Did you know that the eCommerce industry grew by over 27% in 2020?
Covid-influenced changes to the traditional business-to-business (B2B) and business-to-customer (B2C) models underpinned this immense growth.
As a business owner, you want to stay on top of trends that will boost your bottom line—and the shift to eCommerce is almost certainly one that will. Familiarizing yourself with an emerging eCommerce model can help you snag a bigger piece of the $6.5 trillion eCommerce pie.
This new model is a hybrid of B2B and B2C, known as the “business-to-business-to-customer” (B2B2C) eCommerce model.
In this article, you’ll learn everything you need to know about the B2B2C eCommerce model and see whether it can work for you.
What is B2B2C eCommerce?
Business-to-Business-to-Customer eCommerce refers to a business model where two businesses (Business A and Business B) partner up to sell their products and services to the same customers or consumers.
The difference between B2B, B2C, and B2B2C
Business-to-Business (B2B) commerce is when businesses sell directly to other companies. For example, Intel sells microprocessors directly to other companies like Lenovo and HP.
The Business-to-Customer (B2C) model involves businesses selling directly to their customers. Chick-Fil-A, Dunkin Donuts, and Starbucks are well-known examples of this model.
With the Business-to-Business-to-Customer (B2B2C) model, Business A taps into Business B’s customer base to sell its product and services.
Here are the three business models in a nutshell:
B2C: Businesses sell goods and services to consumers
B2B: Businesses sell goods and services to other businesses
B2B2C: Businesses sell goods and services to both consumers and businesses
How B2B2C eCommerce works
At first glance, a B2B2C model seems straightforward. It suggests that any business that sells to both businesses and customers can be defined as a B2B2C business. But that’s not always the case.
Many businesses that sell to other businesses and consumers may seem to fit the B2B2C definition but aren’t considered B2B2C companies. For example, businesses that sell white-label products to other businesses (which then sell them to consumers) are not true B2B2C businesses. Similarly, businesses that sell via channel partnerships are also not considered B2B2C companies, although they share similar characteristics.
A little confusing, right? Let’s look at an example to clarify things.
The first “B” in the term B2B2C is the primary business that initiates the chain. Let’s call it B1. It desires a sizable customer share. This business relies on tapping another business’s existing consumer base to acquire new customers.
The middle “B” in B2B2C refers to the business with all the customer connections. Let’s call this business B2. This business may have several reasons for creating a relationship with the first business.
For example, it might benefit from charging a commission for services rendered or engaging in profit-sharing with B1. Either way, this intermediary business gains tremendous value from this partnership. It’s this intermediary business that connects to the customers (C).
Four primary hallmarks define the partnership between B1 and B2:
- No white-labeling: End users are fully aware they’re buying a product or using a service from B1.
- Greater brand recognition: Businesses can reach new customer groups they couldn’t reach before.
- All parties benefit from this model: B1 can introduce its products and services to a whole new group of paying consumers. B2 enjoys a new revenue stream and can present its customers with fresh, relevant, and exciting products and services that do not require warehousing or manufacturing. Finally, consumers benefit because they can choose from a wider variety of products and services.
Why adopt the B2B2C model?
The importance of customer satisfaction cannot be overstated in today’s market. With so many choices available to them, customers can easily switch to a competitor if one business fails to provide the products or services a consumer desires.
However, since it’s impossible to be all things to everyone, many businesses have chosen to rely on other companies to increase their product lines or service offerings. This allows businesses to provide broader options for customers without relying on their own resources to do so.
There are unique advantages and disadvantages to this business model. Let’s consider the pros and cons.
Pros
More revenue for all parties
The B2B2C model leads to greater sales for everyone. B1 gains access to potential customers; B2 earns commissions and profits by offering more products to consumers.
Lower overhead costs
Whether it’s logistics costs or payment fees, businesses in the B2B2C model all share in the spend, lowering average costs per firm.
Positive partner brand associations
Forging a brand and reputation is not easy. Such recognition can take years to build and can be destroyed in a matter of days, thanks to lightning-fast social media communication.
With the B2B2C model, businesses can quickly gain credibility and reputation by becoming associated with more established brands. (Note that even if you do opt to partner with more well-known brands for this model, you still need to put effort into building your own reputation.)
Cons
Negative brand associations
When you work with an established brand, its reputation and credibility influence how consumers see your company. But choose your partners carefully: Working with a brand that lacks credibility will negatively affect how others view your business. Before pivoting to this model, thoroughly review any prospective partner’s background and consumer sentiment to avoid destroying your own brand.
Less control over user experience
Factors such as price, service, and distribution are controlled by various merchants rather than the business itself. If you decide to adopt B2B2C, you’ll need to enact strict quality control of merchants and products to improve the end user’s experience.
