“D2C” and “B2C” are acronyms that you’ve heard within the business world. But what do these terms actually mean, and what’s the difference between the two?
Here’s everything you need to know about these business models — and others — so that you can choose the right one for your business idea:
What Is D2C?
Direct-to-consumer businesses, also known as “D2C” or “DTC,” involve the sale of products directly from the manufacturer to the consumer without the use of a retail intermediary. D2C businesses have gained a ton of popularity in recent years as the internet has made it easier for manufacturers to sell directly to consumers without needing to go through third-party retailers.
This can be a win-win scenario as consumers pay lower prices and manufacturers get higher profit margins.
What Is B2C?
Business-to-consumer businesses, also known as B2C, involve the sale of products from manufacturers to businesses who then sell to consumers.
The B2C model can take a lot of different forms with a number of different steps. Like D2C, this model has evolved since the 1990s and will likely keep evolving as consumers continue to change their shopping habits — both in-store and online.
What’s the Difference?
To many, D2C and B2C may look similar or even the same. And while it’s true that some forms of B2C businesses may look like D2C, there are some key differences to know about.
With D2C companies, the entire process from production to fulfillment is handled by that same company. With B2C, on the other hand, fulfillment and distribution may not be handled by a single company. Let’s discuss some examples to give you a better idea of these different models in practice.
Coca-Cola is an example of a B2C company since it doesn’t sell its drink products directly to consumers. Instead, it sells products to grocery stores, convenience stores, restaurants, etc. who then sell to consumers whenever they need something to drink!
Warby Parker, on the other hand, is an example of a revolutionary D2C company. Warby Parker manufactures and sells its own eyeglasses. This differs from the traditional B2C model undertaken by eyeglass companies wherein they manufacture eyeglasses before selling them to eye doctors and other retail stores where they are then sold to consumers.
With Warby Parker, consumers get their glasses directly from the company — either in-store or online. This business model has helped provide consumers with a new way to purchase more convenient and cost-friendly eyeglasses.
Which Model Is Better?
Let’s explore the pros and cons of both models so that you can make the right decision for your business:
Pros and Cons of the D2C Business Model
The pros of the D2C business model include:
- Higher profit margins since this model effectively cut out the middleman and the price increases that come along with it since they are also looking to make a profit. As a result, D2C companies are able to reinvest the money saved thanks to this model back into the business.
- Better relationships with consumers since this model provides companies with direct access to customer data. As a result, D2C companies are more in touch with customers and can offer more personalized products and services based on preferences.
- Easier scaling since this model allows companies to access consumers all around the world easily. As a result, D2C companies can break down the geographical barriers encountered by other businesses and expand operations worldwide.
The cons of the D2C business model include:
- Tough competition as many companies is looking to take advantage of the benefits offered by the D2C model as well.
- Increased liability as D2C companies isn’t able to share liability with third parties since there are no third parties involved in business operations.
- Countless moving parts that can be difficult to manage on your own, especially when you take into account supply chain issues involving shipments, transport, returns, etc.
Pros and Cons of B2C Business Model
The pros of the B2C business model include:
- Shared liability and other costs since more than one company is invested in the sale and success of the product. As a result, you can spend less money on things like insurance, marketing campaigns, etc.
- Stability and predictability as the B2C business model have been around for years and have proven to be successful by countless companies who have made it big — both online and in-person — thanks to this strategy.
- Better sales since the B2C company is able to access the established customer bases of third-party companies rather than having to spend time and money building their own customer base from scratch.
The cons of the B2C business model include:
- Less control over brand reputation since you’re relying on third-party companies to actually sell your products. As a result, a lot of the customer experience is out of your hands.
- Higher barriers to entry since you have to find third-party companies that are willing to buy your products in hopes that consumers will want to buy them instead of just relying on consumers.
- Tough competition since you’re often competing with more established brands to work with third-party companies to place and sell your products in industries where name recognition and experience are important.
Other Models to Consider
In addition to D2C and B2C, there are other business models to consider, namely B2B and C2C. Here’s what you need to know about these models to make the best decision for your business:
Business-to-business companies involve developing and selling products specifically designed for other businesses rather than individual consumers.
There are several different forms of B2B companies. For instance, a B2B company could provide raw materials for a company that then uses these raw materials to manufacture products. A B2B company could provide business software and support for companies within a specific industry.
Finally, a B2B company could sell the products they manufacture to wholesalers or retailers. Developing B2B relationships differ from building relationships with individual consumers.
In most cases, “account managers” are in charge of these relationships rather than having a marketing team in charge of developing relationships and a customer service team in charge of maintaining them.
Customer-to-customer companies provide platforms for selling products or services from one customer to another. This might seem like a weird concept, but it’s actually a popular and proven business model used by big companies, including Craigslist, Etsy, and eBay — just to name a few. Other examples include Airbnb, Lyft, and Uber.
What do all these companies have in common? They act as a platform for individuals to sell products or services to other individuals, including driving services, vacation home rentals, artwork, and more.
Final Thoughts on Business Models
Choosing the right business model can be tough — which is why you need all the information possible to make the best decision. Sometimes, information alone isn’t enough, and you need expertise from seasoned business professionals to help guide you through your business journey.
In this case, you should reach out to Greg Gillman. Greg Gillman specializes in omnichannel growth strategies for D2C brands. So if this is a business model you’re interested in, he’s definitely the guy to talk to for personalized advice and pointers to help get your business idea off the ground.