Disintermediation is the removal of the third party that offers intermediation services between two trading parties in a supply chain. It is basically “cutting out the middle man” from the distribution channel allowing direct links between buyers and sellers. Businesses/consumers would not have to go traditional distribution channels, which had some type of intermediate; this includes distributor, wholesaler, brokers, or agent etc. With disintermediation, companies are able to deal with every customer directly, for example via the Internet.
An example of supply chain disintermediation is a manufacturer selling directly to retailers, rather than indirectly through wholesalers. A familiar example of disintermediation is Dell, Inc. Dell sells many of its systems direct to the consumer bypassing traditional retail chains. Dell - has succeeded in creating a brand, well recognized by consumers, profitable and with continuous growth. Likewise, maybe the most notable example to reintermediation is the Levi Strauss company, who unsuccessfully launched a multimillion dollar web site and later shut down most of its online operations.
The advantage of disintermediation is obviously the greater efficiency and lower cost achieved by reducing the number of transactions and processes involved.
Disintermediation can help producers in many ways this is because they are able to save money as organisation do need to pay the intermediation.
The term ‘disintermediation’ has been offered to describe the alleged move towards shorter value chains in electronic marketplaces.
Producers can benefit from increasing their profit margins and passing a part of their savings to the consumers who thus enjoy lower prices and greater choice. Further, where one producer can dominate on price or quality, direct sales reduces the uncertainty of consumers and a “winner take all” market can emerge. Consumers are able to get their products straight away with low cost as it does not have to go through the ‘middle man’ where they have to pay and make deals at low prices. This can attract more customers as businesses are able to sell at low prices which catch more attention making more customer awareness and able to retain existing customers. ASOS is based online so the advent of e-commerce made it possible for them to sell directly to customers. So they do not have to pay intermediation which let them make more profits and as they save money they are able to use it on their customers by providing a better service, more variety of products, more advanced promoting etc.
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