Disintermediation

[1] Instead of going through traditional distribution channels, which had some type of intermediary (such as a distributor, wholesaler, broker, or agent), companies may now deal with customers directly, for example via the Internet.

[2] Disintermediation may decrease the total cost of servicing customers and may allow the manufacturer to increase profit margins and/or reduce prices.

Disintermediation initiated by consumers is often the result of high market transparency, in that buyers are aware of supply prices direct from the manufacturer.

However manufacturers will still incur distribution costs, such as the physical transport of goods, packaging in small units, advertising, and customer helplines, some or all of which would previously have been borne by the intermediary.

[citation needed] The term was originally applied to the banking industry in 1967; disintermediation occurred when consumers avoided the intermediation of banks by investing directly in securities (government and private bonds, insurance companies, hedge funds, mutual funds and stocks) rather than leaving their money in savings accounts.

[5] Reintermediation occurred due to many new problems associated with the e-commerce disintermediation concept, largely centered on the issues associated with the direct-to-consumers model.

The high cost of shipping many small orders, massive customer service issues, and confronting the wrath of disintermediated retailers and supply channel partners all presented real obstacles.

Notable examples of disintermediation include Dell and Apple, which sell many of their systems direct-to-consumer—thus bypassing traditional retail chains, having succeeded in creating brands well recognized by customers, profitable and with continuous growth.

Tesla avoids using dealers as middlemen by offering their own outlets, which have only a few vehicles for display and test driving; customers complete their full purchase online.