April 14, 2022
The Customer to Customer Revolution
The emergence of ecommerce in the 1990s has changed the way people do business and buy consumer goods. The success of ecommerce has been driven by a combination of new technologies and consumer driven markets, with tech savvy consumers playing a greater role in the products they buy and the success of the companies they support. This trend eventually gave birth to the subset of ecommerce known as consumer to consumer (C2C) business, which has staked out an important and growing niche in the sector. In the future, the most successful C2C companies, and individuals who sell on these platforms, will be those who understand what drives the consumer trends in this sector, particularly the desire to choose a wide array of quality products and services at a reasonable price.
One of the most important types of ecommerce that has emerged in the last 20 years is the customer to customer, or C2C model. The C2C business model lets consumers directly trade with sellers, who are also often consumers, generally in online platforms that provide web interface, advertising, and sometimes escrow services. As C2C platforms grow in size in terms of market cap, revenue, and in the number of entities in the space, the most successful companies will by those who know their customers and are able to follow consumer trends.
The C2C model appeals to contemporary consumers and sellers for a number of reasons. Consumers are attracted to the C2C model for the choices it offers as well as its convenience and lower prices. Sellers frequent C2C platforms also for the convenience, as the platform usually handles the most complicated and costly aspects of business.
Craigslist, eBay, and Etsy are the best known C2C businesses, but there are a number of other competitors currently attempting to carve out a share in the competitive market, in the U.S. and globally. All of these platforms offer a number of benefits for consumers and sellers, so let’s take a look at the history of the C2C model, its potential future impacts on the wider retail sector, and how consumers benefit from this growing business model.
The Road to C2C
The C2C model may be establishing some major space in the ecommerce world, but it’s not exactly a new or complicated idea. You could say C2C began when the first markets appeared along the Nile, Tigris, and Euphrates rivers more than 5,000 years ago and continued into the modern era. Farmers markets, flea markets, and garage sales are all examples low-tech, traditional C2C business, but things changed drastically in the 1990s. As the dotcom era began taking off in the late 1990s, which was often driven by ecommerce brands such as Amazon, the C2C business model made the transition to the internet and caught a ride on the coattails of larger ecommerce companies.
Among the earliest C2C companies to ride the ecommerce wave to success was eBay. You more than likely know a little about eBay and there’s a good chance you’ve used the platform at some point, as today it boasts more than 724 million active buyers worldwide. The company was started by tech entrepreneur Pierre Omidyar in 1995 as what was at the time a very unique platform that matched consumers with sellers of specific items. The formula was a major success, as eBay weathered the storm of the dotcom bubble to rack in $10.8 billion in revenue in 2019 with a market capitalization of over $27.2 billion in 2018. The key to eBay’s success has been its ability to understand its customers while staying current with technology trends.
Customers and buyers alike enjoy the selling options eBay offers: buyers can choose to sell their items at a fixed price, in an auction, or accept a “best offer” from a buyer. Although sellers are charged insertion fees for listings and “final value fees” once an item is sold, the platform takes care of payments, disputes, and makes listings fairly user friendly.
Around the time eBay was starting in northern California, not far away future C2C giant Craigslist was also starting from humble beginnings. Techie Craig Newmark started the eponymously named C2C in 1995 as a dating service, but soon learned that it was more profitable to use the platform as a middleman to connect consumers and sellers who were offering used items, services, or apartments for rent. Although most listings on Craigslist are free, ads for bigger items, apartments, jobs, and gigs require small fees. The business model, which mixes elements of C2C with the gig economy, has proved to be quite successful, as the company’s 2016 revenue was reported at $694 million.
Like eBay, Craigslist has found success by appealing to a specific set of consumers and generating brand loyalty. Although the web site’s interface may be considered a bit dated, it’s user friendly, which is appreciated by less tech savvy consumers and sellers. Sales are also done low-tech, with cash deals usually being made in person. The early, and continued, success of Craigslist and eBay has led to a whole host of new C2C internet platforms entering the space in recent years.
