B2B2C Ecommerce: How to Tap into Economies of Scale

When it comes to selling your products, you know your options: sell to a business (B2B) or a consumer (B2C). But with the rapid rise of ecommerce, the lines between these two sales channels have blurred. And the sales ecosystem has spilled over these standard two models into a new framework — B2B2C ecommerce.

B2B2C stands for business to business to consumer. As the name implies, it’s a business model where Company 1 sells their product or service in partnership with Company 2 to an end customer. Unlike when you whitelabel a product, the end customer understands that they are buying a product or using a service from Company 1.

Few B2B leaders can rapidly scale their operations without compromising service levels or overall sales efficacy. Thus, instead of attempting to ‘be everything’ on their own, many B2B companies choose to go the partnership route and morph into a B2B2C model to maximize business opportunities and achieve scalable growth.

For B2B2C to work, both companies need to be targeting the same consumer base and provide value that each company couldn’t achieve on its own. And perhaps most importantly, the partnership needs to make sense for the end customers. Here are some examples of how the B2B2C model benefits everyone involved:

• Company 1: builds brand credibility quickly and taps into an existing customer base for lower acquisition costs 
• Company 2: offers a new or complementary service without investing internal resources and gains additional data about customers
• Consumer: takes advantage of a convenient service that’s backed by a reputable source

When it comes to B2B2C, many people often confuse it with other sales channels — which makes sense considering businesses are constantly evolving and changing.

B2B2C is different from a channel partnership because you’re not selling products to another company who then sells them to the consumer. For instance, a wholesaler who sells to a retailer who then sells to the consumer, is not B2B2C. Diving into that further, a B2B brand that’s launching a DTC channel also doesn’t fall into the B2B2C model.

To further clarify, let’s take Ben & Jerry’s as an example. The company sells its ice cream through retail grocery stores (a channel partnership). The brand also launched a website with BigCommerce to sell merchandise and ice cream pints online (a DTC channel). And while both of those channels may appear to fit the B2B2C model, they don’t. Instead, they are great examples of channel partnerships and DTC selling.

To better understand how companies have employed a successful B2B2C model, let’s take a look at some popular examples.

1. Instacart and grocery stores.

Instacart is an excellent example of how B2B2C works for newer tech start-ups and legacy grocery stores to add a service that’s beneficial for consumers. Here’s how that breaks down.

With busy schedules, consumers don’t have time to go to the grocery store. Today, shoppers often prefer when someone else does the shopping for them, and then delivers the items. 

Grocery stores don’t typically  offer this service, though, because it could involve a hefty investment in both technology and staffing. In comes Instacart. They offer an ecommerce site where consumers can mimic the entire grocery shopping experience, directly from Instacart’s ecommerce website. 

So in this example, Instacart is Company 1 and is able to reap the benefits of partnering with the existing grocery stores, which gives them a built-in customer base. The grocery stores are Company 2 and they are able to offer a service to their customers without investing their own resources. And most importantly, the end customer understands that they are purchasing products from the grocery store, not Instacart. Yet eventually, they come to associate grocery shopping with Instacart.

2. Affirm and ecommerce retailers.

How Affirm works with ecommerce retailers is another example of B2B2C. For this example, let’s look at the partnership between Affirm and BigCommerce merchant UPLIFT Desk.

UPLIFT Desk sells a variety of standing desks on its website to help customers create customized workstations. However, some customers might not be able to pay for the desk all at once. Instead of offering financing themselves, UPLIFT Desk partners with Affirm to offer customers the option of monthly payments. Once again, in this example, customers know that they are working with Affirm for the payment solution not UPLIFT Desk, which is key for the B2B2C ecommerce model. 

While B2B2C ecommerce offers a host of attractive benefits for brands, by no means, it’s an easy setup to orchestrate. 

B2B2C partnerships require works from both sides — in particular, when it comes to:

• Data sharing: Successful B2B2C ecommerce partnerships require real-time integrations between all the participants. Data for customer records, stock, inventory, pricing, promos, marketing, loyalty data integrations must be synced together. Failure to do so can result in a fragmented customer experience (CX). 
• Customer ownership: B2B2C partnerships thrive when both parties contribute equal amounts of customers and share customer ownership. Or one party maintains all customer records and fairly compensates the 'contributor' for driving sales. 
• Brand differentiation: Unlike "white label" partnerships, B2B2C assumes clear differentiation between each company. For example, UberEats flexes its brand while delivering food for its partners. They also count customers' (and their data), driven by Starbucks as theirs. 
• Promotion: Both parties need to fairly contribute to promoting the products. If the partner doesn’t give your products a decent spotlight, why bother having them on-board?

The lines between different business models are vanishing. According to McKinsey analysts, US ecommerce penetration saw 10 years’ growth in 3 months, jumping from just over 15% at the end of 2019 to 35% by the end of Q1 2020.

Indeed, a brand manufacturer can now sell to anyone asking online. 

Still, it doesn't mean that every type of business will (or should) adopt the B2B2C model. Here's why.

1. The B2B2C model requires a certain level of digital maturity.

Or, at least, a strong commitment to executing digital transformations and adding new integrations to your online commerce setup. At present, not every retail business is there yet.

2. The product itself can be a limitation.

Complex, regulated or niche products such as medical or industrial equipment (for example) are not viable to sell to end-customers directly.

3. You are not ready to negotiate.

B2B2C arrangements can be tough to sign off if your company isn't willing to give them proper credit, share customer data or provide fair compensation.

The B2B2C model can help scale your customer acquisition efforts by leveraging different sales channels and partners for different purposes. 

Still, running successful B2B2C operations is a challenging task, especially when it comes to negotiating win-win partnership terms, ensuring data exchanges and customer experience consistency across channels, plus figuring out customer ownership. 

While this model may not be suited for every product or business, it does have its merit when done right.