People have been running businesses ever since the dawn of civilization, or maybe even further back! Although businesses might have been simpler back then, with the passing of time, it has taken up many shapes and forms! In today's modern age, you’ll easily find different shapes and forms of businesses - known as business models.
These can be B2B, B2C, D2C, C2C, C2B, and many many more.
And I can surely tell that you might’ve, quite often than not, found yourself confused with all these terminologies. And this is what the main purpose of this article is. Today, in this article, we present to you a clear difference between the two most common business models - D2C and B2C.
So read on and find out for yourself!
What are D2C and B2C? (with definitions)
D2C or Direct-to-Customers are those businesses that sell their products directly to their end consumer. D2C companies distribute their products to customers within their own medium or channels.
On the other hand, B2C or Business-to-Customers sell products and services to end-users through third-party websites. Unlike the D2C model, the producer isn’t using his/her own platform or channel to sell or distribute his/her products.
Here are some definitions for a clear understanding:
“D2C (Direct to Consumers) is a business model where service providers/product manufacturers sell and ship their products/services directly to end-consumer without any intermediary. These brands sell their product directly to consumers via self-owned sales channels, such as an outlet, showroom, or online store.” - Source - techjockey.com
“B2C (Business to Customers) is one of the leading business models. It refers to a sales model where companies sell products to consumers through any channel. Any business that sells products to end-users is B2C. It does not matter where the organization manufactures the product themselves or buys and resells it; it is a B2C model.” - Source - techjockey.com
Some examples of D2C can be-
mamaearth
Xiaomi
realme
Sugar Cosmetics
Lenskart
boAt
Some examples of B2C can be-
Reliance Digital
Hindustan Unilever
Dabur
Croma
Flipkart
To better understand the differences, it’s important to know each of the business models’ pros and cons.
Benefits and Pitfalls of D2C
Benefits-
1. D2C provides valuable insights into customer data
Customer data and analytics are priceless possessions for any business. Crucial personal data like preferences, buying habits, contact information, demographics, and purchase patterns of customers will help your business efficiently sell products to their existing customer base and strategically target a new market.
2. Personalized Customer Experience & Brand Loyalty
When you have access to your customers’ data, you have the ability to deliver personalized experiences. And customers LOVE that! This business model will give your company the opportunity to build strong emotional bonds with your customers, thus adding value to their buying journey.
This feature helps build trust among customers and persuades them to stay loyal to your brand for a long time.
3. No mediators = lower price = higher profits
The most significant advantage of this model is that you can sell your products and/or services directly to your consumers without any mediators’ involvement. It reduces the selling price and increases the net margin for your company.
Intermediaries like wholesalers, distributors, and retailers lead to higher overhead costs for your brand as well as for your end customer because, in a large distribution network of intermediaries, everyone takes their own share.
4. Greater Control over your Brand
If you have a D2C business model, you don’t need to work as per the opinions of retailers or distributors but can market and sell your products and/or services on your own terms. You will also have a clearer picture of your sales channels and requisites to increase sales.
It will be relatively easier for you to deliver higher customer satisfaction as D2C businesses enjoy more control over their sales and marketing.
5. Exciting Offers and Sale
D2C Business Model gives you the opportunity to create online offers and sweepstakes that’ll help create buzz around your brand. It’ll be an excellent way for your company to increase its customer base through coupons, attractive offers, and flash sales.
Pitfalls-
1. The D2C Business Model has a cut-throat competition
Given the fact that it’s quite easy to enter the D2C market, there are hundreds of companies pushing toward the D2C model at any given time. Gaining a competitive edge is gradually becoming tougher as this field is growing at an incredible pace.
2. Difficult to Scale
Though it may be easy to enter the D2C market, it’s quite challenging to scale as it requires rigorous organic marketing. The D2C model doesn’t work unless you have great brand visibility and distribution over a large geographical area.
3. Complex Management as compared to other business models
Since you have total control over all the business processes, from production, distribution, marketing, customer service, to eCommerce fulfilment, all of the liability falls on your shoulders. You are the one who needs to take care of the entire supply chain.
You also need to have a sound knowledge of social media marketing.
4. A greater upfront investment
Your D2C brand is your very own business that requires investment from your side to set it up in the first place. Therefore, before you even start earning from your business, you need to set aside some money for investing in it.
Benefits & Pitfalls of B2C
Benefits-
1. Omni-Channel Distribution
B2C Businesses have more exposure on different platforms and marketplaces. Under this business model, you’ll get to sell your products via multiple channels, that’ll include social media channels, retail outlets, online stores, or eCommerce websites like Amazon and Flipkart.
2. Higher Scalability
This model will give you a broader reach as it can be spread over a large geographic area. You can easily add an unlimited line of products and/or brands to your sales channel. This feature makes B2C businesses more scalable than D2C models.
3. Lesser Initial Investment is required
As compared to the D2C model, the investment you require here is much lesser as in this model, you are dependent on third parties for setting up your business.
4. The B2C Business model has lesser risk involved as compared to D2C Model
Similarly, if anything goes wrong in your business, you can fall back on the third parties. You don’t get this facility in the D2C model as there, the entire business stands on your shoulders.
5. Increased Accessibility
Customers can buy products from multiple channels - retail stores, eCommerce websites, and even social media channels. This feature of your customers being able to buy products from anywhere and anytime further boosts your sales.
Pitfalls-
1. Lower Profit Margins
With there being intermediaries like distributors, wholesalers, and retailers between the end customers and companies, the profit is cut down by quite a considerable margin.
2. Longer Sales Cycle = Longer delivery times
The manufacturing, distribution, and sales in B2C commerce are longer and require more working capital to maintain cash flows. This also causes inevitable delays in the delivery of the products.
3. Less Control over Customer Experience and also Less Control over Product Quality
Because in this model, the shopping experience of the customers and the other factors of the marketplace are not in your hands but the middlemen, it becomes difficult for you to control any of those factors. In the D2C model, you have your hands on everything.
4. Difficulty in handling multiple orders
B2C businesses keep receiving orders for sales from different channels - distributors, wholesalers, social media channels, company websites, and also eCommerce websites - all at the same time. This requires complex inventory and logistics management capabilities to be able to handle multiple orders in one go.
5. Higher Dependency Rate
Companies need to be dependent on retailers and sales channels for word-of-mouth marketing. In this model, companies rarely have control over brand sentiment.
Table showing Differences in D2C & B2C
Here’s a table that will sum up the differences and will make it easier for you to understand the conflict between the two business models.
The Final Word
Phew! That was a long read, wasn’t it? But hey! at least it was worth it. With so many points about the 2 business models - their pros and cons, their basis of differences - I can tell that it was definitely a valuable read for you, and hope that this article will come to your help the next time you find yourself confused with these business models.
So, do tell, which business model are you planning to implement? ;)