Higher marketing costs
B2B2C businesses must market to both consumers and businesses at the same time. Since both parties are using your products or services, you need to reach them simultaneously and show them how you provide value, which can result in higher marketing costs.
Examples of B2B2C companies
You’ve probably already aware of many companies that use this model. Whenever you engage with one business to order a product or service from another, it’s an example of B2B2C in action.
Let’s look at two prime examples.
UberEats
Say a restaurant wants to capitalize on the growing demand for delivery. Investing in an in-house delivery service would require significant money and time to build from the ground up.
Enter UberEats, which sells its delivery service to restaurants. UberEats is an eCommerce app people use to order delivery takeout from their favorite restaurants, a win-win for both customers and restaurants.
UberEats provides these restaurants with a built-in customer base (it boasts 66 million users around the world), and restaurants can enjoy an additional revenue stream from delivery without investing their own resources.
SnackPass
SnackPass is an app that allows its users to skip the line at restaurants. Its business model is another example of the B2B2C system in action. With SnackPass, hungry customers no longer have to wait in line, as they can place an order on the app and walk straight to the restaurant counter to pick it up.
One could argue that restaurants could easily offer this service. They could, but it would put more strain on their staff and increase their overhead costs.
With SnackPass, restaurants can sell to more customers without worrying about the accompanying strain on their existing resources, and SnackPass gets to tap into restaurants’ existing customer base.
Best practices for implementing the B2B2C business model
If you have chosen to pivot o a B2B2C business model, be sure to follow these best practices:
Appeal to both audiences
There must be sufficient demand for your products or services from your middle businesses and consumers to successfully adopt a B2B2C model.
Some companies focus more on attracting consumers, using branding and marketing to increase their visibility. Others zero in on business intermediaries, looking for ways to ensure that the intermediary promotes their product or service.
The right balance depends on your business; however, it is vital that your marketing ensures both audiences will see a need for your products or services.
Shift workforce based on channel needs
Not all areas of your business will require the same level of investment. Many B2B2C companies start by building compelling products. But once these products have caught the attention of a vendor or partner business, the priority shifts to creating a solid connection with the end customer.
While both parties (customers and intermediary businesses) are vital to the business’s success, the company certainly doesn’t need to allocate the same effort, workforce, or resources to each one at all times.
Continue to analyze both sides to see where you’ll need more staff and resources for optimal results.
Vet partners
It goes without saying, but it is essential to reinforce it. If your consumers are not happy, it doesn’t matter the business model that you run—you will fail.
Since there are two or more businesses involved in B2B2C, creating a positive consumer experience can be a bit more complicated. But it’s well worth the effort. If B1 delivers a bad experience to the consumer, B2 will suffer. And the same happens if B2 offers a lousy consumer experience.
Vet partners and make sure their customer experience aligns with yours. You don’t want someone to associate a negative interaction with your brand.
Know your customers
Market research is a necessity regardless of the business model that you choose. If it is vital to B2B and B2C, then it is doubly vital in B2B2C businesses.
However, it can be especially challenging for B2B2C companies because you have to map out several additional paths on the journey. For example, you need to map out:
- How the customer makes a purchase
- B2’s influence on the customer’s choice
- How B2 recommends products and services to the consumer
Use multiple digital channels
B2B2C brands need to provide their target market (end consumers and business customers) an excellent and consistent experience. They must use several digital channels—ranging from social media to websites to online broadcast channels and portals—to enhance engagement and deliver customized messages.
Is the B2B2C model right for you?
Now that you know all about the B2B2C business model, do you think it could work for your organization?
To find out, ask yourself:
Is my business digitally mature?
Knowing if your business is digitally mature will help you determine whether you can navigate the B2B2C waters. Your business must be committed to executing digital transformations and including integrations to your online platforms.
If your business isn’t digitally mature, you should focus on achieving maturity before pivoting to this business model.
What are you selling?
You cannot sell all products to end consumers yourself. For instance, medical supplies, industrial equipment, and other highly regulated products cannot be sold directly to end consumers.
What are you willing to sign over?
Trust between both parties is crucial. When two businesses enter the B2B2C partnership, it involves exchanging private company details that both parties must be willing to sign over. If you aren’t ready to share sensitive information like customer data and profits (in some cases), this business model is not for you.
Final thoughts
Although challenging, the B2B2C business holds a lot of promise. And with the information in this guide, we’re sure you’ll be able to determine whether it’s right for you. Even considering the challenges, brands that adopt this business model can enjoy a larger customer base, increased brand awareness, and greater revenue. With a little thought, you too can pivot to a B2B2CeCommerce business and grow your bottom line.
