Business applications 2: business-to-consumer (B2C) commerce - Business Environment

Key features
The business-to-consumer (B2C) model was the first to mature on the Internet, and has generated the most publicity. It involves a simple, singular retailing transaction between a business and a consumer. About one-fifth of e-business is between businesses and consumers. One example of the successful development and use of a B2C business model is by the e-retailer Amazon.com, which we will look at in more detail later.It has been estimated that retail sales over the Internet in the UK totalled £39.5billion in 2004, while wider forms of IT sales, such as email, electronic data exchange and automated phone sales, accounted for £195.6 billion, which is equivalent to one-fifth of the UK economy.
B2C commerce can be characterized by a number of key features, including:

  • Goods or services are offered for sale and purchased over the Internet; these may include both digitizedproducts, such as music, airline tickets or computer software that can be delivered virtually direct on the Internet, or physical products such as books, flowers and groceries that are delivered by post or courier. Currently in the UK, two-thirds of Internet sales are in physical products rather than digitized products.
  • Transactions are typically quick and interactive.
  • There are no pre-established business agreements.
  • Security is primarily an issue for the buyer, rather than the seller.
  • Low volume between each individual purchaser and supplier, often for relatively inexpensive items and/or frequently purchased items such as groceries.
  • Well known packaged items, which have standard specifications.
  • Items backed by a security guarantee and/or high brand recognition. The remoteness from the customer means that a strong reputation may be required to establish consumer confidence.
  • Items whose operating procedures can be most effectively demonstrated by animation or video.
  • Well designed websites, which are attractive and easy to use, are essential.

Emerging B2C and e-retailing business models
There are a number of ways of classifying the various B2C business models that are emerging:

  • Direct marketing product websites where manufacturers advertise and distribute their own products to customers via Internet-based stores, by passing the use of intermediaries. Examples include Dell Computers, Nike, Cisco, The Gap and Sony.
  • Pure electronic retailers (e-retailers) that have no physical stores, being purely cyber-based, such as Amazon.com.
  • Traditional retailers with websites sometimes called brick-and-click organisations where the Internet provides an additional distribution channel for an existing business. Examples include Wal-Mart, Tesco and Barnes & Noble.
  • Best price searching agents intermediaries, such as BestBuyBooks.com and Buy.com, that use software to search for the lowest prices available on the Net.
  • Buyer sets the price the customer nominates a price which they are willing to pay for certain goods or services, and the intermediary then tries to find a seller willing to sell at that price or lower. An example is Priceline.com.
  • Electronic (on-line) auctions host sites, such as eBay, act like brokers, offering website services where sellers post their goods for sale, thereby allowing buyers to bid on those items. Data suggests that the main users of e-commerce are across the manufacturing, retail and travel sectors.

Benefits of B2C commerce
There are a number of potential benefits and drivers of B2C commerce. Some of the more important are as follows:

  1. For existing business organisations, many of the benefits are similar to B2B commerce, in that B2C commerce can expand the marketplace, lower costs, and improve management support systems, internal communications and knowledge sharing. It can also allow firms to focus more effectively on customer relationships. However, it might also promote more competition.
  2. For new businesses, the Internet can reduce barriers to entry, and thus make it easier to enter new markets. One example would be Amazon.com, which did not need to incur the expense of opening up high street shops in order to successfully enter the retail book industry.
  3. For customers, B2C on average provides faster and more complete information, a wider choice, and cheaper products and services. It also allows greater interaction with other customers.
  4. For the wider community, an increase in B2C commerce may well have an impact in employment patterns, perhaps with an increase in home-working.

Possible limitations
While B2C commerce has some obvious benefits for the parties involved in transactions of this kind, as one might anticipate there are a number of potential limitations to its future growth and development. These include:

  • lack of trust and consumer resistance;
  • unresolved security, legal and privacy issues;
  • insufficient buyers and sellers on-line;
  • technical issues such as poor reliability, insufficient bandwidth, and speed;
  • hardware and software tools are rapidly evolving and changing;
  • the very expensive off-line marketing costs involved in building brand recognition for new on-line companies;
  • lower barriers to entry will increase competition, and potentially increase rather than decrease consumer search and selection costs, as well as possible reduced industry profits overall;
  • there are still significant distribution and storage costs involved for the sale of physical goods;
  • existing bricks-and-mortar companies will not go away, and will continue to compete hard to maintain existing market share.

Many of the potential advantages and disadvantages of B2C can be illustrated by looking at the case study below, based on Amazon.com. As with the previous case study, you are encouraged to attempt at least some of the questions at the end of the text.


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