Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes activities of E-businesses serving end consumers with products and/or services. It is often associated with electronic commerce but also encompasses financial institutions and other types of businesses. B2C relationships are often established and cultivated through some form of Internet marketing.

Classifications of B2C e-commerce

Online intermediaries

Online intermediaries are companies that facilitate transactions between buyers and sellers and receive a percentage of the transaction's value. These firms make up the largest group of B2C companies today. There are two types of online intermediaries: brokers and infomediaries.

An infomediary is a Web site that provides specialized information on behalf of producers of goods and services and their potential customers.

Advertising-based models

In an advertising-based system, businesses' websites have an inventory, which they sell to interested parties. There are two guiding philosophies for this practice: high-traffic or niche. Advertisers take a high-traffic approach when attempting to reach a larger audience. These advertisers are willing to pay a premium for a site that can deliver high numbers, for example advertisements on Yahoo! or AOL. When advertisers are trying to reach a smaller group of buyers, they take a niche approach. These buyers are well-defined, clearly identified, and desirable. The niche approach focuses on quality, not quantity. For example, an advertisement on WSJ.com would chiefly be viewed by business people and executives.

Community-based models

In a community-based system, companies allow users worldwide access to interact with each other on the basis of similar areas of interest. These firms make money by accumulating loyal users and targeting them with advertising.

Example: Yahoo! Groups

Fee-based models

In a fee-based system, a firm charges a subscription fee to view its content. There are varying degrees of content restriction and subscription types ranging from flat-fees to pay-as-you-go.

Advantages of B2C e-commerce

B2C e-commerce has the following advantages:

Shopping can be faster and more convenient.

Offerings and prices can change instantaneously.

Call centers can be integrated with the website.

Broadband telecommunications will enhance the buying experience.

Challenges faced by B2C e-commerce

The two main challenges faced by B2C e-commerce are building traffic and sustaining customer loyalty. Due to the winner-take-all nature of the B2C structure, many smaller firms find it difficult to enter a market and remain competitive. In addition, online shoppers are very price-sensitive and are easily lured away, so acquiring and keeping new customers is difficult.

A study of top B2C companies by McKinsey found that:

Top performers had over three times as many unique visitors per month than the median. In addition, the top performer had 2,500 times more visitors than the worst performer.

Top performers had an 18% conversion rate of new visitors, twice that of the median.

Top performers had a revenue per transaction of 2.5 times the median.

Top performers had an average gross margin three times the median.

There was no significant difference in the number of transactions per customer and the visitor acquisition cost.

Essentially, these masters of B2C e-commerce (Amazon, etc.) remain at the top because of effective communication and value to the customer.