Will China’s New Business Model Completely Turn the E-Commerce World On its Head in the Next 3-4 Years? (Hint: It Already Has )

Will China’s New Business Model Completely Turn the E-Commerce World On its Head in the Next 3-4 Years? (Hint: It Already Has )

C2M (Consumer-To-Manufacturing). That’s the name of the business model that’s been revolutionizing the e-commerce stage in China the last few years by prioritizing consumers’ needs.

This new, disruptive business model connects manufacturers and consumers via different platforms to produce customized products at lower prices.

Compared to traditional B2C or D2C models, the biggest difference is that in C2M, product design and demand are driven by consumers rather than by brands and manufacturers.

All thanks to the power of AI-driven data analytics. Thanks to AI, online retailers, consumer brands, and AI companies are now making mass customization possible for buyers in China.

Platforms such as Pinduoduo, with 536.3 million active buyers and 7 billion products sold in the first half of 2019, are the best examples of what’s sometimes called the “fourth technology revolution” (the first three being steam engine, electricity, and automation).

How Does C2M Work?

Probably the biggest benefit of the C2M model is that it produces on demand. Unlike traditional B2C or D2C, the user places an order first, and then the factory produces the item. This eliminates potential inventory problems.

How do products get customized?

In C2M, a manufacturer uses large amounts of social media data and consumer digital activity (e.g. from website and app cookies) to precisely identify consumer desires and needs. Based on those insights, manufacturers tailor new product design and production quantity.

C2M vs Standard Product Customization

C2M is distinct from typical product customization, where, for example, a consumer can specify a unique color, length, or trim of a garment.

In C2M, big data is responsible for identifying and capturing clients’ preferences.

This means that the same product design is manufactured in repeatable batches, but is now catered to a much narrower niche.

In this way, C2M manufacturers can keep prices and margins higher and produce products more quickly to capture a demand that might only be temporary.

This is important, because in the standard product design process, it typically takes more than 18 months to develop a new product.

How Does Data Get Collected?

Top Chinese marketplaces like tmall.com, jd.com and Pinduoduo have vast quantities of customer data.

They know who their avatars are, where they live, what they buy, where and how they travel, brands they like, and so on.

Manufacturers get access to this data by participating in innovation programs that enable them to deliver C2M processes and products.

The Advantages Of C2M

The C2M model streamlines the functioning of all intermediate links, such as inventory, logistics, general sales, and distribution. As a result, unnecessary costs are reduced or removed. And consequently, users can buy good quality products at super low prices.

For manufacturers, the switch to C2M will also benefit them in the long run.

On one hand, it makes them more flexible in crises by pivoting online and selling directly to users. On the other hand, factories can also save an average of 20-30% in production costs. Therefore CPA also goes down.

Youth Are Taking the Scene

C2M has gained momentum over the last two years due to two significant shifts.

First, customization options for consumers were previously costly and limited to luxury product categories.

Second, the younger generation that typically celebrates their individuality wants more personalized products to meet more sophisticated demands. This has largely accelerated the rise of C2M, which from this point onward can only grow. With that said, the future of e-commerce seems to be really interesting.