Today, a B2B2C business is a popular model for companies to make alliances, seeking to achieve their goals of higher revenues, efficiency and better growth. However, when we talk about B2B2C, many professionals often confuse it with other sales channels, which makes sense, considering that companies are constantly evolving and changing.
If you are looking to learn more about the B2B2C business model or want to improve the implementation that you may be carrying out in your company, then this article may be useful to get ideas and reorient strategies.
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What is a B2B2C business?
A B2B2C business is one that combines the “Business to Business” (or B2B) and “Business to Consumer” (or B2C) models. In B2B2C models, two companies deliver products or services to customers through an integrated supply chain. The first company in the supply chain offers the second company access to a service that can increase revenue, give access to more customers, or increase efficiency. While the second company sells products or services directly to customers, who use the service of the second company.
This may be an example.
A company in the finance sector can partner with a furniture manufacturing company to provide financing to end customers when they buy furniture, allowing them to pay for the furniture in installments. In this case, customers know that they are receiving financing from a different company than the one they buy the furniture from, but both companies partner to provide this service.
For its part, the furniture business can benefit from this association by using a pre-established financing service instead of investing capital and time to develop its own financing service. On the other hand, the finance company can benefit from the partnership, by opening and expanding a new channel to attract more customers.
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The differences between B2B and B2B2C models
In B2B models, company "A" sells a product or service to another company, without being involved in selling said product or service to final consumers. Company "B" may use the products or services provided by Company "A" within its own catalog of products or services, but customers may not be aware of this relationship.
For example, a manufacturing company in the construction industry may sell its products and materials to a remodeling company that then uses those products to remodel end-customer properties, but the customers may not know that those materials originally came from the manufacturing company.
Although historically, to sell their products, companies have based their business models separately, on B2B or B2C, the dynamics of the market and the needs of digital transformation have forced them to rethink their strategies.
With the rapid rise of e-commerce and remote work, the lines between these two sales channels have blurred and the sales ecosystem has overflowed to create a new framework: B2B2C e-commerce.
B2B2C the most popular business model in Brazil
According to Statista, the B2B2C business model is the second most popular in Brazil among e-commerce entrepreneurs.
According to a May 2021 survey, almost half of interviewed industry executives (48.7%) said that their company sold products to end consumers through an online store without intermediaries. The second main sales channel was B2B2C, that is, selling products to the final consumer through marketplaces with 42.3% of those surveyed. Traditional B2B, where manufacturing companies sell to distributors or retailers before reaching end consumers, was used by 36.5% of respondents.
In the graph below, you may be able to see that the sum total of the sales models in the Statista report exceeds 100%. This is because companies combine different sales models as long as they benefit the company's bottom line.
How does B2B2C eCommerce work?
As we have said, Business-to-Business-to-Consumer (B2B2C) is the term that describes a model, in this case of e-commerce, in which a supplier of goods or services (let's say "B1 Company") offers its products to a company (“B2 Company”) to sell to final consumers, through its e-commerce channels.
It is important to highlight that the B2B2C model differs from traditional reselling. Which is based on the principle of monetization through commissions deducted by "Company B2" from any product sold by "Company B1". By comparison, a traditional “B2B plus B2C” reselling model works with price-based revenue—buying wholesale cheaper, selling in smaller lots, or retailing at a higher price.
The final price for the consumer in this model is generally set by “Company B1”, and “Company B2” simply receives a commission for each sale. Although, of course, there may be maximum price agreements between them and marketing initiatives to stimulate demand, so that the price remains attractive to customers.
The B2B2C model is especially effective today for niches and industries of a very diverse nature, in which smaller companies can benefit from the reputation of medium or large companies.
An example of B2B2C eCommerce.
This can be a good example of the B2B2C model that we all know as smartphone users. This example is: app stores. Any business that develops a mobile app for iOS or Android must register it on the AppStore or Google Play Store for a fee.
Well, when you buy the app, the store deducts a commission and passes the rest to the app development company.
