When we talk about C2C, it comes to Taobao. When talking about B2C, JD comes to our mind. And now, C2M, with the viral online advertising recently, I believe that Biyao Shangcheng, has occupied a new place for some consumers.
Before we continue with Biyao, let’s be clear about the concept of C2M first. Well, the C stands for what you would expect, which is consumer, and the M stands for manufacturer. Or manufacturing, or sometimes, some publications refer to it as manufactory, which is apparently an old way of saying factory. To be clear, consumers are still the buyers, and consuming.
If you go to Biyao’s website, you can find lip balm from the same supplier to DIOR for $12, versus $34 on Sephora USA. That’s 65% cheaper already. But it’s even cheaper if you compare it to the product’s retail price in China, which is closer to $46. That’s because a lot of the foreign brands have additional markups in China due to tariffs and whatnot. Even if they’re actually manufactured in the country.
For example, after two years, it only had 15 manufacturers on its platform, since they had to be already working with big international brands and designers in order to be even considered. Additionally, these manufacturers have to maintain a sub-7% return rate, and sub-1% bad rating rate, or else they would be kicked off.
Biyao’s business model is simple. It takes 2-15% of each sale made. By default, products are ranked by user reviews, so you can’t “jump the queue” just by paying more for marketing. And prices are kept low by having an agreement with manufacturers that they cannot charge prices that are more than 15% above their cost.
Why there’s Biyao? Obviously there’re three reasons.
First, complete ability. There’re a few concepts about OEM, ODM, and OBM that we need to clarify. OEM, original equipment manufacturers. ODM, original design manufacturers. OBM, original brand manufacturers. It’s normally an iteration for a manufatory from a simple based factory to a giant brand with well-known reputation. In 1990s, there’re many Chinese OEM like Foxconn who get offer from Apple. After a long time of evolution, some of them got complete ability to design and produce the items, especially in fast consuming areas.
Second, incentive. Cutting out the middlemen and letting the factories sell direct to the consumer, ensures that lower price for customers, also the higher economic return for platforms. At the beginning, we’re just
Third, policy supports. The global economy was taking its sweet time to recover from the Great Financial Crisis of 2009, the Chinese currency was appreciating, labor costs were increasing, the country had overproduced in some sectors, etc. The end result being, everyone was like, if we don’t shift more to internal consumption, we are really screwed.
The main value proposition so far, to the consumer anyway, is still price. So when these people can get the big brand quality without paying for the big brand markup, definetly they will become a fan of them.
More pervasively, using data to aggregate demand and help increase the efficiency for manufactory is more interesting to me. Chinese giant tech has stored many user data, and naturally it can be used to help predict the demand and better meet the needs of users.
C2M is still pretty small. Even the most generous estimate I saw placed at just $2.5Bn in 2018, with the expectation that it will be at $6Bn by 2022. That’s in comparison to over a trillion dollars in total retail e-commerce in China 2018, so C2M wasn’t even 1%. It may indicate a larger future, or this sector is inconsistent in reality.
One more interesting thing to discuss with. If we give some prediction based on the previous behavier, are we satisfying the demand? or creating a new demand?