufacturer and a reseller.  The white label business model involves a company selling products with its own branding that were manufactured by others. In this case, the manufacturer provides the product in white-label to the reseller/retailer, who can customize it and present it with its own brand/logo to final customers.

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.

Price convenience

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!

For the B2B2C business model to work, you’ll need a barbel marketing strategy.

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.

B2B2C examples

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

manufacturer-to-consumer
Manufacturer-to-consumer is sometimes referred to as factory-to-consumer (F2C) because the manufacturer sells direct to the consumer. In essence, the company that produces the item takes the place of the retailer and any other third-party such as a wholesaler or supplier.

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. 

B2B2C Business Model Case Studies

Affirm Business Model

affirm-business-model
Started as a pay-later solution integrated to merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interests earned from the consumer loans, when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.

Instacart Business Model

how-does-instacart-make-money
Instacart’s business model relies on enabling an easy set up for grocery stores, the comfort for customers to get their shopping delivered at home, and an additional income stream for personal shoppers. Instacart makes money by charging service fees, via memberships, and by running performance advertising on its platform.

OpenTable Business Model

how-does-opentable-make-money
OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014, for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.

Key takeaways:

  • 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

LinkedIn Business Model

linkedin-multi-sided-platform
LinkedIn is a two-sided platform running on a freemium model, where to unlock unlimited search and other features, you need to switch to a paid account. Acquired by Microsoft for $27 billion in 2016, LinkedIn made $5.2 billion in revenues in 2018 and nearly 630M members by October 2019.

Udemy Business Model

udemy-business-model
Udemy is an e-learning platform with two primary parts: the consumer-facing platform (B2C). And the enterprise platform (B2B). Udemy sells courses to anyone on its core marketplace, while it sells Udemy for Business only to B2B/Enterprise accounts. As such, Udemy has two key players: instructors on the marketplace, and business instructors for the B2B platform.

Zoom Business Model

zoom-business-model
Zoom is a video communication platform, which mission is to “make video communications frictionless.” Leveraging on the viral growth from its freemium model, Zoom then uses its direct sales force to identify the opportunity and channel those in B2B and enterprise accounts.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

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

What’s A Business Model

fourweekmba-business-model-framework
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.

Business Model Innovation

business-model-innovation
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Level of Digitalization

stages-of-digital-transformation
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.

Digital Business Model

digital-business-models
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.

Tech Business Model

business-model-template
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Platform Business Model

platform-business-models
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

AI Business Model

ai-business-models

Blockchain Business Model

blockchain-business-models
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Cloud Business Models

cloud-business-models
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).

Open Source Business Model

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

B2B vs B2C Business Model

b2b-vs-b2c
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.

B2B2C Business Model

b2b2c
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.

D2C Business Model

direct-to-consumer
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.

C2C Business Model

C2C-business-model
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

Brokerage Business Model

brokerage-business
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.

Dropshipping Business Model

dropshipping-business-model
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.

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