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  • B2B2C: Who Benefits Most—Manufacturers or Retailers?

B2B2C: Who Benefits Most—Manufacturers or Retailers?

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Business-to-business-to-consumer (B2B2C) is a hybrid of the traditional business-to-business and business-to-consumer models. With B2B2C, a manufacturer sells its products through a retailer, interacting with end-customers under its own brand. Unlike a channel partnership, the manufacturer gets to keep and use the customer data harvested from each transaction. And the customer knows they’re transacting with the manufacturer directly.

Epicor customer Tuff Shed, a manufacturer of storage sheds, garages, and other custom structures, has a B2B2C 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.

B2B2C: What’s in it for the manufacturer?

The Upside

The advantage to manufacturers under the B2B2C model is instant access to a large chunk of customers they would otherwise struggle to reach—and at a pretty low cost per acquisition. Manufacturers increase their revenue and build economies of scale by leveraging the retailer’s infrastructure and customer base.

Manufacturers also get their products in front of 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 harvest the customer data that would otherwise be gobbled up 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 and grow customer loyalty. They gain big-brand credibility by partnering with established players and greater control over how their products are priced and sold within stores.

The Downside

On the flip side, manufacturers’ margins are considerably tighter under a B2B2C than a D2C setup, as they have to give away a sizable portion of their profits to retailers. They also have to hand over significant control. The retailer might place less emphasis on customer experience than they do, get embroiled in some scandal, or face financial difficulties, which could end up reflecting poorly on the manufacturer’s brand.

For B2B2C to work, retailers need to market their partners’ products aggressively. If they don’t give products a proper push, B2B2C relationships break down. But suppose the retailer makes a concerted marketing effort and sales are still lacking. In that case, they’re often quick to show manufacturers the door, regardless of how much the manufacturer invested in IT integration and in-store training, which can be substantial.

It can take large retailers longer than expected to make and act on decisions. Then there’s red tape—legal reviews, product testing, labeling, etc. Entrepreneurial, agile manufacturers with products ready to go can find this incredibly frustrating.

B2B2C: What’s in it for the retailer?

The Upside

Retailers gain access to a new revenue source without getting their hands dirty. They can encourage more customers into stores by offering an exciting new product or service, creating a competitive advantage while increasing sales of complementary products through cross-sells.

Although B2B2C is most effective when retailers have no intention of ever selling the manufacturer’s product otherwise, retailers sometimes use B2B2C as a covert market research exercise. They can trial a new product on the manufacturers’ dime and if it sells well, start manufacturing a white-label alternative themselves.

The Downside

The retailer has to relinquish access to its valuable customer data with only incomplete knowledge of the manufacturers’ intentions. A white label alternative eliminates this risk and generates substantially more margin.

Most importantly, the retailer’s reputation rests in the manufacturers’ hands. They have to trust that the manufacturer will provide a good quality (and above all, safe) product in the manner agreed or risk stirring up a customer service nightmare or a PR disaster.

B2B2C: What’s in it for the customer?

No doubt B2B2C is excellent from the customers’ perspective. Not only do they get greater access and a more convenient shopping experience, but they have manufacturers and retailers both working hard to add value to the overall consumer experience.