Among the C2C platforms that have followed eBay and Craigslist, Etsy has been one of the most successful. Etsy started in 2005 and went public in 2015 as a platform to connect producers and sellers of handmade and vintage items with consumers, but in recent years the platform has expanded to include listings for clothing, electronics, and toys among other items. Etsy has proven that there is room in the C2C beyond eBay and Craigslist, producing $604 million in revenue with a net profit of $77.5 million, or a net profit margin of just under 13%, for fiscal year 2018. In 2022, consumers have even more options of C2C platforms from which to choose.
For consumers who want high-end clothing but don’t want to pay high-end prices, or mind wearing used clothes, there is the C2C Poshmark. Airbnb and Vrbo connect vacationers with people who rent their homes for short getaways in a growing segment of the C2C space, and Craigslist has recently seen some competition in the form of Facebook Marketplace and a similar British company called Gumtree. The C2C sector’s history has largely been driven by its success, which has relied heavily on the benefits it provides to consumers.
Consumer Benefits and Drawbacks of Using C2C Businesses
The growth of the C2C trend has been fueled by the numerous benefits it offers consumers as well as sellers, which usually go together in this unique retail model. The primary draw for consumers is the lower prices found on C2C platforms. Sellers have little to no overhead, as they sell products out of their homes and use the platforms for advertising. Also, sellers often aren’t professional retailers and want to unload their merchandise as quickly as possible, both of which combine for lower prices than one would find in a brick and mortar store or larger ecommerce sites.
Consumers are also turning to C2C platforms because it offers them more choices. Platforms such as eBay connect consumers and sellers from every part of the globe, making the process relatively easy and convenient for both parties by providing shipping labels and converting transactions into local currencies. Despite these many benefits, though, consumers need to consider some of the drawbacks and limitations of C2C businesses.
Not getting what you pay for is a major concern on many C2C platforms, although some companies, such as eBay, have attempted to mitigate this by offering free and easy returns. Safety issues are a concern on face-to-face meeting platforms like Craigslist, and high platform fees have been barrier for some sellers who desire to enter the space.
Although there are some problems inherent in the C2C business model, as it continues to grow and the platform owners learn more about their customers, we can expect that many of these problems will be overcome in the near future. And for the consumers and sellers who use C2C platforms the future does indeed look bright.
Future C2C Trends
The numbers all indicate that the C2C model shows no signs of losing momentum, and thanks to shifts in consumer habits, the success of these platforms will likely increase. Due to the lockdowns associated with the COVID pandemic, a number of platforms experienced increases of more than 50% visits to their sites, with platforms that sell fashion, clothing, and household items doing particularly well. The increase in C2C ventures has economists predicting that companies in the space will be making billions in combined revenues over the next few years and many new opportunties will open up for startup entrepreneurs as well as existing businesses.
Perhaps one of the most interesting potential impacts of the C2C trend is how it could change the landscape of the general ecommerce sector. Many larger, more traditional ecommerce businesses have begun utilizing elements of the C2C model, especially in the fashion niche. The companies ABOUT YOU, ASOS, and Zalando have indicated they are planning to sell second-hand goods in an attempt to cut into the burgeoning C2C market, while Patagonia has recently went online with a site that specifically sells second-hand Patagonia goods. As these traditional companies devise new ways to capture part of the C2C market, C2C companies will in turn have to conceive new methods to retain their existing customers as well as gain new ones. Ultimately, consumers will benefit greatly from the increased competition and growth in the sector through lower prices, more choices, and increased quality of products and services offered.
A Truly Consumer Driven Trend
Over the last 25 years, rapidly evolving technology merged with changing consumer interests and habits to help make the customer to customer business model a reality. And as the most successful C2C companies realize what is driving consumers into their space—namely lower prices with equal or higher quality as well as convenience and control—they will continue to prosper and grab greater part of this growing market share.