Disintermediation (Strategy) - Explained
What is an Disintermediation Strategy?
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What is a Disintermediation Strategy?
In simple words, disintermediation means removal of the intermediaries or middlemen from a supply chain (sales) or transaction (finance). These intermediaries include brokers, agents, wholesaler, distributor, banks and other finance houses.
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Disintermediation in Distribution Channels
In a disintermediated system, the consumer directly deals with the producer, thus removing the intermediaries or middlemen from the supply chain. There may be more than one level of intermediaries in a supply chain. In a traditional retail system, the retail stores work as the intermediaries. They purchase the products from the producers and sell those to the end customers. In other situations, buyers can directly buy the products from the producer. When these middlemen are removed from this supply chain and the manufacturers directly deal with the customers, it is an example of disintermediation.
Disintermediation often results in lowering the prices of the products as the middlemen are removed from the distribution channel. Customers often share in the lower cost structure. It also helps in increasing the profit margin of the producing company in long run. Unfortunately for consumers, all companies do not opt for disintermediation as it involves more investment in resources for distributing the products.
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