Many B2B companies, feeling the squeeze of thin gross margins or concentrated buyer power(and these days due to Venture Capital’s focus on “large markets”) look toward the retail consumer. The B2C promise is seductive – better gross margins, a massive addressable market and “control” over your own brand. But, there is a hidden tax that often makes the B2C journey a value-destroying one, particularly for those relying on digital channels.
The “Digital Platform Tax” is the New Cost of Goods:
In the digital world, Facebook ads and e-commerce placement fees have replaced the traditional distribution costs. My (limited) observation, particularly in sectors like food, hardware products and education, is that sales often become a direct function of daily spend on these platforms. You stop spending, the sales vanish. These digital platforms are incredibly efficient at using your own data to price their services. The moment your product starts doing well, the algorithm finds a way to capture that extra margin, or worse, the platform launches a private label to undercut you. (Luckily, Facebook doesn’t sell products! Or we would have Facebook Trail Mix Bar?)
The Myth of “Brand Building” as an Investment:
We are often told that high marketing spend on online platforms is an “investment” in brand building that will eventually lower customer acquisition costs. In practice, this is rarely the case for physical products or non software products. Instead of building a brand, many companies find themselves in a loop: spending more than their margins just to maintain volume. As volumes grow, platforms quietly raise rents. Algorithms optimise for volume, not seller profitability. Direct demand never really shows up. Sellers become dependent on the platform and, if a product does well enough, the platform may launch its own competing version.
Rocky Way Back to the Past:
When the B2C experiment fails, returning to B2B becomes a struggle because the cost structures and core expertise of the team have fundamentally shifted.
The Narrative Gap:
Most of the online literature on profitable online growth is dominated by SaaS and software where marginal costs are near zero. Or the narrative is dominated by VC backed companies who are yet to see profits.
But for those selling physical products or services without the cushion of VC-funded “burn,” the path and the conversation is scarce.
-Are there successful, profitable models for B2C growth that don’t involve becoming a slave to the platform’s algorithm?
-How are companies successfully controlling their distribution channels rather than being controlled by them?
– Beyond the “splurge and pray” approach, what combination of marketing and distribution actually builds a sustainable bottom line?
I’d love to hear from people (or sources) who have seen (or built) “B2C machines” that prioritize unit economics over vanity metrics.
Avishek Gupta 