Consumer-to-manufacturer (C2M) is a model connecting manufacturers with consumers. The model removes logistics, inventory, sales, distribution, and other intermediaries enabling consumers to buy higher quality products at lower prices. C2M is useful in any scenario where the manufacturer can react to proven, consolidated, consumer-driven niche demand.
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Understanding consumer-to-manufacturer
Interactions between the consumer and manufacturer are nothing new. In the early 1990s, a group of car enthusiasts from the Netherlands joined forces in an attempt to persuade a car manufacturer to import a particular sports car into the country. The bid ultimately failed, but consumer-to-manufacturer lives on today.
Consumer-to-manufacturer is a disruptive form of consumer-driven demand-shaping that combines elements of social selling and tech-enabled consumer aggregation. In recent years, C2M has enjoyed a resurgence in interest thanks to technological advances.
In essence, C2M is an interaction between the end-producer and the end-consumer. Today, manufacturers use consultants to analyze consumer data and identify potential trends. Manufacturers also canvass on a much broader scale in the search for innovative product ideas. What’s more, technology has allowed small manufacturers to sell direct-to-consumer on farm-to-table platforms and eCommerce sites such as Taobao and Douyin.
Key characteristics of consumer-to-manufacturer
The key characteristic of the consumer-to-manufacturer approach lies in the initiator of demand. Rather than fulfilling one order at a time, the manufacturer receives real-time data on demand levels for specific products that is driven by a community of buyers.
This allows the business to passively source important metrics on consumer preferences, location, and purchase behavior. Note that in most cases, the manufacturer does not produce an item unless there is sufficient demand within the community to warrant it.
In essence, consumer-to-manufacturer involves consumers approaching the manufacturer as a group with what they should produce. The strategy differs from traditional methods where the manufacturer approaches consumers with what it could produce.
Some also confuse consumer-to-manufacturer with pre-ordering, but there are two important differences between the two:
Demand-scoping – pre-ordering is associated with solving cash flow issues or capital requirements and relies on marketing to pursue demand. C2M, on the other hand, seeks to allow niche demand to materialize on its own before the manufacturer reacts.
Initiator – the initiator in pre-ordering is the product manufacturer or in some cases, an intermediary. In consumer-to-manufacturer, as we noted earlier, the consumer is the initiator in most instances.
Where is C2M most suited?
C2M is useful in any scenario where the manufacturer can react to proven, consolidated, consumer-driven niche demand. Note that C2M will not be able to compete in marketplaces where common products are easily sourced. Here, product demand is more predictable and is already being met by manufacturers.
Instead, consumer-to-manufacturer should be employed to analyze niche demand infrastructure within specific verticals such as insurance. In this context, demand is more difficult to detect and typically occurs in industries with high production costs for high-value or high-importance items.
How are manufacturers benefitting from C2M?
To capture more value from the C2M approach, manufacturers are now incorporating a range of upstream and downstream initiatives. This can be better understood by detailing the evolution of manufacturer business models as C2M has started to become more popular:
Original equipped manufacturer (OEM)
The traditional model where manufacturers take orders from other brands and produce them according to detailed specifications.
Original design manufacturer (ODM)
In this case, the manufacturer has more freedom to design and produce products. Brands reach out to manufacturers without detailed specifications in place, with some simply choosing a design from a list. This increases efficiency since the manufacturer already knows it can produce the design and has the necessary infrastructure in place.
Original brand manufacturer (OBM)
Where the manufacturer has full control of product design and production. When we consider the previous two business models, we can see that OBM is the next logical step for manufacturers. Before C2M was sufficiently developed, however, most had little experience in building a successful brand. Today, social eCommerce platforms in particular have allowed traditional manufacturers to flourish.
Consumer-to-manufacturer models
According to Chinese consumer insight company iResearch, there are three general C2M models in use today:
Consumer-to-manufacturer (C2M) eCommerce platform
The first C2M model to emerge and one which we explained earlier. Manufacturers join the platform, own the brand, but only go into production after demand meets a certain threshold. Chinese platform Biyao was one of the first to implement C2M, selling a range of brandless products in fashion, eyewear, food, and electronics.
Factory-to-consumer (F2C) eCommerce with a self-operated brand
Or any eCommerce platform that sells a brand of private label products by partnering with a factory to handle the manufacturing process. Note that the brand itself belongs to the eCommerce company. There is also an inventory risk here since the products are manufactured before they are sold.
