Are you in the process of starting a business? Being an entrepreneur is one of the dreams that revolve around many people’s minds. It is a step to financial freedom and wealth creation. You too want to join this wagon that is why you are on this page.
As you start your entrepreneurial journey, picking your business model is central. You need to determine how you are going to run your venture to scale it and generate profit. Maybe you are aware of models like B2B and B2C. These models have been in existence for decades and many businesses use them in their operations.
However, with technological advancement and internet usage growth, new business models have come up. C2C is one of the latest models in the e-commerce world. But what does this model entail?
In this article, we discuss the C2C model and how it works as well as its pros and cons. Therefore, keep reading to get to understand more about this business model.
What is C2C Business Model?
C2C is an acronym of the Consumer-to-Consumer business model. This model allows consumers to buy products and services from other consumers. The transactions occur through a third-party platform. Unlike the traditional models, the players in this approach – sellers and buyers – are consumers.
The purpose of the C2C business model is to eliminate the intermediaries and middlemen. As well, it helps the parties to sell products without necessarily having to maintain an online storefront.
With the diverse internet penetration, many entrepreneurs are adapting C2C as their operational model. The other name of the C2C model is the online marketplace. The internet is enabling sellers and buyers to connect and transact through these marketplaces. So, the model involves individuals to individuals in place of a business dealing with an individual.
How Does C2C Business Model Work?
Maybe you are wondering: how does C2C model work. As noted, both buyers and sellers are individuals and not businesses. These individuals are consumers in need of a given product or service. However, it is not easy for consumers to meet with one another without passing through middlemen.
With the internet, now it’s possible through a third party known as an online marketplace. This space allows the consumers to meet and transact with one another without involving middlemen. The third party earns a commission from one or both parties for facilitating the transaction.
Also, the marketplaces all sellers to advertise and promote their products or services. Each of the platforms has different operational terms and conditions. While some facilitate delivery and shipping, others only allow transactions. Your customers will pay on delivery through the platform.
So, the consumer to consumer approach eliminates the need for establishing a business to customer relationship and replace it with the customer-to-customer connection.
C2C Business Model Examples
With the internet becoming part of basic needs, many intermediaries are transforming into online marketplaces. These marketplaces are making it easy for you to drive sales without having to establish an online storefront. What you need to do is create an account on them, explain the services or products you offer, and wait for customers to reach out to you.
There are many examples of businesses using this model. Amazon is one of them. Though it uses a combination of different business models, C2C is one of them. As a seller, you have a chance to list your products on Amazon. Customers requiring what you’re selling can view your products and place an order. So, you deal one on one with the consumers.
Fiverr is another example of a platform applying the C2C model. Here, sellers can create gigs of services they are offering. A buyer requiring these services reaches out to the seller. The buyer and seller deal with each other without involving a business entity.
Pros and Cons of C2C Business Model
No doubt, the C2C business model is making it easy for people to drive sales. It is a new model transforming how people do business. However, it is not immune to challenges. Before deciding whether to implement it on your venture, here are its pros and cons:
Pros
High profitability
Every business’s desire is to boost its profitability. For you to achieve this goal, you must reduce your costs and parties in the sales process. C2C enables you to accomplish this aspect by cutting off the intermediaries. In this model, you deal with customers one-on-one meaning you take a big profit margin after the platform fees.
Also, the model saves you from costs for running an online storefront. The online marketplaces allow you to interact with customers without needing your online shop. Eliminating these costs adds some coins to your profit basket.
Shared credibility
When running an online store, you face several hurdles in establishing your brand. You can face credibility issues during your startup stages. As you know, customers do not truth new businesses due to the increase in online frauds. This aspect means that it will take you a long period before you establish yourself in the market.
With C2C, credibility is not an issue. The level of sales you make does not depend on your credibility level rather it relies on the perception of the customers on a particular C2C platform. As such, you get shared credibility which reduces your marketing costs and helps you to make a sale within a short duration.
Large market base
Unlike in an online store, your products or services features on a platform with large traffic. You will get impressions and clicks from people seeking particular products. With this aspect, your products are accessible to a large customer base that can result in sales.
Cons
High competition
As people seek to maximize profits, many sellers are turning to the C2C model. This means that you will find many sellers offering similar products and services at different prices. As result, this model attracts high competition which can lead to a lower profit margin.
Payment and platform fees
Selling in a C2C platform can pose payment issues. Some platforms do not have a policy for facilitating transactions. Due to this, you might fall prey to online scammers. Also, these platforms vary on the facilitation fees. The fee can be beyond what you would incur if you used intermediaries to sell your products.
Conclusion
As you can see, C2C is a powerful business model that is easing how people transact. Eliminating the middlemen helps you to earn extra coins in profit. Also, you can save on store setup and marketing costs. However, However, be aware of the high competition and facilitation fees on different C2C platforms.
