Disintermediation
Disintermediation is a concept used in the marketing world to explain a process of how things can get down in a quicker process. If we further look into the definition of this it is explained in this manner, Disintermediation is the strategy of removing the middleman when it comes to a supply chain, market, or process. The idea is that by removing the intermediary from the picture, it is possible to reduce associated costs and possibly speed up the completion of any tasks associated with the process. As a result, both the originator of the task as well as the recipient benefit from the direct interaction. (Hinder 2011). The concept of disintermediation can be applied in several different ways. One application that is growing in popularity has to do with financial markets. In part, this is because of the trend of raising capital through the buying and selling of securities, rather than simply going through a bank or other lending institution. The borrower chooses to sell securities rather than approach a bank for some type of loan arrangement. For example, the borrower may create a bond issue and sell the bonds directly to investors as a way of raising the needed capital. This creates a direct line of communication between the bond issuer and the bond holders, making the need for an intermediary unnecessary. (Hinder, 2011) With this being said, Disintermediation can be beneficial to businesses and consumers both from some of these very facts stated.
If there are agents, brokers, or other middleman between the producer and the consumer each one adds to the price of the goods. Traditionally, this has been explained away as paying for a provided service. Sometimes this was true--for example the middleman might transport the goods. As the agents increased and services decreased consumers began to look for alternatives. The Internet is what brought consumer and producer together. When the consumer could directly see the producer's catalog and order online, disintermediation took off in a big way. Fewer middlemen mean fewer price hikes between producer and consumer and more savings for the consumer. Once the first few producers started marketing online, others soon followed.
If you are eliminating the middleman, you have it eliminated the timing from the middleman and the handling time. This is not only true for the shipping time from producer to consumer; it also effects the time to place an order. If order placement goes through several agents between consumer and producer it definitely takes more time than it does for the consumer to order online. When something goes wrong like a product is out of stock or discontinued, the communications and reordering can become prohibitively time-consuming. (Fox, 2012).
The world today has many examples of disintermediation. In the early 2000s, disintermediation had permeated a wide array of industries. In the packaged goods and toy industries, companies like Nabisco and Mattel sold a percentage of their products directly. In the computer industry, Dell Computer sold directly on an exclusive basis. Because of the company's overwhelming success in the early 2000s, Dell is an excellent example of how disintermediation can work. The company, which climbed to the top of the overall world market in the first quarter of 2001, built computers on demand for both individual consumers and organizations.