With the introduction of eCommerce, many online businesses adopted new strategies to attract customers through the internet. With that, many new business models got created, which changed the course of online businesses. Most of these business models focus on cutting down intermediaries and getting through to customers directly.
What is a Business to Consumer (B2C) business model?
The Business-to-Consumer business model refers to the model in which companies or businesses sell their products or services directly to the end-user. In this process, a company does not involve any additional third-party intermediaries. Therefore, this business model is more direct and allows for better interactions with consumers.
The companies that follow a Business-to-Consumer business model are known as B2C companies or businesses. The primary source of the popularity of this business model came in the late 1990s during the dotcom boom.
Back then, the term B2C companies referred to all online retailers that sold their products or services to their customers through the internet.
In today’s modern business world, the Business-to-Consumer business model is one of the most successful models for online companies. It is an outstanding sales model among these businesses. Traditionally, B2C companies only included those companies that needed consumers to be physically present to offer them products.
For example, Walmart was and still is a B2C business where consumers would buy their groceries. Similarly, most restaurants belong in this category as well.
However, as mentioned, with the introduction of online retail shops and marketplaces, the meaning of the word B2C companies have significantly changed. Nowadays, B2C refers to companies that use online platforms to directly contact and transact with their customers, such as selling their goods or providing their services.
How does it work?
The Business-to-Consumer business model is straightforward to understand. In a way, this model is the opposite of the Business-to-Business model, which occurs between two companies, and after some steps may reach the end consumer.
Companies that employ a B2C strategy heavily rely on customer relations and interaction to be successful. These companies must keep updated with their customer’s needs and wants and try to fulfill them continuously.
Similarly, the marketing and promotional activities of B2C companies also focus on consumers rather than other businesses. In this business model, companies are much closer to their consumers than other models.
What are the advantages and disadvantages of the Business to Consumer business model?
Using the Business-to-Consumer business model comes with a few advantages and disadvantages. A few of these are as below.
Advantages:
The most prominent advantage of the B2C business model is that it reduces costs and time. Companies that use this model can reach their consumers directly and cut any intermediaries in the process.
It allows the company using the model to benefit more because it doesn’t have to divide its profits, while also allowing customers to get better prices.
The B2C business model also increases the sales opportunities for a company. The company gets customers directly without having to rely on others. Especially for tech-based companies, the B2C model can be significantly useful.
The B2C business model also comes with the advantage of better cash flows. Companies that use the business model don’t need to wait to receive their payments from intermediaries.
Instead, they get those payments directly from customers through various payment gateways. The faster cash flows come as a result of the prompt payments from customers.
Disadvantages:
Companies that operate a Business-to-Consumer business model face a significantly high amount of competition. It is because of the industry they operate in having low barriers to entry. It means any new company can start up and start using this model without the need for much work.
Some customers may also not prefer to interact with B2C companies. It is because these companies make the journey complex for customers, who may want a simpler customer experience instead. Most B2C companies also offer generic products, which some customers may not prefer.
Lastly, as B2C companies rely on customer interaction, they need to spend extra on keeping their customers satisfied. It means they may need to have dedicated customer support services to listen to its customers. In the absence of these services, customers may not want to interact with a business.
Examples:
Examples of B2C companies or businesses include all businesses that interact with customers directly. Therefore, it may consist of gyms, shopping malls, hospitals, car dealerships, etc.
In the online world, companies such as eBay, Facebook, Spotify, and some others are all examples of companies that use the B2C business model.
Conclusion:
The Business-to-Consumer business model is for companies that interact and transact with their consumers directly without the need for any intermediaries.
This business model has become more common due to eCommerce. While it has many advantages, it also comes with several disadvantages.