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.
Aspect
Explanation
Concept Overview
The Consumer-to-Consumer (C2C) Business Model is a type of e-commerce or marketplace model where individual consumers buy and sell products or services directly to and from each other, often facilitated by an online platform. Unlike traditional business models, where businesses sell to consumers, C2C platforms enable peer-to-peer transactions, allowing consumers to become both buyers and sellers. These platforms create virtual marketplaces where individuals can exchange goods, services, or information.
Key Principles
The C2C Business Model is guided by several key principles: 1. Peer-to-Peer Transactions: It facilitates direct transactions between individual consumers. 2. Platform Facilitation: C2C platforms provide the infrastructure and tools for listing, payment processing, and communication. 3. Trust and Reputation: Trust is crucial, often built through user reviews, ratings, and transparent communication. 4. Varied Offerings: A wide range of products, services, and information can be exchanged. 5. Participation: Anyone can participate as a buyer or seller, fostering inclusivity.
Process
The process of C2C transactions typically includes the following steps: 1. Listing: Sellers create listings for items or services they want to sell, providing descriptions, images, and pricing. 2. Search and Selection: Buyers browse listings, search for specific items, and select products or services of interest. 3. Communication: Buyers and sellers often communicate through the platform to negotiate terms, ask questions, or arrange logistics. 4. Payment: Payment processing is usually handled securely through the platform, with options like credit cards or online payment systems. 5. Transaction Completion: After the transaction, buyers may leave reviews or ratings to build trust within the community.
Examples
Prominent examples of C2C platforms include eBay, Craigslist, and Airbnb. eBay, for instance, enables individuals to buy and sell a wide range of products in auction-style or fixed-price listings. Airbnb allows individuals to rent their homes or accommodations to travelers. These platforms connect individuals worldwide for various transactions.
Advantages
Implementing the C2C Business Model offers several advantages: 1. Wide Variety: It allows for a diverse range of transactions, from selling used items to offering services or experiences. 2. Inclusivity: Anyone can participate, creating opportunities for individuals to generate income. 3. Cost Efficiency: It often involves lower operating costs compared to traditional retail models. 4. Community Building: C2C platforms can foster a sense of community and trust among participants. 5. Sustainability: Promoting the reuse of goods aligns with sustainability goals.
Challenges and Risks
Challenges in the C2C Business Model include issues related to trust and fraud, the need for effective dispute resolution mechanisms, and the responsibility of managing one’s listings and transactions. There may also be regulatory and legal considerations in some markets.
In the offline world, the customer-to-customer business model has existed for years. Take the humble farmers market, for example, where farmers pay market organizers for a stall where they can sell their produce to consumers. The classifieds section of a newspaper is also a typical example of the C2C model.
The model has also become popular online due to advances in eCommerce technology, with eBay considered a pioneer of the strategy when it was launched in 1995. The C2C model has also benefitted from the rise of the sharing economy, where goods and services are shared on a community-based online platform. Companies in this space include Airbnb, Uber, Spacer, Airtasker, and Gumtree.
Four types of C2C business model platforms
Most C2C platforms make money by charging sellers a listing fee or collecting a small commission on each successful transaction.
Examples of these platforms include:
Exchange of goods platforms
Which connects buyers and sellers looking to exchange physical goods. Some of these platforms exist in website and app form and allow both parties to complete the transaction in person. Examples include eBay and Etsy.
Exchange of services platforms
Where buyers and sellers come together to exchange money for services. Freelancing platforms such as Fiverr, Upwork, and 99designs are commonly cited examples. However, there are also platforms selling dog walking, house sitting, and employment services.
Auction platforms
Here, sellers list goods at a minimum price and allow buyers to bid on them for a set time. Auction platforms such as eBay offer an assortment of goods, while others are more specialized. For example, Sotheby’s is known for luxury and collector items while Copart sells used and wholesale vehicles.
Payment platforms
These C2C platforms exist to facilitate transactions between the buyer and seller, with many also charging a small fee when sellers transfer earnings to their bank accounts. Examples include Stripe, PayPal, and Payoneer.
Strengths of the C2C business model
There are several obvious benefits for buyers and sellers under the C2C model:
Increased profitability – the model is attractive for sellers because they avoid many of the costs associated with rent, website hosting, marketing, and distribution. For example, a freelancer can create an account on a services platform for free and start attracting customers almost immediately.
Increased customer base – online merchants can also sell their goods to a vast online audience where there is demand for niche or less-popular items. In most cases, the merchant also gains access to the C2C platform’s user base when they sign up for an account.
