The two options for Internet startups, all entrepreneurs know, have long been B2C (business to consumer) or B2B (business to business). But in his speech at Softbank World 2014, Jack Ma, Alibaba's self-made founder and CEO, declared open the era of C2B, or consumer to business, an era in which customers will soon completely dictate to companies what they need and only companies that accommodate them will thrive.
Ma's notion is so on-target that it would be worth heeding even if his company wasn't launching a record-breaking IPO. Currently, seven major trends back his paradigm-shifting vision.
The TaoBao Model
If you've looked into Alibaba because of its IPO, you probably know that a huge chunk of its profit comes from a platform called TaoBao. Think eBay meets Etsy, with the China manufacturing backbone behind it. Alibaba.com at its origin was a website listing thousands of Chinese factories offering production outsourcing services for many sectors. This was a B2B website, to which foreign businesses would come and find the right manufacturer for the products they wanted to produce or export. As such, minimum order requirements ran to thousands of units. When TaoBao emerged, it allowed consumers to trade between themselves as on eBay but also tapped into this existing database, enabling factories and even farmers to become direct-to-consumer businesses overnight, through its order fulfillment centers and services. The TaoBao platform is an incredibly powerful economic engine, when matched with China's emerging middle class of more than 400 million potential consumers.
TaoBao is the core reason Alibaba's Jack Ma is so confident about his C2B prediction. If direct consumer to manufacturer relationships are already enabled, all you need to add into the mix is customization options for all goods on offer and voilà--welcome to the C2B era in the world's second-largest economy.
Digital Distribution and Software as a Service
Music, movies, series, and video games can now all be consumed over the air, without the need to buy a physical component anymore. Virtual goods deliveries present far less overhead than traditional items: Businesses don't need to store them or ship them, and there is no reproduction cost tied to them. This also allowed the emergence of a new business model: software as a service (SaaS).
SaaS hews to a "freeware" model, through which users can try software for free and purchase additional features through micro-transactions. The model has become dominant in gaming, and is also widely adopted by B2B startups, which provide a basic service to their clients on the cheap and then find ways to charge the top-tier accounts.
To generate success, the free-to-play model often means that the game developer must deliver frequent content updates, with new levels, new characters, new features, and new powers. The best way to deliver the right content, which will guarantee an uptake in revenue, is to listen to the members of your existing audience as to what they want next. In the product era, you would just ship the final iteration and customers had no real say in what was being offered. But this shift in the customer-company relationship has consequences that run deep.
For consumers, social networks are a place to get in direct contact with brands and voice their concerns, and where they gather to apply pressure for a change in policy or products. Even the ending of a major video game like Mass Effect 3 can be altered through public outcry nowadays. Combine this with software as a service and you get pretty strong dynamics for consumers' inspiring, and at times even leading, creators in one direction or another.
And it's not just Facebook or Twitter. Sina Weibo, QQ, and TenCent WeChat give you access to hundreds of millions of people in China. VKontakte pretty much puts the Russian population at your fingertips. Ask.fm lets anyone and everyone interview members, without any form of moderation from a talk show host. As for Pinterest, its ever-growing impact on e-commerce sales demonstrates how social media are becoming deeply intertwined with fashion, trendsetting, and goods consumption.
YouTube, Twitch.TV, Instagram, DeviantArt--all these platforms rely on their user base to generate content and keep them alive. Many entertainment productions integrate some UGC component in their marketing campaigns, hoping to boost virality this way. Countless video games implement generated content into their franchises, be it by encouraging "mods," by allowing live video-sharing in one touch, or by baking editing possibilities into the product.
The trend is no longer limited to the digital world. Look at Pepsi's Spire experiment: The drink customization machine allows consumers up to 1,000 flavor combinations. When Lays runs country-based contests allowing people to submit their ideas for new flavors of chips and then produces the winning idea en masse, that is also a form of UGC.
With the rise of Kickstarter, and other more niche crowdfunding platforms such as Indiegogo, Pubslush, YouCaring, Seed&Spark, and GiveForward, consumers now vote with their wallet right at product inception and incubation. Now companies can turn to fans with an early demo or even a paper concept and not only ask them if they would buy, but actually give them the opportunity to preorder the thing right now, providing the project with funding to materialize in the process. For creators and inventors, the ecosystem allows them to try ideas on a much smaller budget. For consumers, it increases their power over what gets made.
Although we are still far away from every household's having a good quality color 3-D printer at home, allowing businesses to deliver physical goods in file format directly to consumers, the French company Sculpteo has struck major deals with Adobe to let you order a physical production of any 3-D file you create in Photoshop. Shapeways has entered agreements with Hasbro to a run a SuperFanArt initiative, through which fans can create and even sell 3-D print designs based on the My Little Pony franchise.
In the video games industry, many startups are working on in-app merchandising solutions that revolve around 3-D printing. Toyze enables players of Cut the Rope and Pouto to make personalized 3-D printed items based on in-game characters and virtual pets and get them delivered to their doorstep. In similar fashion, Chair and Sandboxr let you 3-D print high-quality figurines of characters from Infinity Blade III. GLU mobile partnered with Ntensify at the end of last year to try out an innovative angle in its mobile game Deer Hunter: The option to purchase 3-D printed merchandise was tied to in-game achievements. Only if you completed a level with a particularly high score, or if you reached the top of a leaderboard, or reached a key point in the game, were you offered the opportunity to 3-D print a unique trophy to materialize that moment. The object you chose to 3-D print and order would engrave your personal score within the design. This is where 3-D printed swag gets the most exciting: fully personalized and customized designs tied to memorable events and moments. Two recently opened startups also believe and heavily bet on this: FabZat and Things3D.
Now, with the new ChefJet 3D Printer from 3D Systems, another possibility is 3-D printing of computer-designed desserts and candies, thereby adding edible marketing into the mix. Metal is coming next. Just imagine what big game universes with massive player bases, such as Angry Birds or League of Legends, could do with such tools. Now consider how blockbuster movies and music superstars could also capitalize on this trend.
The Internet of Things
Smartwatches are just the first wave. Soon enough we'll have fridges capable of figuring out, on the basis of our usual consumption, that we need to order more butter before the weekend and then sorting out promo offers from e-tailers' digital catalogs before automatically placing the right order using brand preferences and pricing, all without any form of human intervention. In coming years, there will be CPUs in pretty much everything we own or wear.
As opposed to a device, clothes we wear are highly dependent on taste and culture. Therefore, it will only be natural for electronics manufacturers to team up with fashion designers going forward. In a second phase, it's totally within grasp to imagine that social media, UGC, and 3-D printing will all be assimilated by the movement, and that components will eventually be available to the hobbyists, ushering us into an era in which there will definitely be unique pieces of smartwear. A company called Normal already 3-D prints earplugs that are specifically designed for your ears. Disney can turn any 3-D printed item into a speaker. It's only a matter of time before all this research and technology is merged together into applications that will provide consumers with levels of customization well beyond present boundaries.