The rise of eCommerce has brought a drastic change in consumers’ buying habits and revenue models of businesses. Brands now prefer to sell directly to the customer rather than going through a third party and even customers prefer buying directly from businesses.
Not long ago, if you had to buy a phone you had to go to a retailer. The retailer used to show you phones of multiple brands, and you had to choose one of them. This was the traditional way of selling a product and is still one of India’s most preferred sales models.
However, things are changing now as most people prefer to buy Smartphones and other electronic gadgets directly from the official website be it Xiaomi, realme, or Vivo.
D2C businesses are not limited to gadgets and smartphones. In 2021, eyeglass company Lenskart was valued at $2.5 billion whereas cosmetic brand Nykaa became the first D2C brand to go public in India.
However, there has been a lot of confusion among customers and marketers related to D2C (direct to customers) and B2C (Business to Customer) models as both tend to sell products to customers. This article aims to explain all the differences between D2C vs B2C business models.
Table of Contents
An Overview of D2C or Direct to Consumers
D2C (Direct to Consumers) is a business model where service providers/product manufacturers sell and ship their products/services directly to end-consumer without any intermediary. These brands sell their product directly to consumers via self-owned sales channels, such as an outlet, showroom, or online store.
Previously, D2C was famous for high-value and luxurious items like automobile, fashion, footwear, and jewellery brands. Most of these companies used to sell their products directly to their customer through their brand outlet or showrooms.
Now, things have changed, and all personalized products, whether smartphones, laptops, wearables, electronic items, cosmetics, and even consumables, are available on the manufacturer’s website or store.
The Role of 3PLs in D2C
3PL stands for third-party logistics, which provides eCommerce fulfilment services like warehousing, picking, packing shipping, and even reverse logistics to other companies.
Most D2C companies today have their online store and sales channel, which requires eCommerce fulfilment. For D2C business, it’s essential to focus on advertising, production, and growth.
Putting the entire effort in handling logistics isn’t the most productive way to profitability and growth. Therefore, most D2C businesses outsource all the outbound logistics to 3PLs.
In short, A 3PL is a significant link between D2C business and their customers. It helps the company to focus on important aspects like advertising and quality control and leave the cumbersome task of eCommerce fulfilment in better hands.
Best D2C Examples
India has seen a rising wave of D2C business in the last few years. There used to be a time when D2C was limited to automobiles and gadgets in India, as it required huge investments and operational capabilities to set up outlets and showrooms.
As the Indian consumer’s buying habits shifted towards online shopping, D2C companies swiftly made their place on the Indian market leveraging the price and impeccable customer service advantage.
Here are some of the best DTC examples in India:
- Sugar Cosmetics
Advantages of D2C Commerce
Indian D2C market size was around $26.8 Billion in 2019, which rose to $33.1 in 2020 and then to $44.6 Billion in 2021. The D2C market in India is expected to be worth around $100 billion by 2025. D2C commerce is growing exponentially in India, and there are valid reasons for it. Here are some of the major advantages of D2C business models in India.
- Few Mediators-Lower Price-Higher Profit
Intermediaries like wholesalers, distributors, and retailers in traditional models lead to higher overhead costs for brands. The larger distribution network of intermediaries increases the price for the end customer as everyone takes their share.
The most significant advantage of D2C business model is that manufacturers can sell their goods directly to consumers without any wholesaler or reseller. It reduces the selling price and increases the net margin for companies.
- Greater Control Over Brand Value and Vision
A D2C business can market and sell its products on its terms. It doesn’t need to rely on the opinions of retailers or distributors to present or sell its products. Companies can have a clear picture of their sales channels and requisites to increase sales.
- Valuable Customer Insights
Customer data and insights are the most valuable assets for D2C businesses. D2C businesses collect valuable data like contact information, demographics, buying habits, and purchase patterns of customers. This data helps companies efficiently cross-sell, upsell, and resell products to an existing customer base and strategically target a new market.
- Better Customer Service and Brand Loyalty
Direct to customer companies can provide personalized service for returns, repairs, and other queries. The fact that the brands directly accountable for products and their functioning helps build trust among customers. It persuades the customers to stay loyal to a brand for a long time.
- Run Exciting Promotions and Offers
D2C businesses can create online offers and sweepstakes to create buzz around the brand. Companies that sell through their website can run offers based on their priority and competition. It’s an excellent way for companies to increase their customer base through attractive offers, coupons, and flash sales.
Suggested Read: Best eCommerce Platforms for Building Online Stores
Limitations of D2C Commerce
D2C business sounds excellent and profitable, but it’s not for everyone. Here are some of the major limitations of D2C fulfilment that make it a ‘Not so good’ business idea.
- Limited by Products
While D2C brands attract consumers, it’s not true for all products. Consumers still prefer the traditional system of buying goods from retailers for consumables, grocery, home decor or other non-personalized items. D2C commerce is limited to personalized items like smartphones, wearables, clothing, footwear, etc.
- Difficult to Scale
D2C doesn’t work unless you have excellent brand visibility and distribution over a large geographical area. It’s easy to enter the D2C market, but it’s challenging to scale as it requires rigorous organic marketing.
- Cut throat Competition
Since it is easy to enter D2C market, there are hundreds of companies pushing towards D2C model. Gaining a competitive edge is gradually becoming harder as more companies are trying to sell same products to similar customer segment.