Credibility – one drawback of the customer-to-customer business model is the potential for fraudulent transactions from unproven sellers. While many sellers do not have a proven track record, they can leverage the reputation of a C2C platform to build positive customer reviews and establish a reputation that way.
Potential Challenges of the C2C Business Model:
While the C2C business model has numerous advantages, it also faces potential challenges:
Trust Issues: Dealing with unfamiliar individuals can lead to trust and safety concerns, including fraud and scams.
Quality Control: Ensuring the quality of products or services can be challenging as they may vary widely among sellers.
Regulatory Compliance: C2C platforms must navigate complex regulatory landscapes related to taxes, consumer protection, and liability.
Privacy and Data Security: Handling personal information and payment data requires robust privacy and security measures.
Relevance in the Modern Digital Economy:
The C2C business model has gained immense relevance in the digital age. As technology has advanced, online platforms have facilitated frictionless peer-to-peer transactions, enabling individuals to participate in the global marketplace without the need for significant capital or infrastructure. This model has disrupted traditional retail and created opportunities for entrepreneurs and small businesses to thrive.
Examples of C2C Platforms:
eBay: A pioneer in the C2C space, eBay allows individuals to buy and sell a wide range of products, from electronics to collectibles.
Etsy: Focused on handmade and vintage goods, Etsy provides a platform for artisans and crafters to sell their creations directly to consumers.
Airbnb: This platform enables individuals to rent out their homes or spare rooms to travelers, creating a peer-to-peer lodging marketplace.
Upwork: A freelancing platform where individuals offer their skills and services to clients seeking various professional services.
Key takeaways:
Customer to customer (C2C) is a business model where consumers buy and sell directly between themselves. The strategy has become very popular thanks to advances in eCommerce technology and the sharing economy.
Customer-to-customer platforms include exchange of goods platforms, exchange of services platforms, auction platforms, and payment platforms. Third-party facilitators earn revenue by charging listing, transaction, or withdrawal fees.
The C2C model reduces overheads and increases profitability for sellers. With access to a vast online audience, sellers may also be able to find a market for niche items or items otherwise unviable in a bricks-and-mortar store. Buyers can transact through established C2C platforms to reduce the potential for fraudulent transactions.
Key Highlights
Definition of C2C Model: The C2C business model involves direct transactions between consumers, where one consumer sells products or services to another consumer through a third-party platform that facilitates and often handles the transaction.
Offline and Online Existence: C2C interactions have existed offline for a long time, such as farmers’ markets and classified ads in newspapers. The model gained significant traction online due to advancements in eCommerce technology. eBay played a pioneering role in establishing the C2C model in the online space.
Diverse Platforms: The C2C model encompasses various platform types:
Exchange of Goods Platforms: Connect buyers and sellers for physical goods exchange, with examples like eBay and Etsy.
Exchange of Services Platforms: Enable transactions for services, including freelancing platforms like Fiverr and Upwork, as well as other service-based offerings.
Auction Platforms: Sellers list goods with a starting price, allowing buyers to bid on them. eBay and Sotheby’s are examples, catering to different markets.
Payment Platforms: Facilitate transactions between buyers and sellers, often charging fees for transactions and withdrawals. Examples include PayPal and Stripe.
Revenue Generation: C2C platforms typically generate revenue through listing fees, transaction fees, commissions on successful sales, or withdrawal fees, depending on the platform type.
Benefits for Sellers:
Cost Savings: Sellers can avoid expenses related to physical stores, marketing, distribution, and other overheads.
Access to Customers: Sellers gain access to a broad online audience and can target specific niche markets that might not be viable in traditional brick-and-mortar settings.
Ease of Entry: Setting up accounts on C2C platforms is often straightforward, enabling sellers to start attracting customers quickly.
Benefits for Buyers:
Diverse Selection: Buyers can access a wide range of products and services from various sellers.
Trust and Reputation: Established C2C platforms provide credibility through seller reviews and platform reputation, reducing the risk of fraudulent transactions.
Credibility Building: Sellers without established reputations can leverage the platform’s reputation to build positive customer reviews and establish their credibility over time.
Rise of Sharing Economy: The growth of the sharing economy, exemplified by platforms like Airbnb and Uber, has contributed to the C2C model’s success. These platforms allow people to share goods and services within a community.
Global Reach: Online C2C platforms have a global reach, enabling transactions between buyers and sellers from different parts of the world.
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 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.
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.
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.
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.
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.
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.
In an asymmetric businessmodel, 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.
In an asymmetric businessmodel, 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.
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 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 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.
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.
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.
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, 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.
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.
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.
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.
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.
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.
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.
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.
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 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.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
Discover more from FourWeekMBA
Subscribe now to keep reading and get access to the full archive.
