Posts Tagged "Intermediaries"

B2C Characteristics

Posted by on Dec 29, 2012 in Uncategorized | 0 comments

The B2C (Business to Consumer) model of selling is advantageous for consumers and businesses.

From Chron.com:

Characteristics

The B2C model focuses on direct selling and marketing between a business and a consumer via an e-commerce website. A lower purchase volume of higher priced products typically characterizes B2C companies. Since the model depends on individual transactions and eliminates the wholesale purchaser, the company can make a higher profit while the consumer spends the same amount of money or sometimes less. B2C is effective for smaller companies since individual consumers are not as concerned with company recognition as they are with getting the product for the best price.

Types

B2C companies divide into five major categories: direct sellers, online intermediaries, advertising-based models, community-based models and fee-based models. Each type is so different from the others that they are not directly comparable. In fact, some B2C businesses utilize more than one type to reach different audiences.

Direct Sellers

Direct sellers, such as online retailers, sell a product or service directly to the customer via a website. You can further divide direct sellers into e-tailers and manufacturers. E-tailers are electronic retailers that either ship products from their own warehouses or trigger deliveries from other companies’ stocks. Product manufacturers use the Internet as a catalog and sales channel to eliminate intermediaries.

Online Intermediaries

Online intermediaries perform the same function as any other broker. The business allows non-B2C companies to reap some of the benefits. Brokers offer buyers a service and help sellers by altering the price-setting processes, according to economics professors Thierry Pénard of the University of Delaware and Michael A. Arnold of the University of Rennes in Rennes, France.

Advertising-Based Models

Popular websites rely on advertising-based models. These websites offer a free service to consumers and use advertising revenue to cover costs. They draw a large number of visitors, making them ideal advertising streams for other companies. Advertisers will pay a premium to sites that deliver high traffic numbers.

Community-Based Models

Community-based models combine the advertising method that relies on traffic at sites that focus on specialized groups to create communities. Community sales and advertising take advantage of social and network marketing by focusing on specific groups that want specific products. For example, sites used by computer programmers are perfectly placed to advertise computer hardware and software products. At least one social media website uses member information to target advertisements to interests and locations.

Fee-Based Models

Pay-as-you-buy or paid subscription services fall under fee-based models. The most common of these are online subscriptions to journals or movie sites such as NetFlix. These companies rely on the quality of their content to convince consumers to pay a usually nominal fee.

Griffin, Dana. “Explain the Business to Consumer Model.” Chron.com.  Accessed 12/29/2012. http://smallbusiness.chron.com/explain-business-consumer-model-2258.html

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Nine Reasons to Sell Direct to Consumers

Posted by on Oct 31, 2012 in Uncategorized | 0 comments

Basic civilizations in history have been organized into communities where goods were made locally and sold or traded directly to the end consumer.  The American Industrial Revolution pushed the business world into complex supply chains that create many problems for the people in the world that actually do the producing.  Consumers have become distant from the producers and have generally lost touch.

The customers of your business spend money on your goods to solve a perceived problem.  In general for the last 80 years, American consumers make these purchases at some form of retail store.  The retail store buys it from a wholesaler who buys it from a manufacturer.  Several additional steps may be involved.  Each step requires time, transport, and money to exchange hands, along with earning that entity a profit.  The actual product manufacturers become distant from the end consumer that will use their product.

As a manufacturer, why would you not shorten the cycle and sell directly to the end consumer?

There are several reasons that this strategy would make good sense.

 

1. NO Middleman/Middlemen.

  • Remove distributors that do not understand your products and service.
  • Allow end customer to get the same pricing regardless of their geographical location

2. More profit.

  • Stop losing profit margin to distributors, wholesalers, retail outlets, etc.
  • Lower costs due to extra shipping, handling, paperwork, etc.

3. Less redundancy in customer service.

  • Manufacturers already provide customer service to wholesalers/distributors.  Instead, provide it directly to end users thereby streamlining the system required for consumers to get help for their problems.
  • Improvement in customer satisfaction.

4. Simplicity.

  • Fewer intermediaries between the manufacturer and the consumer.  Long periods of human history required the makers to work directly for their customers.  For example,
    • i.      Sawmills sold their lumber directly to people building homes and barns.
      ii.      Blacksmiths formed horseshoes directly for horse owners.
      iii.      Farmers took food to the market to sell to the hungry masses.
  • The shorter value stream will have fewer steps, simpler logistics, and lower inventory in the system.
  • Lower Supply Chain inventory reduces cost should there be quality control problems.

5. Faster payment.

  • Shorter supply chains require fewer entities through which to pass money.
  • Many distributors only pay the manufacturer when they get paid.   As products get to the end consumer in a faster manner and the payment is collected sooner, the cashflow cycle is much shorter.

6. Competition.

  • Distributors will not be selling your product directly alongside your competitor’s product.

7. Everybody else is doing it.

 

8. Technology allows it.

  • We are in the 21st century.  Computers and the internet have made the world smaller.  Online marketing can quickly direct customers to your website, answer their questions, and provide a method for them to place an order and satisfy payment.
  • Quote requests for custom products and orders for off the shelf items can be submitted 24 hours a day, 7 days per week, collected in one location, and be answered in a timely fashion.
  • Modern and efficient shipping methods allow for goods to be moved long distances in a fast manner and delivered directly to the best point for goods transfer to the end customer, usually their front door.

9. Faster response to market changes.

  • End consumers communicating directly with the manufacturer can quickly provide feedback for changes and improvements.  Low supply chain inventory allows for product update cycles to occur quickly and efficiently.

Wholesalers, retailers, distributors, etc all play important roles in a supply chain to the customer.  They can be removed, but their function must be replaced.  Things like marketing, advertising, collecting payment, shipping, etc. must all be handled in order to provide a positive customer experience.

Industrial Revolution changes pushed the business world into complex supply chains that create many problems for the businesses in the world that actually do the producing.  Consumers became distant from the producers and many times have lost touch.  Modern technology has advanced to create a world where mass producers can again sell directly to consumers around the world and be successful.  Companies large and small are doing it, shouldn’t you?

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