B2B & B2C & DTC Fulfillment Business Models —All You Need to Know
According to studies, consumers spent more than $517 billion online with U.S. companies in 2018? Given the strong demand for ecommerce services, it’s no surprise that the immense spending power of consumers also corresponds to increasing expense budgets. As a result of the massive revenue potential created by online shopping, your company has a huge opportunity if you wish to expand (or even establish) your existing business. To take advantage of this opportunity, however, you’ll need to decide which ecommerce fulfillment model is right for your company.
Ecommerce Business Model
Your ecommerce business model is your business plan to make money where you set up your company’s operations, marketing, customer service, and financing in order to meet this objective. While most business owners would like to sell to both consumers and businesses, some online retailers choose to specialize in one or the other. There are many ecommerce business models to choose from such as B2B (business to business), B2C (business to consumer), or DTC (direct to consumer). Each model has its own set of pros and cons which you should consider prior to the launch of your ecommerce store.
B2B: B2B ecommerce is the business model where an online retailer supplies a product or set of products directly to other businesses. The products sold may be niche, and tend to appeal more to enterprise-size buyers than individual consumers. In B2B ecommerce models, you will find dropshippers , wholesale B2B resellers, wholesalers , distributors , manufacturers and service providers.
B2B businesses share the following characteristics: Under this model, companies sell directly to other companies rather than consumers.
B2B is a value game: The number doesn’t matter in this model. The value generated from one single customers is greater than the number of potential customer
It’s All About Reputation: Your business reputation is the most crucial here. Due to low volume of customer base with high value, poor word of mouth can impact a relatively small prospect pool.
Fact-based Marketing: Facts, figures, statistics, use cases etc. inspires B2B decision makers. One poor decision can cost a lot of money.
Available B2B Ecommerce Platforms:
As large enterprises and brands that have their own ecommerce capabilities, SMEs/SMBs can leverage these platforms that powers up the B2B ecommerce business.
B2C: A B2C is a model in which consumers (end users) are the buyers and businesses (distributors/middlemen/brands) are the sellers. Thus, a B2C model involves direct interaction/relationship between end users and companies. It is the most common type of ecommerce business model. Instead of businesses selling their own products to other businesses, online retailers such as Amazon, Jet and Walmart sell their products directly to consumers.
B2C businesses share the following characteristics:
- Products sold are for personal usage: Low volumes of products are sold to individual consumers at a premium price by companies. These consumers typically don’t have a need for high volume products or bulk or bundled products.
- Big name recognition is not required: There are two factors that impact B2C consumers. Immediate use and pricing. Thus, the purchase risk decreases and customers don’t go for big name recognition. They don’t need the seller to have a significance or recognition or market share.
- Emotion-based marketing: In B2C, Purchase decisions are made based on emotions rather than facts. Any B2C company plans emotion provoking marketing strategies which must elicit an emotional response that can inspire and trigger purchase decisions of the consumers.
Available B2C Ecommerce Platforms:
Here are a few noteworthy names of such platforms that powers up the B2C ecommerce business of online merchants.
- Wix Stores
- Big Commerce
- Site Builder
B2C vs B2B – Which one is better?
As an entrepreneur, you may be thinking about what kind of online business model to choose. The traditional market is B2B or business-to-business model and most people might associate this model with the brick-and-mortar shops. It involves a partnership between manufacturers and wholesalers or retailers for the sales of goods, services and information. With more than 10 million eCommerce websites today, it is clear that another kind of online business model has emerged. This new approach called B2C or consumer-to-consumer eCommerce involves direct interaction between consumers who can sell to each other privately through their personal websites.
D2C & Ecommerce
Direct-to-consumer (“D2C” or “DTC”) is a term that has gained popularity in the marketing and business world in recent years. It refers to businesses that sell products and services directly to customers without any intermediary (i.e., the customer doesn’t need to go through a retailer or a third party). Often, D2C offerings include consumable products and services — such as beauty products, pet supplies, or kids’ toys. Unsurprisingly, D2C businesses have recently grown increasingly popular.
