1. Disintermediation rising: How digital is helping companies reach consumers directly

Disintermediation rising: How digital is helping companies reach consumers directly

An example of disintermediation is the agri-industry, where conscious customer wants to communicate directly with the farmer

Published: December 7, 2017 5:28 AM
Disintermediation, digital, consumers, Digital technologies An example of disintermediation is the agri-industry, where conscious customer wants to communicate directly with the farmer (Reuters)

Disintermediation, in simple terms, indicates a removal of intermediaries between a manufacturer and customer. The driving philosophy here is being closer to the origin and transacting directly. Digital technologies and digital natives have made it more possible than ever to connect and amplify further. A few trends that are driving disintermediation include the rising need for peer-to-peer communication, the need to be closer to customers, and the rise of ‘digital communities’. Looking back at the crises and scams that have hit the industry in the last 10 years, it is becoming difficult for brands to win and, more importantly, keep the trust of their stakeholders. It was hence a matter of time before something like cryptocurrency happened. This is one of the most disruptive examples of the possibility of disintermediation. Apart from the multiple things it was supposed to do or does, it did sent out a strong message to the impacted communities that they have not done their job well and the power needs to be claimed back by the customers who were key to that transaction in the first place.

Today, disintermediation is not only happening when goods or money are getting transferred, but also in case of information. For example, the agri-industry where the conscious customer wants to communicate directly with the farmer. It is becoming important for commodity players and specifically exporters of agri-products or handicrafts to trace the product back to the farmer or craftsman. It is also a common practice to embed Quick Response (QR) codes on individual packaging to ensure that when a customer buys a product anywhere in the world, she not only knows who has produced it, but also where and how it was produced. The acute need to have transparency in the system is driving this peer-to-peer transaction. For a long time, the industry has been operating in a three- to four-tier distribution network and data regarding secondary and tertiary sales that are hard to come. While it is perhaps an optimal method of operation and continues to fulfil the need, it has created an overdependence on the network itself for the company to understand consumer behaviour. This has concentrated the power in the hands of a few.

While no one sees the need for these intermediaries to disappear, digital is democratising access by helping companies reach out to end-consumer directly. Companies, big and small, are creating hyperlocal strategies to deliver directly to customers. Organic milk, fruits and vegetables, or grocery companies are interacting directly with customers to deliver door-to-door services. FMCG companies are creating websites and apps for customers where they can order online and the fulfilment happens from the next-door kirana stores. One might be mistaken to think this trend is restricted to the financial or consumer sector only, but we are seeing a growing number of manufacturing and even auto companies reaching out directly to their customers to co-create anything right from the body to in-car multimedia systems. In 2014, when the Time magazine recognised ‘The Ebola Fighters’ as the Person of the Year, other than saluting these brave hearts, it also made another significant recognition and that was the rise of the community and the power it can wield. In a digital world, this community is more formless than ever, but as effective in coming together to fight a cause, and share knowledge or purpose. Over time, what these communities are doing is disintermediating the need for a power broker. Take the example of crowdsourcing for funds. It has created alternate channels for organising money and, one can argue, at a much faster pace, by doing away with the need to go to a bank or a financial institution. Alternately, digital communities like those for health and wellness are reducing or, in some cases, eliminating the dependence on gyms and instructors. The government is tapping into these communities to drive its agenda. It is a common phenomenon to see the PM reach out to the citizens directly using NaMo app or social media to source ideas, say, for the Independence Day speech or disseminate key ideas and events, thus disintermediating the power brokers and reaching directly to the citizens. Alternatively, the citizen can reach out to a central minister directly with a grievance. As with anything digital, disintermediation will happen in many forms and shape. In some cases, intermediaries may all together disappear or in other morph into a new role that is more facilitative. Whatever the case, it is important to recognise the ones that are disrupting our industry or ecosystem and are at the forefront to lead it rather than being disrupted.

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