B2B2C: A Surging Trend in Digital Commerce
This phrase isn’t quite as universally familiar as the other two, but has become increasingly prevalent within digital commerce. Indeed, it’s been a motivating factor behind certain companies’ M&A strategies of late, so we thought it would be worth delving into what B2B2C actually entails.
Expanding the sales ecosystem
The age of e-commerce, with its near limitless sales channels and collaborative pathways, has allowed the business ecosystem to expand well beyond the classic B2B/B2C binary.
We’re seeing more and more online firms partnering with others in order to diversify their reach and provide products/services to customers through an integrated supply chain. Or, to put it another way, Business A will team up with Business B to access the latter’s customer pool in a mutually profitable way. Hence, business-to-business-to-consumer, or B2B2C.
A defining aspect of the B2B2C model is that the product or service provided by Business A isn’t repackaged by Business B under the latter’s own name. In other words, there’s no white label rebranding or reselling going on. Customers are aware they’re buying Business A’s products, or using its services, through Business B.
B2B2C in action
Companies following the B2B2C model have been embedded in our everyday lives for a long time now. A towering example is Amazon, which provides a ready-made retail pathway for manufacturers and vendors who might otherwise struggle to reach customers. Not only does Amazon present a shopfront on a prime piece of digital real estate, but it can also handle deliveries and take care of other crucial logistical issues. It also lends credibility to lesser-known names operating through the site.
The food industry has been revolutionised by B2B2C companies. Consider the monumental rise of delivery services, with many of us now very used to ordering groceries as well as hot food through online platforms like Deliveroo, DoorDash, Just Eat and Instacart. Such apps work symbiotically with restaurants, takeaways and supermarkets, with the latter businesses able to provide food deliveries to without having to hire drivers and invest in complex digital interfaces. (Bear in mind that if, say, Instacart was simply a logistics company whose drivers and vehicles operated under a supermarket’s name, it would be a B2B, rather than a B2B2C, firm.)
Fintech is another sector where the B2B2C dynamic has been fruitful. Take the “buy now, pay later” financing platform Klarna, which lets users pay for clothes and other products over several instalments. Partnering with big-name retailers like ASOS and H&M so that it’s a payment option on the checkout page, Klarna gets to tap into each retailer’s substantial customer base without have to directly market to the customers itself. The retailers, meanwhile, are able to offer the attractive “buy now, pay later” option to customers without shouldering the technical and financial burdens of such a service.
Growing B2B2C offerings through M&A
At Hampleton, we’ve noted how strategic acquisitions can be integral to expanding a company’s B2B2C technology strategy. Our newest Digital Commerce M&A report discusses one of the leading B2B2C success stories in North America: Instacart. While it made its mark as a grocery delivery service, allowing customers to shop for food remotely, Instacart has since made inroads into the in-person retail space by acquiring tech startup Caper AI for an estimated $350 million.
Caper AI has developed smart shopping carts which are equipped with state-of-the-art scanners allowing shoppers – and Instacart delivery workers – to bypass checkout lines. Whenever items are placed in a cart, the scanner automatically adds the price to the running total, without the need to even bleep the barcode. Caper’s carts also feature screens which can interact with customers, pointing out relevant deals in the store and providing retailers with valuable data on shopping habits. The startup’s other big invention is a smart checkout that uses weight sensors and cameras to streamline the whole payment process.
With Caper AI’s technology already rolling out in some of Instacart’s partner retailers, the acquisition has both strengthened and diversified Instacart’s B2B2C model. In the words of the company’s CEO, “we’re focused on creating even more ways for retailers to develop unified commerce offerings that help address consumer needs across both online and in-store shopping.”
The advantages and challenges of B2B2C
A B2B2C model can be highly effective and profitable for both partners. It allows a B2B tech company to reach new markets without having to radically transform its core business. For example, e-food delivery firms don’t have to invest untold millions in food storage facilities – they simply supply customers with items from pre-existing supermarkets. Meanwhile, by teaming up with a B2B firm, a B2C company can diversify its offerings to its customers without having to set up whole new departments to deal with the necessary software infrastructures, logistics solutions and other overheads.
Of course, there are inherent challenges. Greater numbers of stakeholders are involved in B2B2C models, so coordinating supply chains can be a more complex task compared to linear B2C and B2B models. Seamless sharing of data regarding inventories, marketing promotions and customer records is vital; this can require significant upfront investment in IT systems that are able to integrate the whole ecosystem, allow stakeholders to easily communicate and prevent silos from developing.
The bottom line is that forging a formidable B2B2C partnership will inevitably require time, money and – on the B2C side of the equation – a willingness to think outside the box and embrace emerging technologies. But the rewards can be immense, and this kind of integrated approach looks set to become even more widespread as digitalisation continues.
As Marc Benioff, CEO of Salesforce, has said, “What company does not have to directly connect with the consumer? You could be a traditional industrial company who’s selling to B2B resellers and you have to be ready in this connected digital revolution to be able to connect directly to your consumer as well.”
That same interview included a one-sentence summary by Benioff that investors, startups and legacy firms may want to remember: “Every B2B and B2C company is becoming a B2B2C company.”