What Is Business-to-Consumer (B2C)?
The term business-to-consumer (B2C) refers to the process of selling products and services directly between a business and consumers who are the end-users of its products or services. Most companies that sell directly to consumers can be referred to as B2C companies.
B2C became immensely popular during the dotcom boom of the late 1990s when it was mainly used to refer to online retailers who sold products and services to consumers through the internet.
As a business model, business-to-consumer differs significantly from the business-to-business (B2B) model, which refers to commerce between two or more businesses.
- Business-to-consumer refers to the process of businesses selling products and services directly to consumers, with no middle person.
- B2C typically refers to online retailers who sell products and services to consumers through the internet.
- Online B2C became a threat to traditional retailers, who profited from adding a markup to the price.
- However, companies like Amazon, eBay, and Priceline have thrived, ultimately becoming industry disruptors.
Understanding Business-to-Consumer (B2C)
Business-to-consumer (B2C) is among the most popular and widely known sales models. Michael Aldrich first utilized the idea of B2C in 1979, who used television as the primary medium to reach out to consumers.
B2C traditionally referred to mall shopping, eating out at restaurants, pay-per-view movies, and infomercials. However, the rise of the internet created a whole new B2C business channel in the form of e-commerce or selling goods and services over the internet.
Although many B2C companies fell victim to the subsequent dotcom bust as investor interest in the sector dwindled and venture capital funding dried up, B2C leaders such as Amazon and Priceline survived the shakeout and have since seen tremendous success.
Any business that relies on B2C sales must maintain good relations with their customers to ensure they return. Unlike business-to-business (B2B), whose marketing campaigns are geared to demonstrate the value of a product or service, companies that rely on B2C usually elicit an emotional response to their marketing in their customers.
B2C Storefronts vs. Internet Retailers
Traditionally, many manufacturers sold their products to retailers with physical locations. Retailers made profits on the markup they added to the price paid to the manufacturer. But that changed once the internet came. New businesses arose that promised to sell directly to the consumer, thus cutting out the middle person—the retailer—and lowering prices. During the bust of the dotcom boom in the 1990s, businesses fought to secure a web presence. Many retailers were forced to shut their doors and went out of business.
Decades after the dotcom revolution, B2C companies with a web presence continue to dominate over their traditional brick-and-mortar competitors. Companies such as Amazon, Priceline, and eBay are survivors of the early dotcom boom. They have gone on to expand upon their early success to become industry disruptors.
Online B2C can be broken down into five categories: direct sellers, online intermediaries, advertising-based B2C, community-based, and fee-based.
B2C in the Digital World
There are typically five types of online B2C business models that most companies use online to target consumers.
1. Direct sellers. This is the most common model in which people buy goods from online retailers. These may include manufacturers or small businesses or simply online versions of department stores that sell products from different manufacturers.
2. Online intermediaries. These are liaisons or go-betweens who don't actually own products or services that put buyers and sellers together. Sites like Expedia, trivago, and Etsy fall into this category.
3. Advertising-based B2C. This model uses free content to get visitors to a website. Those visitors, in turn, come across digital or online ads. Large volumes of web traffic are used to sell advertising, which sells goods and services. One example is media sites like HuffPost, a high-traffic site that mixes advertising with its native content.
4. Community-based. Sites like Meta (formerly Facebook), which build online communities based on shared interests, help marketers and advertisers promote their products directly to consumers. Websites typically target ads based on users' demographics and geographical location.
5. Fee-based. Direct-to-consumer sites like Netflix charge a fee so consumers can access their content. The site may also offer free but limited content while charging for most of it. The New York Times and other large newspapers often use a fee-based B2C business model.
B2C Companies and Mobile
Decades after the e-commerce boom, B2C companies are continuing to eye a growing market: mobile purchasing. With smartphone apps and traffic growing year-over-year, B2C companies have shifted attention to mobile users and capitalized on this popular technology.
Throughout the early 2010s, B2C companies were rushing to develop mobile apps, just as they were with websites decades earlier. In short, success in a B2C model is predicated on continuously evolving with consumers' appetites, opinions, trends, and desires.
Because of the nature of the purchases and relationships between businesses, sales in the B2B model may take longer than those in the B2C model.
B2C vs. Business-to-Business (B2B)
As mentioned above, the business-to-consumer model differs from the business-to-business (B2B) model. While consumers buy products for their personal use, businesses buy products to use for their companies. Large purchases, such as capital equipment, generally require approval from those who head up a company. This makes a business' purchasing power more complex than that of the average consumer.
Unlike the B2C business model, pricing structures tend to be different in the B2B model. With B2C, consumers often pay the same price for the same products. However, prices are not necessarily the same. Businesses tend to negotiate prices and payment terms.
What Is Business-to-Consumer and How Does It Differ From Business-to-Business?
After surging in popularity in the 1990s, business-to-consumer (B2C) increasingly became a term that referred to companies with consumers as their end-users. This stands in contrast to business-to-business (B2B), or companies whose primary clients are other businesses. B2C companies operate on the internet and sell products to customers online. Amazon, Meta (formerly Facebook), and Walmart are some examples of B2C companies.
What Is an Example of a Business-to-Consumer Company?
One example of a major B2C company today is Shopify, which has developed a platform for small retailers to sell their products and reach a broader audience online. Before the advent of the internet, however, business-to-consumer was a term that was used to describe take-out restaurants, or companies in a mall, for instance. In 1979, Michael Aldrich further utilized this term to attract consumers through television.
What Are the 5 Types of Business-to-Consumer Models?
Typically, B2C models fall into the following five categories: direct sellers, online intermediaries, advertising-based B2C, community-based, and fee-based. The most frequently occurring is the direct seller model, where goods are purchased directly from online retailers. By contrast, an online intermediary model would include companies like Expedia, which connect buyers and sellers. Meanwhile, a fee-based model includes services such as Disney+, which charges a subscription to stream their video-on-demand content.