C2M is Challenging the Traditional Supply Chain

Consumer-to-manufactory (C2M), also known as factory-to-consumer (F2C), is a business model reshaping the retail industry. This business model is challenging the traditional supply chain, as producers are gathering data from consumers and ship directly to the end-user. This way, brands are able to tailor the products to fit the specific consumer needs.

Traditional supply chain from manufacturer to end consumer

The traditional supply chain begins with manufacturer, then to wholesaler, continuing to retailer, before the final arrival is end consumer. This requires the product to flow through many layers before its delivered to the end-customer. What impact does this have on the product and the overall user experience? The product will accumulate more cost for each layer it passes, the quality of the product may be jeopardised and the delivery time slows down. Additional, the feedback loop becomes longer, so product innovation slows down.

What happens if we utilize the C2M business model?

Consumer-to.manufacturer model

The C2M business model skips the middle layers and connects the manufacturer directly with the end-consumer. This leads to a faster delivery, its cost effective and can provide a better product based of rapid feedback and tailoring of products. It also helps enterprises better predict the market demands, and keeps product innovation in center.

Chinese e-commerce giant JD.com has partnered with many manufacturers in various fields, such as computers, mobile phones, home appliances, fast-moving consumer goods and living services, to pass consumers’ needs to manufacturers to develop these goods. (source: Chinadaily).

Zhao Ping, director of the international trade research department of the Academy of China Council for the Promotion of International Trade (ACCPIT), said:

The C2M model enables retail enterprises to take advantage of consumer data and pass consumers’ precise demands to upstream manufacturing enterprises, so that they can produce products that better satisfy market demands.”

Pinduoduo leverages the C2M model to lower manufacturing cost and enable mass customisation.

Pinduoduo is an example of a company using the C2M business model. They leverage group-buying to provide discounts to the end consumer. By also leveraging the factory to consumer model, they manage to keep the price at a minimum. Pinduoduo was founded in 2015, and has experienced huge growth since and has become one of the biggest e-commerce companies in China. Pinduoduo is particularly popular among women who make up 70% of the user base. The highest growth has come from the lower tier cities where consumers are highly driven by discounts and value deals. Pinduoduo is on the course to expand their success also to include the first and second tier cities.

Pinduoduo is able to give up to 90% discount on a product when the consumers buy in big volume. By ‘creating’ your own shopping-team, and the more people join your team, the better deal you can get on the product you buy. Pinduoduo is a place that incorporates this as consumers discover and explore products on the platform rather than searching for a specific product. Gamification is also a technique to attract users to stay engaged on the platform. Moreover, Pinduoduo is a highly customer-centric company that uses the online data gathered to get a better understanding of their customers and then use this to create a better overall customer journey.

Overview of Pinduoduo business model to provide better and more tailored products to the consumer. Source: http://investor.pinduoduo.com

“The traditional manufacturing industry contains numerous links along the supply chain, and usually takes more than 18 months to develop a new product. The C2M model passes consumer data to upstream manufacturers at the very first instance, and each link can function synchronically.” (source: ChinaDaily)

The C2M model is already being used by many companies. This will also be the case going forward, as consumers demand more, better and customised products to a reasonable price at the right time.


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Sources:

http://www.chinadaily.com.cn/a/201905/17/WS5cdea56da3104842260bc56b.html

https://en.pinduoduo.com/stories

investor.punduoduo.com

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