MIT Sloan Management Review

Management of Information Systems, Marketing

 

The New E-Commerce Intermediaries

By Philip Anderson and Erin Anderson

July 15, 2002

The Internet was supposed to bring manufacturers into direct contact with end customers in a ruthlessly efficient world that left no room for middlemen. But the opposite is occurring. The downstream supply chain is becoming more complex and fragmented, creating opportunity for a new breed of uniquely positioned problem solvers.

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Not long ago companies embracing the Internet thought e-commerce meant cutting out intermediaries. Businesses would go directly to customers and save money. Times change and perceptions crumble. Companies discovered it isn’t so easy to do everything alone. Middlemen are still needed. However, their role is changing. Only those middlemen and producers who understand just exactly how the intermediary role is changing can make good on the promise of e-commerce. Intermediaries add value. Three of the nine ways they currently add value (providing information about buyers, sellers, and goods or services) probably will change; middlemen will have to provide all that gratis. Another set of functions (economies of scale, economies of scope, arranging convenient times and places) will survive in a new form. The final three activities (reducing uncertainty about quality, preserving anonymity and tailoring offerings) represent growth opportunities for specialist companies and supplier partners.

Consider the upstream company, the one that expected to use the Web to cut out middlemen. How does it succeed today? It weaves a distribution partnership and finds new ways of compensating members. It moves away from selling wholesale and leaving the channel partner to fight for a markup. The proper response to the Web for suppliers is to embrace channel partners, not replace them; the proper response for channel intermediaries is to leverage, rather than dread, Web-enabled commerce. Providers will... To read the complete article, login or sign-up using the form below.

 
 

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