| In economics, disintermediation is the removal of intermediaries in a
supply chain. Disintermediation is often the result of high market transparency, in that buyers are aware of supply prices direct from the manufacturer. As a
result, buyers will bypass the middlemen (wholesalers and retailers) in order to buy directly from the manufacturer and thereby
pay less. Buyers can alternatively elect to purchase from wholesalers. Often, a B2C intermediary functions
as the bridge between buyer and manufacturer.
To illustrate, a typical B2C supply chain is composed of four or five entities (in order):
- Supplier
- Manufacturer
- Wholesaler
- Retailer
- Buyer
It has been argued that the Internet modifies the supply chain due to market transparency:
- Supplier
- Manufacturer
- Buyer
Impact of Internet-related disintermediation upon various industries
Strong impact
Still in progress (due to legal or structural obstacles)
Failed and became niche ancillary services
Discussion
An example of disintermediation has been Dell Computers which sells
many of its systems direct to the consumer bypassing traditional retail chains. In the non-Internet world, disintermediation has
been an important part of many big box retailers such as Walmart which attempt to reduce
prices by reducing the number of intermediaries between the supplier and the buyer. Disintermediation is also closely associated
with the idea of 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.
However, disintermediation has often occurred less frequently as a result of the Internet than many expected during the
dot com boom. Retailers and wholesalers provide functions such as the
extension of credit, aggregation of products from different suppliers, and processing of returns. In addition, shipping goods to
and from the manufacturer can in many cases be far less efficient than shipping them to a store where the consumer can pick them
up. In response to the threat of disintermediation, some retailers have attempted to integrate an virtual presence and a physical
presence in a strategy known as bricks and clicks.
See also: Reintermediation
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