B2B2C: Who Benefits Most—Manufacturers or Retailers?

B2B2C is a new way of doing business. It is a mix of the traditional business-to-business and business-to-consumer models. With B2B2C, a manufacturer sells its products through a retailer. The customer knows they are transacting with the manufacturer directly. The manufacturer gets to keep and use the customer data harvested from each transaction.

Epicor customer Tuff Shed, a manufacturer of storage sheds, garages, and other custom structures, has a business to business to consumer relationship with home improvement giant Home Depot. Home Depot customers can access Tuff Shed's visual product configurator on iPads located within stores. They use the Tuff Shed-branded configurator to design a custom structure and make a purchase. The data goes to Tuff Shed's manufacturing department, which ships the product. Tuff Shed gets the data and brand exposure. Home Depot takes their cut. The customer enjoys a seamless customer experience with a great shed at the end of it.

What does a manufacturer receive from B2B2C?

The upside

The advantage to manufacturers under the B2B2C model is that they can instantly reach a large number of customers. They would have difficulty reaching these customers on their own, but by working with retailers, they can use the retailer's infrastructure and customer base to their advantage. This allows them to increase revenue and build economies of scale.

Manufacturers can reach customers quickly and effectively without the startup costs and risk. Google and Facebook ads are expensive. SEO is often unreliable (and expensive). There are no guarantees that a manufacturer can draw customers to a direct-to-consumer (D2C) eCommerce site. And B2B2C offers a greater level of predictability.

Then there's the valuable data. With B2B2C, manufacturers can get the customer data that would otherwise be taken by the retailer in a traditional channel partnership. They can learn about customer behavior and preferences. And if they decide to go D2C at a later stage, they'll know how best to position their products and will have pre-qualified leads to market to.

Finally, manufacturers can use B2B2C to build and promote their own brand. They can gain greater control over how their products are priced and sold. This helps them build customer loyalty.

The downside

Manufacturers have to be careful when they set up a B2B2C system. In this system, the manufacturer has to give away a lot of their profits to the retailers. The retailer might not focus on the customer experience as much as the manufacturer would like, and they could get into some trouble. This could end up reflecting poorly on the manufacturer's brand.

In order for B2B2C to work, retailers need to market their partners' products aggressively. If they do not push the products enough, the relationships between the companies will break down. However, if the retailer makes a concerted marketing effort and sales are still low, then they might show the manufacturers the door. This is regardless of how much money the manufacturer has invested in IT integration and in-store training.

Large retailers often take a long time to make decisions. That's because they need to do a lot of reviews and testing before they can actually put anything into production. For agile manufacturers with products ready to go, this can be really frustrating since the retailers aren't able to move as quickly as they'd like.

What does a retailer receive from B2B2C?

The upside

Retailers can find a new way to make money that doesn't involve getting their hands dirty. They can do this by offering an exciting new product or service that will bring in more customers. This will give them a competitive advantage and increase sales of complementary products.

Even though it is most effective when retailers have no intention of ever selling the manufacturer’s product, sometimes retailers use B2B2C as a way to research a new product. They can trial the product on the manufacturer’s dime and if it sells well, they might start manufacturing their own white-label alternative.

The downside

The retailer has to give up access to its valuable customer data, but it doesn't know what the manufacturer plans to do with that data. A white-label alternative eliminates this risk and generates substantially more margin.

The most important thing for a retailer is to have a good reputation. This is based on the quality of the products that the manufacturer provides. The manufacturer has to be sure to provide good, safe products that meet the standards agreed upon. If they don't, it could lead to a customer service nightmare or PR disaster.

What does a customer receive from B2B2C?

B2B2C is great for customers. They get better access and a more convenient shopping experience. Plus, both manufacturers and retailers are working hard to improve the overall customer experience.

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