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66 Part 1 Introduction

Company Customer
Intermediary
(a)

Disintermediation
Company Customer

(b)

Company Customer
Intermediary
(c)
Reintermediation

Figure 2.7 From original situation (a) to disintermediation (b) and reintermediation (c)

verting into sales. This pattern of the incorporation of e-business back into traditional
structures is commonplace amongst the advanced adopters of e-business who have success-
fully integrated e-business into their organizations.
Reintermediation Although disintermediation has occurred, reintermediation is perhaps a more significant
The creation of new phenomenon resulting from Internet-based communications. Figure 2.7 illustrates this con-
intermediaries between
customers and suppliers cept. Let us take the example of car insurance in the UK market. In Figure 2.7(a) we
providing services such commence with the traditional situation in which many sales were through brokers such as
as supplier search and the Automobile Association (www.theaa.co.uk). With disintermediation (Figure 2.7(b))
product evaluation.
there was the opportunity to sell direct, initially via call centres as with Direct Line
(www.directline.co.uk) and then more recently by their transactional web site. Purchasers of
products still needed assistance in the selection of products and this led to the creation of
new intermediaries, the process referred to as reintermediation (Figure 2.7(c)).
In the UK Screentrade (www.screentrade.com) and Confused (www.confused.com) are
examples of a new entrant broker providing a service for people to find online insurance at a
competitive price. Esurance.com and Insurance.com are US examples. Reintermediation
removes this inefficiency by placing an intermediary between purchaser and seller. This
Debate 2.1 intermediary performs the price evaluation stage of fulfilment since its

database has links updated from prices contained within the databases of
Countermediation
different suppliers. Screentrade was purchased by Lloyds TSB, a tra-
‘The advent of e-commerce means that
marketers cannot rely on the online ditional financial services provider, but is still positioned as independent
presence of existing intermediaries – from its parent.
instead they must create their own What are the implications of reintermediation for the e-commerce
online intermediaries.’
manager? First, it is necessary to make sure that your company, as a sup-
plier, is represented with the new intermediaries operating within your
chosen market sector. This implies the need to integrate, using the Internet, databases contain-
ing price information with those of different intermediaries. Forming partnerships or setting
up sponsorship with some intermediaries can give better online visibility compared to com-
petitors. Second, it is important to monitor the prices of other suppliers within this sector
(possibly by using the intermediary web site for this purpose). Third, it may be appropriate to
create your own intermediary, for example DIY chain B&Q has set up its own intermediary to
help budding DIYers, but it is positioned separately from its owners. Such tactics to counter or
Countermediation take advantage of reintermediation are sometimes known as countermediation. Screentrade
Creation of a new
intermediary by an is another example of countermediation, except that here the strategy of Lloyds TSB was to use
established company. the lower-risk approach of purchasing an existing online intermediary rather than creating its