Reintermediation

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Reintermediation
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Reintermediation is where changes in the current business model or advances in technology result in the emergence of new types of intermediary than can create more value than possible in the previous channel structure[1]. In some cases, a new element of a supply chain simply replaces a single displaced element, such as Amazon replacing retailers. In other cases, a reintermediating entity replaces multiple supply chain elements.

These new intermediaries do one of two things:

  1. Provide customers with new, important value-added services not provided in the new direct customer-supplier relationship. An example is Kelkoo, which is a shopping/ price comparison search engine.
  2. Provide customers with more efficient means of transacting business.

The ever-increasing number hubs, portals, aggregators, clearing houses and exchanges shows that entirely new ways of doing business are being created[2].

Reintermediation in the automobile industry

Some infomediaries are developing additional services, such as the supply of general information about a particular product category or products meeting a series of different needs based around general life events. For example, Autobytel.com, a web-based car sales intermediary, started by offering customers general information about cars, which helped them in identifying their search criteria, and the ability to research dealers from whom they could purchase the specified vehicle. The company now assists customers with financing, insurance and service scheduling, increasingly performing many of the functions previously undertaken by dealers and taking ownership of the long-term relationship with the customer[3].

The implications of reintermediation

There are four implications of reintermediation[4]:

  • First, it is necessary to make sure that your company, as a supplier, is represented with the new intermediaries operating within your chosen market sector. This implies the need to integrate, using the Internet, databases containing price information with those f different intermediaries. Forming partnerships or setting up sponsorship with some intermediaries can give better online visibility compared to competitors.
  • Second, it is important to monitor the prices of other suppliers within this sector (possibly by using the intermediary web site for this purpose).
  • Third, it may be appropriate to create your own intermediary to help budding DIYers, but is positioned separately from its owners. Such tactics counter or take advantage of reintermediation are sometimes know as countermediation.
  • Screentrade is another example of countermediation, except that here the strategy of Lloyds TSB was to use the lower-ski approach of purchasing an existing online intermediary rather than creating its own intermediary. A further example is Opodo which has been set up by nine European airlines including Air France, BA, KLM ans Lufthansa. Such collaboration would have been conceivable just a short time ago.

Footnotes

  1. A. Payne, P. Frow 2003, p.304
  2. ACCA Business Analysis 2017, p.329
  3. A. Payne 2012, p.175
  4. D. Chaffey 2007, p.47

References

Author: Karolina Morga