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The new middlemen: the eCommerce model

BY Ruoshan Tao 28 Oct, "14

With increased transparency, the tightening of the supply chain seemed an inevitability. This seemed especially true in the retail world. Now that retailers have direct access to portals like Alibaba, there’s been a notable decrease in the number of facilitators that used to exist.

The traditional B2C supply chain consists of four or five entities: supplier, manufacturer, wholesaler, retailer, and consumer. With the advent of the internet however, the supply chain landscape is changing quickly.

Disintermediation, or the removal of intermediaries in a supply chain, is particularly relevant to eCommerce today.

The idea is that with increased access to information, the barriers that existed previously which prevented manufacturers or wholesalers from selling directly to the consumer have effectively been removed.

ecommerce platforms

Interestingly, the reality hasn’t aligned with this expectation. If anything, conventional ‘middlemen’ roles have evolved in addition to the creation of entirely new intermediaries.

So as an SME, can you afford to cut out the middlemen? Larger organizations such as Walmart can leveraged their incredible network to make the cost savings by cutting out intermediaries where possible.

For SMEs however, resources are generally much more limited. Middlemen can allow you to obtain goods that would be impossible for you to access otherwise.

In order to determine whether or not using intermediaries is right for you, it’s important to identify the potential value that they can bring. The value that modern middlemen bring to the table may be different from what you think.

New role of the middlemen

When it comes to the modern supply chain, the linkages between different players are changing.

Wholesalers continue to serve an important function in the supply chain. However, their role is no longer confined to purchasing from suppliers to distribute to retailers. In order to survive, they must provide a tangible value adding function that’s clear to their customers.

Previously, wholesalers were generally regarded as the portal by which retailers access suppliers. Because it’s so much easier to bypass certain rungs nowadays, proving value is more important than ever.

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The rise of eCommerce platforms such as eBay, Amazon, and ASOS indicates the rise of a whole new type of intermediary.

It’s an interesting new way to think about the supply chain - are platforms an additional rung in the chain, or are they merely a medium for those further up the supply chain to connect with those that are further down by bypassing traditional linkages?

Regardless of its role in the supply chain however, the simple fact remains - the trend towards B2C firms selling through hosted platforms is inevitable.

Why?

Trust and convenience are the two primary factors.

Backed by big names like Amazon, consumers feel assured that certain consumer protection policies are in place. ASOS for instance, offers a 14 day returns policy. Given the multitude of alternative options on the internet, maintaining trust in the platform is central to its success.

Active reviewers are also a big part of creating and maintaining a functional and trustworthy platform. Online reviews have become an integral part of the purchasing process. With online platforms, where sellers can access a larger customer base, there are also likely to be more reviews available for consumers to evaluate their purchasing decision.

Even seemingly minute inconveniences such as having to reenter credit card details can play a role in a consumer's purchasing behaviour. Intermediaries are in a unique position to help facilitate these transactions.

If platforms are successful in offering both buyers and sellers these two factors, it's likely that hosted eCommerce platforms will continue to grow.

Be the The Wholesaler 2.0

Instead of becoming obsolete, intermediaries are expanding and transforming their job functions. We’ve previously written about the Wholesaler 2.0. Not only is this group concerned with pricing and the bottom line, they’re also looking to add value for their customer base in other ways.

The wholesaling business is undergoing a significant transformation. Unlike B2C transactions, the need for a personalized touch is still very much present. After all, the stakes are much higher. For retail businesses, inventory is their lifeblood. As a result, they’re likely to want to connect with real people for an additional sense of security.

Placing orders with real people however, can be a hassle. Phone, Skype, Email, Whatsapp - these are just some of the ways that wholesalers are taking orders. Not only is it difficult to consolidate information, this process will require a set of internal middlemen to process orders, there by creating an unnecessary bottleneck. illu_b2b

Adding a private B2B e-Commerce store would be inline with the objectives of the Wholesaler 2.0. This way, you can create customized portals for Retailers are people too! Increased visibility in the sales process is a great way to build trust with your partners, and ensuring a user friendly experience throughout is an added bonus. Helping relevant stakeholders stay informed is an integral part of building trust between partners.

Conclusion

The disintermediation trend in eCommerce has deviated from expectations, creating an interesting phenomenon whereby a form of reintermediation has actually taken place. New middlemen are appearing, and the functions that they serve are more sophisticated than ever. Players in the modern supply chain are inundated with new opportunities to rethink both their purchasing and sales decisions.

This has created a new space for different kinds of intermediaries, while some traditional linkages may become obsolete.

Regardless, it's an interesting transitional period for middlemen operating in the eCommerce space. Some will disappear, whereas others will spring up to offer value-added services that may not previously have existed.

See also:

Wholesale 2.0: disruption of the conventional supply chain

4 customer acquisition fundamentals that every successful SME knows

5 website personalization tools to help you generate more sales

Out of stock problems? Walmart, Nike, and Best Buy had them too, but here's how you can do better

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