The advent of the internet and e-commerce has significantly impacted the traditional distribution channels of goods and services. This has led to the emergence of two distinct concepts: disintermediation and reintermediation. This article explores the definitions, purposes, and examples of disintermediation and reintermediation, drawing insights from various sources.
Key Facts
- Definition: Disintermediation refers to the removal of intermediaries, such as distributors or brokers, that previously connected a company to its customers.
- Purpose: Disintermediation aims to streamline the supply chain and eliminate unnecessary middlemen, allowing companies to sell products or services directly to customers.
- Examples: General Motors selling cars directly to consumers, insurance companies selling products without agents.
Reintermediation:
- Definition: Reintermediation is the creation of new intermediaries between customers and suppliers, providing services such as supplier search and product evaluation.
- Purpose: Reintermediation occurs when companies recognize the need for intermediaries to facilitate certain business activities, such as customer service, shipping, and supply chain management.
- Examples: Online marketplaces like e-Steel Corp and PetroChemNet Inc bringing together producers, traders, distributors, and buyers in web-based platforms.
Disintermediation
Definition
Disintermediation refers to the removal of intermediaries, such as distributors or brokers, that previously connected a company to its customers (Chaffey, 2009). By eliminating these middlemen, companies aim to streamline the supply chain and sell products or services directly to customers.
Purpose
The primary purpose of disintermediation is to reduce costs and increase efficiency in the distribution process. By cutting out intermediaries, companies can potentially save on commissions, fees, and other expenses associated with third-party involvement. Additionally, disintermediation allows companies to have direct control over customer relationships, enabling them to better understand customer needs and preferences.
Examples
Notable examples of disintermediation include General Motors selling cars directly to consumers, insurance companies selling products without agents, and manufacturers like Levi Strauss & Co. initially attempting to sell clothing online without involving retailers.
Reintermediation
Definition
Reintermediation refers to the creation of new intermediaries between customers and suppliers, providing services such as supplier search, product evaluation, and price comparison (Chaffey, 2009). In contrast to disintermediation, reintermediation recognizes the value that intermediaries can bring to the distribution process.
Purpose
Reintermediation often occurs when companies realize that they lack the expertise, resources, or capabilities to handle certain business activities efficiently. By engaging intermediaries, companies can leverage their specialized knowledge and services to improve customer satisfaction, streamline operations, and expand market reach.
Examples
Examples of reintermediation include online marketplaces like e-Steel Corp and PetroChemNet Inc., which bring together producers, traders, distributors, and buyers in web-based platforms. Additionally, companies like OfficeDepot.com and 3M have partnered with retailers and resellers to create cobranded showrooms and online platforms, leveraging the expertise of these intermediaries to enhance customer experience and product distribution.
Conclusion
Disintermediation and reintermediation represent two distinct strategies in the context of e-commerce and supply chain management. While disintermediation aims to eliminate intermediaries to reduce costs and increase control, reintermediation recognizes the value that intermediaries can add by providing specialized services and expertise. The choice between these strategies depends on various factors, including market conditions, core competencies, and the specific needs of the company and its customers.
References
- Chaffey, D. (2009). E-business and e-commerce management: Strategy, implementation and practice. Fourth Edition. Prentice Hall.
- King, J. (1999). Disintermediation/Reintermediation. Computerworld, 00104841, 13/12/1999, Vol. 33, Issue, 50.
- Steele, D. (2009). Disintermediation and Reintermed by E-business. Faculty.cbpp.uaa.alaska.edu.
- Reintermediation: What it Means, How it Works. (2023, September 28). Investopedia. https://www.investopedia.com/terms/r/reintermediation.asp
FAQs
What is disintermediation?
- Disintermediation refers to the removal of intermediaries, such as distributors or brokers, from the supply chain, allowing companies to sell products or services directly to customers.
What is the purpose of disintermediation?
- Disintermediation aims to reduce costs, increase efficiency, and establish direct customer relationships.
What are some examples of disintermediation?
- Examples include General Motors selling cars directly to consumers, insurance companies selling products without agents, and manufacturers like Dell selling computers directly to customers.
What is reintermediation?
- Reintermediation is the introduction of new intermediaries between customers and suppliers, providing services such as supplier search, product evaluation, and price comparison.
What is the purpose of reintermediation?
- Reintermediation recognizes the value that intermediaries can bring by providing specialized services and expertise, improving customer satisfaction, and expanding market reach.
What are some examples of reintermediation?
- Examples include online marketplaces like Amazon and eBay, cobranded showrooms and online platforms created by companies in partnership with retailers and resellers, and digital platforms that connect producers, traders, and buyers in specific industries.
What factors influence the choice between disintermediation and reintermediation?
- Factors include market conditions, core competencies, the nature of the product or service, and the specific needs of the company and its customers.
Can disintermediation and reintermediation coexist?
- Yes, disintermediation and reintermediation can coexist in different parts of the supply chain or industry. Companies may choose to disintermediate certain activities while relying on intermediaries for others.