Disintermediation

Source: Wikipedia, the free encyclopedia.
The disintermediation process
Intermediary B may be bypassed by A to connect with C directly
Safeway Inc.
) have launched their own delivery services to target the niche market to which Webvan catered.

Disintermediation is the removal of

agent), companies may now deal with customers directly, for example via the Internet.[2]

Disintermediation may decrease the total cost of servicing customers and may allow the manufacturer to increase

business-to-consumer
electronic commerce (B2C) company functions as the bridge between buyer and manufacturer.

However manufacturers will still incur distribution costs, such as the physical transport of goods, packaging in small units, advertising, and customer helplines, some or all of which would previously have been borne by the intermediary. To illustrate, a typical B2C supply chain is composed of four or five entities. These are the

buyer.[citation needed
]

History

The term was originally applied to the

insurance companies, hedge funds, mutual funds and stocks) rather than leaving their money in savings accounts.[3][4] The original cause was a U.S. government regulation (Regulation Q) which limited the interest rate paid on interest bearing accounts that were insured by the Federal Deposit Insurance Corporation
.

It was later applied more generally to "cutting out the middleman" in commerce, though the financial meaning remained predominant. Only in the late 1990s did it become widely popularized.

Impact of Internet-related disintermediation upon various industries

It has been argued that the Internet modifies the supply chain due to market

Amazon are edging out the middlemen. Direct sellers and buyers connect with each other because of the platform created by the virtual marketplace vendor. There is quid pro quo for the vendor for the use of the platform, else it would make no business sense to create such a platform. If the buyer, having connected with the seller, circumvents the platform and talks to the seller and does her deal directly with the seller, then the platform owner is unlikely to get her revenue share. This may be considered a new form of disintermediation.[citation needed
]

Discussion

In the non-Internet world, disintermediation has been an important strategy for many

just in time manufacturing, as the removal of the need for inventory removes one function of an intermediary. The existence of laws which discourage disintermediation has been cited as a reason for the poor economic performance of Japan and Germany in the 1990s.[citation needed
]

However, Internet-related disintermediation occurred less frequently than many expected during the

bricks and clicks
.

Reintermediation

Main article: Re-intermediation

Reintermediation can be defined as the reintroduction of an intermediary between end users (consumers) and a producer. This term applies especially to instances in which disintermediation has occurred first.[2]

At the start of the Internet revolution,

Amazon.com and eBay).[5]

Reintermediation occurred due to many new problems associated with the e-commerce disintermediation concept, largely centered on the issues associated with the direct-to-consumers model. The high cost of shipping many small orders, massive customer service issues, and confronting the wrath of disintermediated retailers and supply channel partners all presented real obstacles. Huge resources are required to accommodate presales and postsales issues of individual consumers. Before disintermediation, supply chain middlemen acted as salespeople for the producers. Without them, the producer itself would have to handle procuring those customers. Selling online has its own associated costs: developing quality websites, maintaining product information, and marketing expenses all add up. Finally, limiting a product's availability to Internet channels forces the producer to compete with the rest of the Internet for customers' attention, a space that is becoming increasingly crowded.

Examples

Notable examples of disintermediation include

Dell and Apple, which sell many of their systems direct-to-consumer
—thus bypassing traditional retail chains, having succeeded in creating brands well recognized by customers, profitable and with continuous growth.

In the automotive industry

Tesla avoids using dealers as middlemen by offering their own outlets, which have only a few vehicles for display and test driving; customers complete their full purchase online. This approach allowed Tesla to raise auto gross profit by about 34%. This strategy also allows Tesla to control more of its customers' experience and build online community.[6] Following Tesla's success, two other automotive brands, Audi and General Motors, decided to start trials of direct sales in 2012 and 2013 respectively.[7][8]

See also

References

'Notes

  1. ^ Wake Forest. Infinite Financial Intermediation. page 50. Law Review 643 (2015)
  2. ^
    doi:10.1080/101967899359337
    .
  3. ^ Gellman, R. (1996). Disintermediation and the Internet. Government information quarterly, 13(1), 1–8.
  4. ISBN 978-3540710028
    . Retrieved 9 January 2017.
  5. ^ Sarkar, Butler and Steinfield. Intermediaries and Cybermediaries: A Continuing Role for Mediating Players in the Electronic Marketplace. 1995.
  6. ^ Dans, Enrique (2013-10-11). "The automotive industry and the trend towards disintermediation". Enrique Dans. Retrieved 2021-11-02.
  7. ^ Read, Richard. "Audi Opens Digital Showroom: Is This The Future Of Shopping?". The Car Connection. Retrieved 2021-11-20.
  8. ^ Read, Richard. "GM Follows Tesla's Lead, Plans To Sell Directly To Online Shoppers". The Car Connection. Retrieved 2021-11-20.

Bibliography

External links

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