Product Distribution Is Changing the Much-Predicted Demise

¶ … Product Distribution Is Changing The much-predicted demise of the middlemen, including the fundamental re-ordering of entire distribution networks including the onslaught of the direct selling model, has failed to materialize. The revolution and rapid ascent of disintermediation is being replaced with a much more potentially disruptive force in many industries, and that is a fundamental change in how customers choose to learn and buy products (Shunk, Carter, Hovis, Talwar, 2007).

Ironically the disintermediation that was to occur in computer hardware and technologies has given way to a re-intermediation of the value-added reseller (VAR) where knowledge and insight into meeting customer needs is replacing what had been purely theoretical frameworks showing how disintermediation would create more efficient value chains (Mills, Camek, 2004).

Analysis of Disintermediation In The Age of Knowledge-Based Competition The traditional role of the middlemen, specifically focusing on streamlining the transaction from a manufacturer or service provider to the customer was not dis-intermediated by price, it was changed by two significant factors. The first is the factor of how quickly customers are changing their preferences for how they learn about, purchase, stay loyal to, and seek service from brands they have purchased in the past (Rosenbloom, 2007).

The second has been the flattening of many industry value chains where the customer is now the co-creator of value (Mills, Camek, 2004). These two trends have forces the middlemen, or value-added resellers in many industries to differentiate not just on managing a part of the transaction, but on delivering valuable intelligence and knowledge to help the end customer attain the goals they want, or solve the problems they are buying the product to address.

Paradoxically disintermediation has given way to a re-integration of resellers and channel partners who have the most knowledge and insight to share in serving the end customers. The only disintermediation occurring today is for resellers who fail to stay in step with the needs of the customer and also stay current on the latest information, intelligence and knowledge needed to stay relevant to customers. Only by being a knowledge re-intermediator can any reseller hope to continually earn and keep the role of trusted advisor to customers regardless of industry (Rosenbloom, 2007).

Disintermediation And The Elasticity Of Demand For Products The dire forecasts and warnings of entire industries having disintermediated value chains has for the most part not come true. Resellers paradoxically are delivering even greater value for products that are highly elastic in demand (therefore also easily differentiated) versus those that are commodity-like (sold on price & availability) (Rosenbloom, 2007).

The greater the elasticity of demand for a product, the more re-intermediation is occurring given the need for expertise and knowledge of these products and how they can meet the needs of customers. This includes high-end PCs, tablet PCs and smartphones. Conversely products that have low switching costs and are sold on price and availability are seeing customers change behavior to trust their online resellers, as Amazon has so successfully done with books and other products.

The greater the need for knowledge to get the most value out of a product, the greater the need for a reseller including a brick-and-mortar store as well. The reality is that disintermediation as a concept ignored the more complex and nuanced aspects of selling and customer relationships, and greatly discounted the role of knowledge in making a customer successful with a given.