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Retail / Business-to-consumer electronic commerce

Business-to-consumer electronic commerce

Business-to-consumer electronic commerce (B2C) is a form of electronic commerce in which products or services are sold from a firm to a consumer.


Five Classifications of B2C E-Commerce

Direct Sellers
Companies that provide products or services directly to customers are called direct sellers. These types of B2C companies are the most well-known. There are two types of direct sellers: e-tailers and manufacturers.

Upon receiving an order, the e-tailer ships products directly to the consumer or to a wholesaler or manufacturer for delivery. Example: Amazon.com

The manufacturer sells directly to consumers via the internet. The goal is to remove intermediaries, through a process called disintermediation, and to establish direct customer relationships. Disintermediation is not a new idea as catalog companies have been utilizing this method for years. Example: Dell.com

Online Intermediaries
Online intermediaries are companies that facilitate transactions between buyers and sellers and receive a percentage of the transaction’s value. These firms make up the largest group of B2C companies today. There are two types of online intermediaries: brokers and infomediaries.

A broker is a company that facilitates transactions between buyers and sellers.

Types of Brokers:

Buy/Sell Fulfillment A corporation that helps consumers place buy and sell orders. Example: eTrade

Virtual Mall
A company that helps consumers buy from a variety of stores. Example: Yahoo! Stores

A firm that offers customers access to a variety of stores and provides them with transaction services, such as financial services. Example: Amazon zShops

An intermediary that offers a fee to locate a person, place, or idea. Example: BountyQuest (now defunct)

Search Agent
A company that helps consumers compare different stores. Example: MySimon

An infomediary is a firm that acts as a filter between companies and consumers. Individuals provide infomediaries with personal information and in turn receive targeted ads. Companies pay these infomediaries for the information that they collect.

Advertising-Based Models
In an advertising-based system, businesses’ sites have ad inventory, which they sell to interested parties. There are two guiding philosophies for this practice: high-traffic or niche. Advertisers take a high-traffic approach when attempting to reach a larger audience. These advertisers are willing to pay a premium for a site that can deliver high numbers, for example advertisements on Yahoo! or AOL. When advertisers are trying to reach a smaller group of buyers, they take a niche approach. These buyers are well-defined, clearly identified, and desirable. The niche approach focuses on quality, not quantity. For example, an advertisement on WSJ.com would chiefly be viewed by business people and executives.

Community-Based Models
In a community-based system, companies allow users worldwide to interact with each other on the basis of similar areas of interest. These firms make money by accumulating loyal users and targeting them with advertising. Example: Yahoo! Groups

Fee-Based Models
In a fee-based system, a firm charges a subscription fee to view its content. There are varying degrees of content restriction and subscription types ranging from flat-fees to pay-as-you-go.

Advantages of B2C E-commerce

  1. Shopping can be faster and more convenient.
  2. Offerings and prices can change instantaneously.
  3. Call centers can be integrated with the website.
  4. Broadband telecommunications will enhance the buying experience.

Challenges Faced by B2C E-Commerce

The two main challenges faced by B2C e-commerce are building traffic and sustaining customer loyalty. Due to the winner-take-all nature of the B2C structure, many smaller firms find it difficult to enter a market and remain competitive. In addition, online shoppers are very price-sensitive and are easily lured away, so acquiring and keeping new customers is difficult.

What Separates the Best from the Rest?

A study of top B2C companies by McKinsey found that:

  • Top performers had over three times as many unique visitors per month than the median. In addition, the top performer had 2,500 times more visiters than the worst performer.
  • Top performers had an 18% conversion rate of new visitors, twice that of the median.
  • Top performers had a revenue per transaction of 2.5 times the median.
  • Top performers had an average gross margin three times the median.
  • There was no significant difference in the number of transactions per customer and the visitor acquisition cost.

Essentially, these masters of B2C e-commerce (eBay, Amazon, etc.) remain at the top because of effective communication and value to the customer..

See Also

  • E-commerce
  • Business-to-business electronic commerce
  • Bricks and clicks
  • Disintermediation

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