Bloomberg Law
July 28, 2020, 8:01 AM

INSIGHT: B2B Companies Need to Realign in a B2C E-Commerce Economy

Eric Bergner
Eric Bergner
Manatt, Phelps & Phillips, LLP
Bea Hinton
Bea Hinton
Manatt, Phelps & Phillips, LLP

As business-to-business (B2B) face mounting inventory and production challenges, inflexible supply chains, and distributors unable to keep up in the current unpredictable and interdependent environment, B2B companies across all industries and sectors should strongly consider reassessing their dependence on traditional business models, channels, and customers.

Major industries are being forced to (quite literally) shut their doors, online sales are surging, digital engagement is up and e-commerce channels are booming. Add to that fluctuations in supply and demand and rapidly evolving buyer behavior, and the message is clear: B2B businesses must consider leveraging their existing products, services and capabilities to optimize e-commerce sales, launch business-to-consumer (B2C) operations and incorporate business-to-consumer strategies to effectively serve their existing B2B buyers.

Recent surveys indicate that the trend of both B2B and B2C buyers migrating toward an online experience (and expecting a seamless and personalized digital journey) will only continue. As early case studies show, B2B businesses that integrate this trend can expect increased sales. For the agile, digital-forward business, then, continued viability during and after the coronavirus pandemic is possible.

The Shift to B2C E-Commerce Isn’t Coming—It’s Here

Prudent businesses are already building responsive and sustainable B2C-like e-commerce infrastructures. Across industries, B2B businesses have seen early success by rolling out new online or contactless B2C business lines and channels; launching new customer engagement portals; modernizing their online presence; investing in targeted, data-driven advertising; and otherwise deploying advanced technologies to provide B2B buyers with what they’re demanding—digital interaction and a personalized B2C-like experience.

Some B2B businesses have already seen massive spikes in B2C e-commerce sales since the onset of the Covid-19 pandemic. According to recent reports, Unilever’s B2C sales now account for 45% of its food service division’s e-commerce sales, compared with 25% pre-pandemic.

Likewise, distributors such as FoodMaven, which have traditionally serviced institutional clients, are now shifting to a direct-to-consumer model in the face of massive closures of, and restrictions on, industries dependent on face-to-face interactions.

Considerations for B2B Businesses Expanding Into B2C E-Commerce Market

For B2B businesses committed to expanding into the B2C e-commerce market or otherwise providing their B2B clients with a direct-to-consumer experience, even measured shifts in operations will present novel challenges.

While each business must engage the appropriate stakeholders and outside counsel to conduct an individual evaluation of its risks and opportunities, there are at least two key challenges all such B2B businesses must consider:

Enforceability of Clickwrap and Other Online Agreements

The terms of service traditionally used to protect B2B businesses and the contracts otherwise governing their clients’ purchases and use of products and services will need to be reviewed and likely modified to ensure their validity and enforceability are in the B2C context.

B2B businesses should expect heightened scrutiny of any nonnegotiable terms and conditions applicable to individual consumers, who generally have less bargaining power and are less sophisticated than traditional B2B clients.

As litigation of online agreements rises, reflecting an increase in businesses having to defend the enforceability of their terms, B2B businesses must consider and head off the potential liability inherent in transacting online with individual consumers.

Well-advised B2B businesses can achieve this in part by:

  • Drafting tailored mutual dispute resolution and arbitration provisions that head off substantive unconscionability claims;
  • Designing web and mobile user experiences that present terms clearly and conspicuously to head off procedural unconscionability claims; and
  • Programmatically tracking, and creating a robust back-end record of, online contract acceptance to meet modern evidentiary and authentication expectations.

Data Usage and Compliance With Data Privacy and Security Requirements

As B2B businesses digitize consumer interactions and leverage and integrate their digital presence to not only complete sales, but also drive sales, consumer data will be the most important asset for B2B businesses to own or control going forward.

However, B2B businesses may not be well versed in the consumer protection laws and industry best practices governing individual consumers’ data. Customer relationships, online agreements, and internal processes will look and feel markedly different.

To protect and advance their interests, B2B businesses must consider, in part:

  • Refreshing their privacy policies and notices to appropriately reflect their data collection, use and sharing practices;
  • Revisiting data ownership and use provisions in their form agreements, and drafting new forms tailored to any B2C offerings and evolving data usage needs; and
  • Implementing a responsive and flexible data privacy and security compliance plan that considers all applicable privacy frameworks, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

To that end, B2B businesses that work with their internal stakeholders and outside counsel early and often to map both B2B and B2C data and track data flows; operationalize legal compliance; establish appropriate physical, administrative and technical safeguards; and conduct employee compliance trainings will have a clear advantage over their competitors and be well-positioned to navigate, in real time, changes to existing privacy frameworks and additional privacy regulations down the line.

Despite the relatively complex and dynamic B2C legal and regulatory landscape, with the right technologies, agreements and backend processes in place, B2B businesses can leverage the B2C e-commerce model to optimize sales and otherwise meet their business and marketing operations goals both during and after the COVID-19 pandemic—all while staying on the right side of the law.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Eric Bergner is a partner with Manatt, Phelps & Phillips LLP in the firm’s Digital and Technology Group. He represents top-tier companies in the entertainment, publishing and consumer electronics industries, advising clients on strategies to monetize content across digital and traditional media platforms, including online, mobile, print and television.

Bea Hinton is an associate with Manatt, Phelps & Phillips LLP in the firm’s Digital and Technology Group where she focuses her practice on content development, production, licensing, and distribution deals.

The authors would like to give a special thanks to Stephanie Thompson, a summer associate who assisted with this Insight.

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