The purpose of every business is to make a profit. But this does not occur naturally. For any business to generate profit, it must establish a way of driving sales. Every business owner must come up with an operational model that they will apply in moving their products and services to the consumer or user.
As an entrepreneur, having a business model is critical. The model helps you to make decisions and determine your target customers. In the e-commerce world, there are many business models you can consider. However, you need to understand how each model works before adapting it to your business.
This article discusses the B2C business model, how it works, and the potential benefits and shortcomings of using it. Hence, let’s keep reading on to learn more about this model.
What is B2C Business Model?
B2C is a short form of Business-to-Consumer and stands for the businesses that sell products or services directly to the end-user through an online space. This model works where you as an entrepreneur transact with the end consumers. Many online and offline stores apply this approach in their operations. For instance, if you run a fashion store that sells outfits to final users, you are using this model in running your business.
The model works the same way with direct to consumers (D2C) only that the operations occur online. Another term for this model is e-retailing or e-tailing. So, you venture to do business with people requiring the product for consumption. The customers can be individuals or other businesses as long as what you are selling is not raw material or ingredient for other product development.
How Does B2C Business Model Work?
As the term suggests, this model involves transactions happening between a business and consumer in a virtual space. The model brings at least three parties and a platform. The first party is the manufacturer or supplier. This party makes the product that they offer to an online retailer. They own the brand name. The retailer can also be a manufacturer or product creator.
The retailer or online shop owner is the next party. This party prepares catalogs, product descriptions, and establishes a virtual platform to display the items they are offering. Also, they provide payment processing and checkout systems. The other task is processing and delivering the customer orders.
Like other models, the customer is the crucial party in this concept. Without a customer, the cycle remains incomplete. Customers are people seeking particular products. They visit the online store or platform, assess the products the retailer is offering, and place the orders. The customers also pay the bill and shipping fees. With this, the next role is for the retailer to carry on the fulfillment task and ensure delivery of the items to the customers.
Example of B2C Business
As noted above, the B2C business model is a common operational approach for many online ventures. Any business that deals with consumer products and deals with the end-users apply this model in their operations. For instance, if you have an online storefront offering jewelry for personal use, your venture is a B2C business.
The B2C businesses fall into five categories. Direct sellers are the first category. These businesses make products and sell them to the customers directly. Microsoft and Apple are good examples of these B2C businesses. The next group is online intermediaries whose role is to provide a platform for sellers and consumers to meet. eBay and Etsy are some of the businesses in this category.
Also, fee-based businesses like Netflix and Hulu fall are another type of B2C ventures. The other types are community-based and advertising-based B2C businesses.
Pros and cons of B2C Business Model
Before applying any business model, it is essential to know its benefits and expected challenges. B2C is like other business models. For this reason, it has both pros and cons. Here they are:
Pros
Easy to scale
When you join the B2C field, you are likely to grow your business faster than in B2B. The consumers of goods are available. Regardless of the niche you choose, you will have a large customer base who are ready to buy your products. So, you can scale up your business within a short duration.
Also, no limitation on what to sell at a given time. Like in a brick-and-mortar store, you can offer multiple products in your online shop. As such, it is easy to expand and grow your venture when applying the B2C model.
Easy to market your products
Marketing is the heart of driving sales in any business. You must create awareness about the products you are offering and how they will help the target customers. With B2C as your business model, marketing is easy.
Your product customers can be on any platform. So, you have a chance to market your products through online platforms and social media. You can apply any marketing approach to drive your sales.
You can predict the market trends
In the modern market, having the ability to predict potential trends in your niche is the secret of remain relevant and profitable. This prediction is not possible without current trends data.
Since it runs online, B2C is a data-driven model. You can correct data about customer behavior and changes in their consumption habits. This way, it will be easy for you to predict the possible market trends and align your business with them.
Cons
High competition
Competition is a major setback in the B2C model. As you know, many businesses are moving online and trying to convince customers to consider their offers. This means that your business will compete with many businesses for the same customers. High competition can hinder you from achieving your goal. Also, it will limit your profit margin. So, you need to sell more products to meet your revenue goal.
Conclusion
As you can see, the B2C business model is a common operative concept. Many e-commerce businesses are using this model in their operations. As a newbie, you can consider it as your stepping stone. However, you need to understand the possible challenges you will encounter such as competition.
