Disintermediation: the benefits of going D2C


December 14, 2018

Johan Boström, our co-founder and evangelist, explains how digital has evolved to eliminate intermediaries whose cost to service has become greater than the value they provide.

The evolution of digital technology has not only facilitated business strategies but has also become the driving force behind them. Financial services and supply chain management have benefited greatly from this evolution. A significant advantage of digitization in supply chain management is the elimination of intermediaries, which traditionally involved a manufacturer selling to a distributor, who then sells to a retailer, and eventually to the consumer. This elimination of intermediaries, known as disintermediation, has simplified the supply chain process. Disintermediation in financial services and supply chain management involves cutting out distributors and retailers, allowing manufacturers to sell directly to consumers (D2C) and reducing the cost of service that intermediaries provide. In essence, disintermediation eliminates intermediaries whose value is outweighed by the cost of their services.

Transparency and disintermediation

I believe that disintermediation is, to a large extent, a consequence of the transparency that the vast amount of readily available product information creates. It empowers the end-customer and makes it fast and convenient to compare offerings by product properties and price—regardless of seller. By removing actors from the supply chain, disintermediation decreases cost and allows the manufacturer to both increase margins and, at the same time, create a direct relationship with the end-customer.

However, it is not only the manufacturers that are taking advantage of disintermediation. Retailers like Walmart and marketplaces like Amazon are also working on reducing the number of intermediaries in the supply chain. There are even credible rumors that Amazon plans to launch a global shipping and logistics operation that will compete with UPS and FedEx, thus creating disintermediation in the logistics industry itself.

Diminishing brand loyalty and disintermediation

In some cases, it is more efficient to use a distributor for shipping smaller orders than going direct. The economy of scale makes certain products and order types hard to manage without the services and facilities that a distributor provides. However, in most cases, it works fine to ship direct or use drop shipping, resulting in distributors being bypassed by manufacturers and retailers. However, in the transparent marketplace, brand value is rapidly diminishing, making it easier for a retailer’s private labels to compete with the well-known brands from the manufacturers. Diminishing brand value coupled with disintermediation creates a threat for the branded manufacturers that they need to acknowledge and address if they want to earn the consumer’s business.

Disintermediation and Product Data Syndication: Enhancing the Digital Commerce Experience

Disintermediation has brought about a profound transformation in digital commerce, reshaping the operational landscape for businesses. By circumventing traditional intermediaries and enabling manufacturers to engage directly with consumers, a more streamlined and efficient supply chain is established, yielding noteworthy cost savings for both enterprises and their customers.

In the context of the digital commerce experience, the significance of product data syndication cannot be overstated. As online shopping growth continues to soar, consumers increasingly rely on digital channels to explore and make informed purchases. Nevertheless, incongruous and erroneous product information disseminated across diverse platforms can breed perplexity and dissatisfaction among customers, thereby tarnishing their overall experience.

Product data syndication emerges as a pivotal solution, furnishing a centralized platform for comprehensive product information management and distribution across multiple channels. By leveraging a robust product information management (PIM) system, businesses can diligently ensure the accuracy, coherence, and timeliness of their product data, regardless of the display medium. The manifold benefits of this approach encompass not only an enhanced customer experience but also amplified sales figures and augmented customer loyalty.

What is the primary benefit to consumers of disintermediation?

Increased access to information and greater control over purchasing decisions is a primary benefit to consumers of disintermediation. Disintermediation is, after all, driven by information transparency, and this allows consumers to make more informed decisions about products and prices. Information transparency can be achieved through product data syndication, as keeping product information consistent across different channels and platforms is key. By providing consistent and accurate product data, manufacturers and retailers can enable consumers to easily compare products and prices, leading to a better overall shopping experience. Furthermore, the process of disintermediation can lead to reduced prices for consumers since it eliminates the costs associated with intermediaries in the supply chain. Both disintermediation and product data syndication contribute to enhancing the consumer experience by granting them greater autonomy in their purchasing choices, overall enhancing the customer’s shopping journey. By leveraging inriver’s PIM solution, businesses can effortlessly integrate product data syndication across all platforms. This fosters enhanced customer engagement, increased sales, and an overall stronger customer experience.

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  • Johan Boström

    Co-Founder & Board Member

    Johan Boström is one of the founders of inriver and a senior business leader with two decades of experience leading international technology companies.

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