B2B, B2C, B2B2C. You are not drunk reading the alphabet, but you are looking at different business models.
B2B, or business to business, is when a company sells to other companies. There are many decision makers and different factors that come into play when buying in a B2B context. B2C, or business to consumer, is when a company sells to a consumer. In this context, the focus lies on the end consumer completely, and that end consumer has all the buying power, without having to consult other stakeholders. B2B2C is a hybrid mix of both, driven by digitalization, where a B2B and a B2C company work together to give the consumer the best possible experience.
Let me explain to you how this works exactly.
To explain the B2B2C model, we’re taking the Klarna x H&M business case. I’m sure you’ve all heard of H&M – a clothing store chain with over 5000 shops in 74 countries and a thriving e-commerce – our B2C player.
Klarna might be new to you: a Swedish fintech company that offers online financial services to e-commerce companies – our B2B player.
Customers can place orders directly at H&M online, but they might not always be able to pay for it upfront, or they only want to pay for the items they keep. This is where Klarna comes in. When choosing Klarna at check-out, customers can choose to pay after their order arrives at home, paying only for the items they decide to keep. Customers know that they are buying from H&M, but through Klarna.
This is a win-win situation, because H&M doesn’t need to follow-up with payments (Klarna does this for them through their partnership), nor do they have to carry the financial risk. Customers can order in a more flexible way, and Klarna is able to leverage H&M’s name for brand awareness, reduce certain costs (they don’t have to stock nor send the clothing) and they get access to H&M customer data. As you can see, this B2B2C partnership makes total sense, because both players gain a lot from it.
What is important to notice in this example, is that customers who shop at H&M know that their items are sold and sent by H&M, but that they are paying through another company, Klarna. In the long turn, customers might not make this clear distinction any longer, and start associating shopping online with Klarna (learn more about marketing psychology here).
In theory, almost any B2B company can adopt a B2B2C strategy by working together with a B2C company. But that doesn’t mean it is always a good move, or something that you should do just because you can.
1. Your product(s)
This goes without saying, but not all products are ideal for this type of distribution. Some products are simply not made to sell to end-customers, for example: niche products in the building industry,
2. Digital maturity
As we’ve stated before, this type of business model is driven by digitalization. This implies that your company and the company that you might collaborate with, both need a certain level of digital maturity to pull this off. Don’t forget: the B2B2C approach stems from the wish to offer the end customer the best possible experience and product, made-to-tailor. In this day and age, that requires some serious digital efforts, where a thought-out e-commerce platform is a strong requirement.
3. Company compatibility
When entering any business partnership, you should check if you are compatible with your potential partner. Pay extra attention to the legal & IT department – if they can’t find common ground, the partnership will be difficult to pull off.
1. You get more insights into consumer data
Let’s circle back to the H&M x Klarna case study. In this example, we see how the B2B player gets insights into the B2C player’s customer data. This type of data would have never been accessible for Klarna if they would not have partnered with H&M.
2. You can cut out certain costs
This goes for both companies in the partnership. In our case study, we see how Klarna has little marketing costs and no product stocking nor shipping costs.
H&M takes care of producing, selling & shipping the goods, but they don’t carry the financial risk of after-payment solutions. When there is an issue with payment, this is followed up by Klarna’s customer service.
3. You can build a stronger brand
Klarna is a relatively new brand that is taking the online world by storm. As some of you business owners or brand directors know, it takes a village to build your brand from scratch. It can take a very long time before it actually takes off. By working with a big B2C player, and by associating with H&M, Klarna took a successful shortcut in getting their name out there.
Are you thinking of taking the B2B2C route? Let’s talk!