The new wave of “Consumer to Manufacturer”

Chia Jeng Yang
Jun 22, 2019 · 4 min read

Technology is disrupting demand and supply forces in very fundamental terms. One of these mechanics is “Consumer to Manufacturer”, consumer-driven demand-shaping.

First, a story: In the 1990s, a group of Dutch car enthusiast banded together to persuade an overseas car manufacturer to produce a small-batch of a particular sports car that they would import into the Netherlands together. They were ultimately unsuccessful.

This is Consumer to Manufacturer, and thanks to technology, we are seeing a resurgence of this particularly disruptive form of demand. C2M is a specific phenomenon of niche demand aggregation, combining elements of social selling and tech-enabled consumer aggregation, almost like technologically-enabled collectivism

C2M is a type of interaction between end-producers and end-consumers, but interactions between consumers and manufacturers are not new. Consultants help manufacturers canvass consumer data to understand consumer trends. Manufacturers canvass internally, externally, regionally and globally for innovative product ideas. Technology has already enabled small-scale manufacturers to do direct to consumer selling, with multiple farm to table platforms and platforms like Taobao existing.

The key difference between Consumer to Manufacturer and other relationships (e.g. Manufacturer to Consumer) is the initiator of demand. Instead of simply fulfilling a sale one at a time, it helps manufacturers get real-time inbound feedback for demand of a specific customized product. This feedback is community driven, grown by the community, with the scope of demand driven by the community itself.

C2M is, therefore, an extremely efficient channel to passively source niche demand. Instead of manufacturers approaching the market with what they could produce, consumers collectively approach manufacturers with what they should produce.

Examples of these include: Bought by Many (Insurance), CarBuckets (automotive), MobOffer (consumer — DEAD), Mercata (consumer — DEAD), MyVici (consumer — DEAD).

The core definition of C2M revolves around the principle of consumer demand arising and consolidating before the production and supply of the good is made, with community-driven demand scoping through community incentives.

What is the difference between C2M and pre-ordering?

As we know, we can already pre-order most things, from 3D machines, to houses, to even the food we grow (cows, etc).

The difference between C2M and pre-ordering is that C2M is a larger umbrella phenomenon that combines and houses the mechanics of social selling, bulk-buying, and pre-ordering.

  • For fashion e-commerce, think communities of large feet women pre-ordering size 48 pink shoes, which are produced once a certain bulk amount is reached.
  • For other consumer products, think small-batch electronic parts manufacturing

Past failures have tried to tackle demand aggregation rather than demand shaping. It is difficult for C2M to compete with general marketplaces where common products are easily found, since the demand is clearly fulfilled. Instead, C2M should be focused on niche demand aggregation, where the demand is clearly present but difficult from a manufacturer’s perspective to detect within the market. The focus should, therefore, be on looking at the supporting infrastructure for niche demand aggregation (C2M’s) to take place, and within specific verticals (insurance, etc). It is likely these verticals are ones where there are high upfront capital costs of production, for high-value/important items.

The implication for ad-tech is huge. By aggregating communities down the purchase intent funnel, there is a significant effect on customer acquisition costs, demand prediction, and production wastes.

As consumers continue to be more demanding for customized and more niche goods and services, and community-driven behavior becomes more important in consumer settings, C2M will continue to grow as an increasingly visible phenomenon.

Existing literature on C2M is nascent. A good introduction piece which explains the history of ‘reverse group buying’ can be found here. A university research piece looks at BIYAO, the Chinese customized luxury e-commerce platform, but fails to make a strong enough distinction between C2M and M2C. In 2010, these researchers explore a reverse bidding model for groups of buyers to collectively auction their demand to a range of suppliers.

Thanks to Elvin Zhang, Rishi Gaurav Bhatnagar for thoughts/comments.

Chia dives into consumer investment trends across North America and Asia, builds interesting projects and works closely with early stage (Pre-A) founders. Previous work here:

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Chia Jeng Yang

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Consumer/fintech investing | Future of VC | ex-Founder/Operator | work with smart people on projects:

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