Disintermediation - Disintermediation, Pros And Cons

PROS AND CONS DISINTERMEDIATION

Disintermediation has several advantages. In addition to giving consumers simpler and more direct access to goods and services, it can also mean lower prices, because supply chains are streamlined and the fees charged by distributors and logistics providers are eliminated or sharply reduced. The advent of e-commerce made it possible for many companies to begin selling directly to consumers, some of whom had never done so before.

While the potential to sell directly via the Internet was appealing because of the potential for greater profits, it also had several drawbacks. First, disinter-mediation caused tension between many companies and their business partners, including salespeople, rep firms, distributors, dealers, and retailers. Because of this tension, industry trade associations like the National Automotive Dealers Association and the Wine Wholesalers Association took steps to preserve their roles. Their efforts made it impossible for wineries to sell wine online, or for automobile manufacturers like Ford and Chrysler to bypass local dealers and sell cars directly to consumers.

Another drawback to disintermediation was that some companies failed to identify the kind of infrastructure required for handling fulfillment online. Fulfillment, the act of filling and shipping orders received from customers, is different on the Internet because high volumes of smaller orders are often received. This stands in contrast to traditional fulfillment involving large shipments of product to distributors or retail chains. Successful online fulfillment requires responsive, integrated back-end processes in areas like accounting, customer service, marketing, and shipping. This makes it possible to offer customers real-time information about available products, shipping and order confirmations, problem notifications, and more. Having a fancy Web site to accept orders simply isn't enough, which many companies eventually discovered to their dismay.