- Complex Management
D2C model has complex internal management compared to other business models. All the business processes, from production, marketing, distribution, eCommerce fulfilment, to customer service, have to be managed by the brand itself.
An Overview of B2C or Business to Customers
B2C (Business to Customers) is one of the leading business models. It refers to a sales model where companies sell products to consumers through any channel.
Any business that sells products to end-users is B2C. It does not matter where the organization manufactures the product themselves or buys and resells it; it is a B2C model.
This brings us to a significant difference between D2C vs B2C: All D2C models are B2C, but not all B2C is D2C. D2C business models are a part of B2C models.
Best B2C Examples
Almost every shop you see around adheres a B2C business example. B2C includes both trading and service business. Here are some of the largest B2C organizations in India:
- Hindustan Unilever
- Reliance Digital
Advantages of B2C Commerce
D2C vs B2C, B2C is by far among the most popular business model worldwide. Here are some of the advantages of B2C commerce.
Broader Reach and Scalability: B2C businesses can be spread over a large geographic area, and you can add an unlimited line of products or brands in your sales channel. This makes B2C businesses more scalable than D2C models.
Omni Channel Distribution: B2C businesses can sell products via multiple channels, including retail outlets, online stores, social media channels, or eCommerce websites like Amazon and Flipkart.
Better Customer Insights: B2C models can better target their customers based on buying patterns and customer preferences. B2C business can effectively cross sell and upsell their products to existing client base.
Lower Prices: Since the B2C business model can cut costs on overhead and other expenses like staffing, rents which ultimately lowers the price of products/services. Digital marketing and online sales channel further cuts down the customer acquisition cost increasing the profitability of the business.
Increased Accessibility: Consumers can buy products from multiple channels including eCommerce websites, retail stores, or even social media channels. The customer can buy the product from anywhere and anytime which further boosts the sales.
Limitations of B2C Commerce
B2C businesses are swiftly moving towards D2C models due to their limitations. Here are some of the boundaries of B2C business models.
Lower margins: As there are intermediaries like distributors, wholesalers, and retails between the customers and companies, the profit is cut down by a considerable margin.
Higher Dependency: Companies must be dependent on the retailer and sales channel for word-of-mouth marketing. The company barely has control over the brand sentiment in B2C models.
Longer Sales Cycle: The distribution, sales and manufacturing process in business to consumer commerce is longer and requires more working capital to maintain cashflows.
Requires Huge CAPEX: B2C models require large infrastructure and production capacity to maintain low prices and competitive edge.
Difficulty In Handling Multiple Orders in One Go: B2C businesses have sales orders coming from different channels like wholesalers, distributors, social media channels, company websites, or 3rd party eCommerce website at the same time. It requires complex inventory and logistics management capabilities to handle all the orders.
What Is the Difference Between B2C and D2C?
The only similarity between D2C vs B2C businesses is that both sell the product directly to the end consumer. Here are two major differences between B2C and D2C commerce.
Production: A B2B business might have their own product manufacturing setup or just act as an agent between manufacturer and end consumer. A D2C company either manufactures its own product or brand white label products as their own for reselling.
Distribution: A B2B business might sell their product directly to their customer or to a distributor, wholesaler or retailer. A D2C business sells its product directly to customer only.
Suggested Read: List of Logistics and Supply Chain Management Software in India
Here is a chart showing the comparison of D2C vs B2C business models:
|Business to Customers
|Direct to Customer
|Production /Procurement- Advertising – Distributor- Wholesaler- Retailer- Consumer
|Manufacturing- Branding- Marketing- Website/ Sales Channel- Sales- Fulfilment- Customer Service
|Lower Operational Cost, Gaining Competitive Edge, Retailer Relationship
|Problem Solving, Lower Pricing, Brand Value Building
|No access to customer data or buyer journey
|Valuable customer insights like buying habits and spending patterns
|Longer sales cycle depending on the product
|Shorter sales cycle
|Consumables, Non-personalized items
|Personalized items and high-value goods
D2C and B2C business models are not comparable to each other as DTC is an extension of B2C business model. Any existing B2C business can shift to D2C model buy simply adding an online sales channel. Most of the growing brands sell their products using both DTC model and 3rd party eCommerce to drive more sales.
The question of D2C vs B2C is itself wrong, and companies should prefer the D2C with B2C model for growth, profitability, and survival.
- Is eCommerce D2C?
An eCommerce website might or might not be a D2C business depending on the product it sells on its platform. An eCommerce website will qualify as a D2C model only if it sells its own product on the website. For example, Flipkart is not a D2C eCommerce website while boAt Store is a D2C website.
- Is there any D2C vs B2C difference?
The most significant difference in B2C and D2C business models is that D2C companies sell their product directly to their customers via outlet or website without any intermediary. Whereas B2C businesses sell their products to end consumers through any sales channel.
- What is the meaning of D2C and B2C business?
B2C stands for Business to Consumer models of businesses where organizations sell products to consumers. In contrast, D2C stands for direct to consumers, where companies sell products directly to consumers without any wholesaler or retailer.
- What is the D2C business model?
The direct-to-consumer model of business is where organizations sell products directly to the end customer through their own sales channel.
- What are the best D2C brands?
Patanjali, boAt, realme, Xaomi, Lenskart, etc. are some leading D2C brands in India.