EXPRESS: Strategic Analysis of the Emerging S2b2C Model

Supplier-to-small-business-to-Consumers (S2b2C) has emerged as a novel e-commerce model, where S2b2C platforms source products from upstream suppliers and distribute them through individual sellers who promote and sell products within their own social networks. This model differs from traditional e-commerce in two key aspects: It segments the entire consumer market into distinct communities (i.e., consumer segmentation), and creates additional consumer value through social interactions with individual sellers (i.e., interaction utility). This paper examines the impacts of consumer segmentation and interaction utility on the market outcomes. Specifically, we compare the S2b2C model with traditional e-commerce in terms of prices, demands, profits, consumer surplus, and social welfare. We find that: First, firms benefit from an asymmetric consumer-segmentation structure, where the high-end seller targets consumers with sufficiently high valuations, while the low-end seller serves the remaining market segment. Second, conventional wisdom on double marginalization may not hold under the S2b2C model. Despite the introduction of an additional layer in the S2b2C supply chain, both the wholesale price and the retail price can be lower. Finally, S2b2C can result in win-win, win-lose, lose-win, or lose-lose outcomes for firms and consumers, depending on the consumer-segmentation structure and the value consumers place on social interactions.