In a nutshell, Direct-to-consumer (D2C) businesses directly market products to consumers, bypassing traditional distribution channels. D2C has some big implications for brands that play their cards right. You probably saw this business model in action with Warby Parker (a direct-to-consumer online glasses company), or Casper (an online mattresses & sheets company).
The rise in popularity of D2C as a business model is difficult to overlook. Research suggests that the model will be less than half of a percent of the market, dwarfing, for instance, B2B marketing. The model’s key benefit lies in its ability to bypass the need for retailers and online marketplaces, while also positioning brands as less corporate and more human.
D2C Model Characteristics
- There’s no middlemen: DTC business model for companies doesn’t need any wholesaler or retail store to manage products.
- It manages an end-to-end process: Companies process an all-in-one business & order management from manufacturing, marketing, and selling, to shipping their products themselves.
- Depends on platforms: D2C companies usually use platforms like Amazon, Instagram, Facebook, and Google etc. to sell their products directly to their consumers.
The Difference Between B2C and DTC
These two product delivery systems are very much opposites. The B2C model is what the most businesses use to deliver their products and services to consumers. DTC, on the other hand, is a method of selling directly to customers without going through traditional channels.
DTC, or direct-to-consumer marketing, is a marketing strategy that cuts out the middleman and allows the brand to have direct contact with its customers. DTC makes the purchase process easier for the consumer by eliminating the traditional sales channels (i.e. retailers) and lowering the cost of customer acquisition through digital advertising.
The typical B2C product journey starts from the manufacturer, goes through wholesaler, retailer and reaches customers. On the other hand, with DTC, the same journey looks sorted without any middleman, wholesaler or retailer. It literally starts from the manufacturer who is the seller too and reaches the consumers.
At the simplest level, this means that you bypass distributors and retail stores. This is a viable strategy and can win out with some products. However, DTC makes the most sense in certain situations.
Why Should Companies Adopt the D2C Business Model?
With multiple benefits, brands are adopting D2C while looking forward to
- Gaining more control over business & customer data
- Creating a better customer experience
- Selling/marketing products at a lower cost
How Can You Succeed at DTC Ecommerce?
If you’re looking to start an ecommerce business, the direct-to-consumer (DTC) market is impactful. Thanks to today’s hyper-digital world, online shopping has become a part of daily life. A lot of consumers are already buying products online from niche sites. If you’re wondering how to succeed at DTC ecommerce, here’s how:
- Develop and protect your brand identity: Build a strong brand that your consumers can trust. Consumers today prefer experience over anything else. If you can create a lasting experience and position your brand as a friendly and familiar one, consumers will be fond of your brand by name.
- Upgrade your website with powerful ecommerce capabilities: Customers prefer a website where they can easily browse products where HD photos can showcase products with maximum visibility. The site should enable them to search for specific items, collect them in a shopping cart, and check out with a flexible and variety of payment methods. With strong analytic capabilities, you should be able to analyze your customer data and refine your marketing strategy.
- Leverage a DTC Ecommerce Fulfillment Software: Manage your inventory and fulfill your orders with an expert warehouse management software (WMS) as Vinculum offers, or 3PL warehouse management software. The key reasons for this shift are increasing demand for speedy deliveries from customers and stringent regulations across the globe.
- Build your rapport with current retail partners: By selling directly to consumers, you’re eliminating a revenue stream for your retail partners. If DTC doesn’t work out, and you need to return to retailers, it’s helpful to have a positive relationship.
Success in ecommerce requires a thorough planning process to ensure you allocate your resources properly. To ensure you have a sustainable online retail business, you should carefully consider all of the options available offering fulfillment services to your customers. To capitalize on the opportunity, you will need a strategy for fulfilling orders that balances your growing ecommerce sales with price and speed commitments you’ve made to your customers. That’s where this guide comes in. It provides an overview of the key business models you can use to fulfill customer orders online, and a framework you can use to decide what type of fulfillment is best for your business.
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