Reintermediation

Reintermediation refers to the reintroduction or insertion of intermediaries between producers and consumers in a supply chain or service process. This term is often used in contrast to disintermediation, which involves the removal of intermediaries.

Purpose and Role

Reintermediation is usually carried out to enhance the efficiency of a process, provide better customer service, or take advantage of new technological capabilities. It can be applied across various sectors, including finance, retail, and information technology. For instance, in the e-commerce sector, online marketplaces like Amazon serve as intermediaries between product manufacturers and consumers, offering value-added services such as product reviews, customer service, and logistics support.

Components

Reintermediation typically involves three main components:

1. Producer/Manufacturer: The original producer or service provider who may seek to use intermediaries to better reach customers or improve service delivery.
2. Intermediary: The new entity inserted into the process, often providing additional services or value to the producer, consumer, or both.
3. Consumer: The end user or purchaser of the product or service, who may benefit from enhanced services or efficiencies brought about by the intermediary.

Importance

Reintermediation can improve business efficiency, customer reach, and service delivery. By leveraging the capabilities of intermediaries, businesses can focus on their core competencies, while intermediaries handle other aspects of the business process, such as distribution, customer service, or technological support.

History

Reintermediation has been prevalent with the evolution of digital technologies. The rise of online marketplaces, digital platforms, and FinTech companies are examples of reintermediation in the digital era.

Benefits

1. Businesses can leverage the expertise and infrastructure of intermediaries to enhance efficiency and customer service.
2. Consumers may gain access to a wider range of products or services, as well as additional features like customer reviews or comparison tools.
3. Intermediaries can earn revenue by providing value-added services to producers and consumers.

Cons

1. Businesses may need to share their profits with intermediaries.
2. The addition of intermediaries can sometimes complicate the business process.
3. There may be increased competition among intermediaries, leading to potential instability.

Example

A well-known example of reintermediation is the role of online travel agencies. While airlines and hotels initially used the internet to sell tickets and bookings directly to customers (disintermediation), online travel agencies like Expedia and Booking.com have reintermediated the process by offering a platform where customers can compare prices, read reviews, and make bookings across multiple airlines and hotels.

See Also

1. E-Commerce: This digital marketplace often drives reintermediation by offering platforms where producers can reach consumers more efficiently.
2. Online Marketplaces: Entities like Amazon and eBay are examples of intermediaries in the e-commerce sector.
3. Disintermediation: The process of removing intermediaries, often contrasted with reintermediation.
4. Digital Platforms: Platforms like Uber and Airbnb reintermediate the taxi and accommodation sectors, respectively.
5. FinTech: Many FinTech companies are reintermediating financial services by using technology to provide more efficient or customer-friendly solutions.