The world today is witness to intelligent customers and consumers. People who no longer take the marketer's claim as sacrosanct and are thinking people. These are the new takers of products and services that today's business folk have to offer. For the action of consumption to be effective and repeatable, direct channels need to be established. A direct reach ensures faster and efficient contact with this thinking customer/consumer. This trend is being met by the disintermediation concept, which is the elimination of intermediaries in a business value chain. During the course of this paper, we talk about the emergence of this concept, its advantages like streamlining, lowered costs and increased speed. These advantages go on to make better business sense which will be illustrated through examples from the industries that are affected by it today namely, real estate, travel agencies, publishing and entertainment, health care, brokerage firms and many more.
[...] Impacted Sectors: This "disintermediation" is occurring in a broad range of industry sectors because the more direct access between a provider and consumer of goods and services, facilitated by the Internet, results in greater economic efficiency and customer convenience. COMPANY PROFILE 49 million customers 31 product categories Presence in 7 countries Known as ‘Earth's Biggest Selection' Books: Amazon is a classic example that has made this concept work for itself. An online portal that lists millions of unique new and used items in categories such as electronics, computers, kitchen and housewares, books, music, DVDs, videos, camera and photo items, toys, baby and baby registry, software, computer and video games, cell phones and service, tools and hardware, travel services, and outdoor living products. [...]
[...] (And that doesn't even include the people who posted reviews on Nancy's site - they just haven't realized that they could be charging for their words.) In fact, every single time Bob clicked his mouse, a transaction took place: a little bit of value was created, and a little bit of money changed hands. Yes, the money usually amounted to only a penny or two, but it seems a safe bet that far more profit was made by the intermediaries that took those pennies than by eToys when it sold the book for half-price and through in free shipping. [...]
[...] At a relatively affordable surcharge of $10 over the standard Levi's price, the custom-fit jeans were seen by many as a glimpse of the anticipated revolution in mass- customization. Levi's partnered with Web enabler USWeb Corp., Santa Clara, Calif., now USWeb/CKS, to develop two direct online sales sites: levi.com and dockers.com. Levi's launched its E-commerce pilot a year ago and started dealing with the challenges of building and operating an online store. But now the company is planning to stop selling clothes online after the holiday season, opting instead to direct consumers to macys.com and jcpenney.com, its top retail partners. [...]
[...] By opening access to information outside of the Brokers/Lawyers control, buyers and sellers now gain economic benefits that would be otherwise be received by market intermediaries or inappropriately distributed among the smart and connected deal makers of the financial world. Health Care: Until recently, doctors, hospitals and insurers monopolized health information. Not anymore. Patients and caregivers are striking back, with the help of consumer Web sites, health-related Web sites and pharmaceutical and healthcare sites. Health sites and the better pharmaceutical sites combine treatment and product information, becoming powerful virtual allies for consumers. [...]
[...] To illustrate, a typical B2C supply chain is composed of four or five entities (in order): Supplier Manufacturer Wholesaler Retailer Buyer And it has been argued that the Internet modifies the supply chain due to market transparency: Supplier Manufacturer Buyer Fig: Electronic Intermediaries Disintermediation: Three fundamental issues are involved in disintermediation, which decide the impact and feasibility of using the electronic commerce medium Strategic market focus of the organization 2. Level of innovativeness present in the corporate culture 3. The nature of the product moving through the distribution channel Other factors also influence this strategy, like: Familiarity of brands and offering Sales generation costs versus costs of being online The value added by channel partners Excellence or deficiencies in delivering customer service Convenience and ease in shopping, trialability and returnability Glitches in the site Linkage of direct marketing practices with the internet presence Ability to build and sustain customer relationships The pros and cons of this concept as identified by us, are as follows: PROS Direct access to good/ services Lower prices Overcome geographic and time constraints Communication passage CONS Failure to identify the infrastructure required for handling fulfillment online Value gaps Conflict with other channel and selling partners The transition from traditional to Disintermediated Markets: Following table summarizes the role of traditional intermediaries: This is how it has changed and these are the threats that are posed to the normal functions: Electronic markets are still far from reaching a state of maturity. [...]
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