Business to Consumer (B2C): Definition & Meaning
Consumers today buy from businesses directly, in store as well as online. Such transactions are ubiquitous and follow the B2C – or business-to-consumer – model. This guide explains how B2C works, what B2C eCommerce is all about, and the various benefits and challenges that the model poses for businesses as well as customers.
What Is B2C?
B2C refers to commercial transactions or interactions between a business and individual consumer, rather than transactions between businesses (see B2B).
B2C businesses typically offer products or services directly to consumers, such as restaurants, online retailers, and service providers.
A business selling coffee to people follows the B2C model. Similarly, an individual buying a mobile phone engages in a B2C transaction. Even getting a subscription for a magazine or a streaming platform is B2C. This is different to when an organization purchases products or services from a seller (which falls under B2B).
B2C transactions take place in brick-and-mortar stores as well as online.
How Does B2C Work?
Since the business-to-consumer model connects companies directly to their end customers, their approach is different from other models.
- B2C transactions typically involve smaller quantities of goods or lower-value services.
- B2C customers purchase products based on their emotional connection with a brand.
- B2C companies focus on building a strong brand identity.
- B2C businesses invest in multi-channel marketing (email, social media, in-store experiences, targeted ads etc.) to drive customer engagement.
B2C companies can target customers around the globe today, but they face stiff competition. A streamlined buying experience, personalized recommendations, and responsive customer service are key to ensuring the success of B2C ventures.
B2C in eCommerce
B2C eCommerce refers to transactions between sellers and customers that occur online.
More and more customers are buying products from businesses on an online platform: through a website, marketplace, or mobile app. Below are some B2C eCommerce models:
- Direct sellers sell their products directly to customers through their websites or apps.
- Online platforms offer products from multiple sellers to end consumers. They do not manufacture or own the product.
- Fee-based platforms have sellers that charge a fee for accessing their product; for example, a subscription-based magazine.
- Community-based platforms leverage common interests to bring sellers and buyers together on a marketplace. Sellers can promote their products to a niche audience using targeted ads.
B2C eCommerce retailers often do not have brick and mortar stores, which helps them avoid physical overheads. They can also expand their reach globally. In fact, with eCommerce integration in B2C, cross-border transactions are on the rise.
B2C eCommerce enables effective data collection about consumer preferences, unlike conventional marketing. Through marketing analytics, businesses can track conversion, improve service delivery, and offer personalized recommendations – all of which improve customer retention.
Benefits of B2C
B2B offers numerous benefits, including:
- Low barrier entry: Companies can enter the market with a small initial capital and benefit from a less complex sales process.
- Bigger customer base: B2C companies can reach millions of consumers worldwide. In case they lose customers, quick replacement is also possible.
- Larger profit share: Since B2C companies sell directly to customers, they can cut back on overhead costs and retain larger shares of profits.
- Strong reverse logistics: B2C companies offer customer-friendly return and exchange policies. This reassures buyers and boosts customer retention.
Challenges in B2C
The B2C model poses certain challenges, including:
- No negotiation: Customers do not have the space to negotiate or bargain for pricing or delivery schedule.
- Segmented market: The B2C market is large and segmented, making it difficult to satisfy customers and gain loyalty. Customer relations demand sustained efforts.
- Higher marketing costs: To stand out amongst competitors, B2C companies invest more in marketing and branding.
- Longer supply chain: B2C supply chains are longer and more complex, including manufacturers, retailers, and shipping companies. This increases risks and compliance regulations.
B2C: Key Takeaways
- B2C or business-to-consumer refers to commercial transactions between sellers and end consumers.
- B2C order volumes are small and low value. Being the only stakeholders, customers rely on emotional connection with brands to make quick purchasing decisions.
- B2C companies invest in building a brand identity and multi-channel marketing to improve customer engagement and retention.
- B2C eCommerce is a fast-growing field with various models including direct selling, online platforms, fee-based and community-based.
- B2C eCommerce companies are well-positioned to cut physical overhead, reach a global audience, and improve service delivery through marketing analytics.
- B2C companies can enter the market at low costs, take larger profit shares, and satisfy a wide customer base through strong logistics.
- However, B2C companies also deal with a segmented market and face tough competition. The supply chain is complex and marketing costs tend to be high.