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What is a Business-To-Consumer Transaction?

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  • Written By: Keith Koons
  • Edited By: Lauren Fritsky
  • Last Modified Date: 24 August 2016
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A business-to-consumer (B2C) transaction is an exchange through which a business serves a final product to the end user without intermediary entities like retail outlets or middlemen. Applications of the business-to-consumer concept have transformed the way businesses interact with the market. There is a marked operational difference between companies that implement the B2C model and companies that utilize the business-to-business (B2B) model, the previously prevalent technique of business-to-consumer interaction. The Internet was instrumental in the shift from the B2B, or retail model, to the B2C paradigm. Many of the most successful and recognizable business-to-consumer operations are implemented over the Internet and are becoming increasingly sophisticated in their approach towards reaching consumers directly.

In the B2B, or retail model, producing businesses distribute their products to businesses like retail outlets or distributors that sell the products to the end consumers. Supply chains guide the product from its origins in a factory to the hands of the customer. Depending on the nature of the product and its accessibility to the customer, these chains can be a couple of links to many dozens of links long. Furthermore, the eventual transaction is between the customer and the last business in the chain, which means that businesses all along the supply chain will take marginal profits for their efforts. With a business-to-consumer setup, however, there is only one transaction, with the sole middlemen being the carrier that transports the goods.

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As cumbersome as it seems, the B2B was the best way to distribute goods at one point in time. The Internet, however, changed that by allowing business to set up a virtual presence in cyberspace that consumers could use to directly purchase wares. E-commerce and banking solutions that enabled online transactions made the process of paying for a product as simple as a few clicks, making business-to-consumer transactions incredibly convenient for both the business and the consumer.

It took only a few years for the business-to-consumer concept to take flight, and there are many big-brand companies that sell their products directly to consumers via the Internet. A more interesting trend is the rise of businesses that retail their goods exclusively online; a prominent example of such a business is Amazon. Some companies have taken the business-to-consumer model further by intertwining their shopping database with information gleaned from social networking sites. Christened the business-to-one (B21) model, these online outlets anticipate a customer’s likes and preferences based on data from his social networking profiles and customize the shopping experience accordingly.

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