It is very likely that we will also define app stores as app marketplaces. This is because a marketplace is the most outstanding and successful implementation of the B2B2C model. In marketplaces, businesses control their own inventory and prices while benefiting from the reach and convenience of e-commerce. For their part, consumers enjoy a wide selection of products, with the most competitive prices in the market.
The B2B2C business model has already been proven in many industries. Alibaba, the world's largest online marketplace, uses a B2B2C business model. And Amazon, the largest online retailer in the United States, also uses a B2B2C model for its third-party sellers.
The benefits of B2B2C eCommerce
For a B2B2C relationship to be successful, there must be justification and motivation from all the companies involved. The “B1” company has to be sure that the B2B2C model will be more profitable or strategically advantageous than going direct to the consumer, which generally generates a higher margin per transaction.
And, for its part, the “B2” company must be sure that, by acting as a channel for “B1”, it is not harming the sales of its products.
How does a B2B2C model benefit the “B1” company?
- Large volumes of bulk customers.
- Economies of scale selling more units, including globally.
- A level of credibility and trust by associating with an established and respected “B2” in the market.
- Extremely low acquisition costs per customer.
How can the B2B2C model benefit the “B2” company?
- A commission on sales.
- More customers in stores.
- A wider range of high-quality products.
- Increased sales of related products and services.
- Co-ownership of B1 clients (according to B2B2C agreement)
How can the B2B2C model benefit end customers?
- A more comfortable shopping experience.
- A higher degree of trust in their purchases.
- Customer support 24/7 online.
The challenges of B2B2C e-commerce
While B2B2C e-commerce offers a number of attractive benefits for businesses and brands, it can also be challenging to implement.
B2B2C partnerships require work from both sides, particularly when it comes to:
- Data sharing: Successful B2B2C eCommerce partnerships require real-time integrations between all participants. Data from customer records, stock, inventory, pricing, promotions, marketing strategies, and loyalty data integrations need to be in sync with each other. Failure to do so can result in a fragmented and confusing customer experience (CX).
- Customer Ownership: B2B2C partnerships thrive best when both parties bring in equal numbers of customers and share ownership of the customer. Or, one party maintains all customer records and fairly compensates the "taxpayer" for driving sales.
- Brand differentiation: Very different from "white label" associations, the B2B2C model supposes a clear differentiation between each company.
- Marketing: Both parties must contribute to promoting the products fairly. If the partner doesn't give their products decent attention, why bother having them on board?
- The digitalization of the business: many companies that were born non-digital invest large resources in obsolete technologies or that simply cannot be fixed, something that, in a world of innovation and technological agility, delays the adoption of new models.
At Orienteed we are closely aware of the challenges of business digitization. An objective that has become urgent for many companies, especially after the impact of the pandemic and new consumer behaviors. We believe that challenge does not mean impossible. With a clear transformation strategy and investment in new technologies, the implementation of a B2B2C ecommerce is today completely possible and with a very high return on investment.
Now is your turn!
As a summary, let us remember that B2B2C is a combination of two business models: business to business (B2B) and business to consumer (B2C). In the B2B2C model, a company uses another company to reach its consumers. The B2B2C model differs from its commission-based monetization principle.
The B2B2C is a mutually beneficial relationship that offers the "B1 Company" the benefit of presenting its products and services to a new range of potential customers. A B2B2C business also simultaneously generates an income stream for the “B2 Company”, as well as opportunities to introduce new and relevant products and/or services to its customers. The final consumer base also benefits as a result of being the recipient of the expanded diversification of products and/or services, especially in the implementation of marketplaces, in digital environments, with agile and modern technologies.
For manufacturers and startups, the B2B2C e-commerce model offers great opportunities for business development and cost optimization. This is a way to expand sales, not only in local markets, but also to establish a presence in other markets in which the partner company operates.
If you are thinking of implementing a B2B2C ecommerce or need to take your current platform to the next level, contact us today here.
Digital Marketing Manager at Orienteed.