When starting a business, you can choose from several operational models. You can focus on selling to other businesses and become a business-to-business (B2B) business or you can sell directly to consumers. You can even sell to businesses and consumers if your offering applies to both or if you have separate product versions.
If you’re selling to consumers, your company will be a business-to-consumer (B2C) business. We’ll explore the B2C business model, including the various types of B2C businesses and B2C challenges.
B2C stands for “business to consumer.” B2C transactions are commerce transactions where a business sells products or services directly to consumers. Traditional B2C transactions included buying clothes from a store at the mall or eating in a restaurant.
B2C is the most well-known model. If you’ve ever purchased an item online for personal use, you’ve experienced a B2C transaction.
As the internet grew in the 1990s, hundreds of thousands of domain names were registered in anticipation of an e-commerce revolution. New technologies arose to address emerging cybersecurity issues. When Netscape developed secure socket layer (SSL) encryption certificates, consumers became more comfortable transmitting data over the internet. Web browsers could identify whether a site had an authenticated SSL certificate, helping consumers find trustworthy e-commerce stores. SSL encryption is still a vital part of fighting network security threats today.
The mid-1990s and 2000s saw the rise of e-commerce through sites like Amazon and Zappos. Today, it’s rare to see a consumer-based business that doesn’t sell products online. Consumers enjoy the convenience of online shopping and businesses thrive on low overhead. With a virtual storefront, a business doesn’t need a brick-and-mortar location or extensive inventory stocked at all times. An e-commerce website is ideal for small B2C businesses like jewelry stores and bakeries.
Dropshipping and fulfillment centers are innovations that allow a layered B2C approach and facilitate inventory management. Sellers can act as interfaces between third-party warehousers and customers.
Consumers regularly interact with various B2C models daily. Here are the five most common B2C business types in today’s market.
The direct seller online business model is the most common. In this scenario, consumers purchase products from a company that fulfills this transaction from its inventory.
Direct sellers can be established brands with physical stores that expand their services to include an online presence and inventory, such as Home Depot or Target. It can also be a fully online store, such as Zappos.com.
Online intermediaries are another popular model. In this model, a third party acts as a middleman between the seller and the consumer. These businesses bring sellers a buyer network and bring consumers vendors to buy from.
The intermediary model has grown and evolved. For example, online travel sites like Expedia and Priceline collect flight, hotel and car rental information and provide it to consumers. These services streamline the travel process.
Online marketplaces are another intermediary form. The biggest example is Amazon, a powerful intermediary that covers nearly every product genre. Etsy and other Etsy alternatives specializing in creative wares are also online intermediaries. Sellers can create Etsy shops that target a specific audience.
Another B2C model receives indirect consumer revenue. These companies provide free content or services that attract significant web traffic and use that traffic to sell ads to other companies.
Companies that choose this model must promote their brand and market heavily to achieve consistent, increasing traffic and place as many consumers as possible in front of paid ads. If their efforts don’t lead to sales for their advertisers, they risk losing those advertisers.
Examples of companies that use an advertising-based B2C model include online publications like The Huffington Post, TechCrunch and The Guardian.
The community-based B2C model is similar to the advertising-based model, relying on significant consumer interaction. However, these companies foster online communities built around a shared interest and attract advertisers who want to sell to site users.
For example, if a company has a specific product, such as camping equipment, it will advertise on websites, blogs and forums focused on camping and outdoor activities.
The strongest example of this B2C model is Meta (formerly Facebook). Utilizing consumer data, Meta can hone in on shared interests and help businesses connect to their target customers via location data and demographics.
In the fee-based model, B2C companies charge consumers a subscription fee to use their services. These are recurring transactions, not one-time purchases. There’s often a tier-based fee system with various features and functions.
Streaming businesses are fee-based B2C companies. For example, Netflix was an entertainment streaming trailblazer that opened the market for competitors like Disney+, Hulu and HBO Max.
Food-based delivery services are also fee-based B2C examples. Consider companies like HelloFresh that deliver meal kits to consumers on a subscription basis.
B2C businesses face unique challenges to stay competitive and grow, including the following.
Building an effective business website is crucial to serve customers, open new markets and expand your business inexpensively. Websites don’t have to be flashy, but they must be easy for consumers to navigate and provide them with a friction-free experience.
Website creation tips include:
B2C businesses must pay attention to search engine optimization (SEO) so their websites can rise to the top of internet search rankings.
Customers generally choose business websites on the first page of results after searching for specific keywords or phrases. Without SEO optimization, your business will get buried in the mix, miss out on traffic and lose potential customers.
To ensure top-quality SEO, businesses can:
Payment processing is another game-changing challenge. B2C businesses must accept credit cards, accommodate myriad payment options, ensure Payment Card Industry-compliance and process all payments securely.
Choosing an excellent, reputable payment processor is essential. Additionally, services like PayPal and Venmo can perform payment processing for online vendors, providing a one-stop solution whether the customer is online or buying in person.
Business-to-consumer sales strategies and operations present many questions for small business owners. Here are some of the most common questions and their answers.
Traditional B2C examples include major retailers like Walmart or Target. Looking specifically at e-commerce, there’s no better example than Amazon. The storefront is entirely electronic and Amazon serves more consumers daily than any other business.
B2B stands for business to business. B2B companies specifically sell products or services to other companies. B2C businesses cater specifically to consumers, offering items or services that make sense to buy on an individual basis.
Modern B2C businesses focus heavily on e-commerce. Many B2C companies lack a physical storefront. This lowers overhead and increases the target audience. Being online also makes it easy for B2C companies to track large amounts of data related to their operations. They can use analytics to improve business policies and strategies.
B2C businesses hold a crucial market position and serve millions of people worldwide. B2C businesses will continue flourishing alongside e-commerce – and e-commerce will continue skyrocketing amid trends like mobile and social media shopping. According to Statista, United States retail e-commerce sales reached nearly $266 billion in the third quarter of 2022.
Ensure your B2C business’s success by identifying what your customers want and distinguishing your products and services from the competition.
Adam Uzialko contributed to this article.