Factory-to-consumer (F2C) eCommerce platform
As the name suggests, this is a marketplace that connects factories with consumers. In this case, the brand belongs to the manufacturer. But like the previous example, there is an inventory risk as products are manufactured before there is demand.
Real-world examples of customer-to-manufacturer
The customer-to-manufacturer strategy has seen great success in China with several apps helping Chinese enterprises respond to consumer demand.
Pinduoduo
Pinduoduo is a Chinese agriculture-centric platform founded by Colin Huang and Chen Lei in 2015. The platform connected farmers and distributors with consumers through an interactive shopping experience. Today, it offers a much more diverse range of products to ordinary consumers.
Pinduoduo has a typical revenue generation strategy for an eCommerce giant under the marketplace business model.
Pinduoduo also offers advertising to merchants in a system not dissimilar to Google’s PPC advertising model.
In 2018, the Chinese eCommerce platform Pinduoduo (PDD) launched its “1,000 New Brand Initiative” giving small and medium manufacturers access to huge buyer traffic.
Consumers use Pinduoduo to buy full-price items or get a discount if they invite others to participate in a group purchase. In most cases, the discounted order is shipped once a certain number of purchases has been met.
Jiaweishi
Manufacturing company Jiaweishi used C2M to redesign the appearance of its robotic vacuum cleaners and give them a less randomized cleaning route.
As a new brand, it also live-streamed the manufacturing process to allay consumer concerns over product quality.
Sanhe
Cookware company Sanhe also used C2M to great effect. Although one of Europe’s biggest cookware manufacturers, Pinduoduo helped the company identify strong Chinese demand for pots made with the same quality and craftsmanship as export models.
This demand was backed by consumer data on product functionality, material, and color. Sanhe also received valuable data on the age, gender, and spending power of its Chinese market.
Key takeaways:
Consumer-to-manufacturer allows consumers to purchase directly from the manufacturer. With most third parties omitted, consumers get access to higher quality products at lower prices.
Consumer-to-manufacturer is less effective in general product marketplaces where demand has been met by established players. Instead, it is more useful in industries with hidden demand and higher product pricing or production costs.
Consumer-to-manufacturer has been popularised in China by eCommerce apps such as Pinduoduo. The company uses technology-driven insights to help Chinese enterprises produce products based on consumer demand and preferences.
Key Highlights
Definition: C2M is a business model that connects manufacturers directly with consumers, eliminating intermediaries and enabling consumers to buy higher quality products at lower prices.
Logistics and Intermediaries Removal: C2M removes the need for traditional elements like logistics, inventory management, sales, and distribution, allowing manufacturers to offer products directly to consumers.
Niche Demand and Consumer-Driven: C2M is effective when manufacturers can respond to proven and consolidated consumer-driven niche demand.
Historical Origin: The concept of consumers influencing manufacturers dates back, but modern C2M combines social selling and tech-enabled consumer aggregation. It has gained traction due to technological advancements.
Initiator of Demand: C2M’s uniqueness lies in consumers initiating demand for specific products, and manufacturers responding to community-driven demand levels.
Real-time Data and Trends: Manufacturers gather real-time data on consumer preferences, location, and purchasing behavior to inform production decisions.
Benefits: C2M offers manufacturers insights into niche demand, focusing on niche verticals where demand is harder to detect and production costs are higher.
Manufacturer Evolution: Manufacturers have evolved from Original Equipped Manufacturer (OEM) to Original Design Manufacturer (ODM) and Original Brand Manufacturer (OBM) models, aligning with the rise of C2M.
C2M Models: Three general C2M models include:
C2M eCommerce Platform: Manufacturers produce based on demand thresholds on platforms like Biyao.
F2C eCommerce with Self-Operated Brand: eCommerce platforms partner with factories to sell private label products.
F2C eCommerce Platform: A marketplace connecting factories directly with consumers.
Real-World Examples:
Pinduoduo: A Chinese platform connecting farmers, distributors, and consumers, demonstrating the C2M approach.
Jiaweishi: Used C2M to redesign vacuum cleaners and stream the manufacturing process to enhance consumer trust.
Sanhe: Leveraged C2M to identify demand for quality cookware in China’s market.
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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.
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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.
