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3.10 Issues in E-Tailing and Lessons Learned 91

3.10 ISSUES IN E-TAILING AND LESSONS goods to customers, and both might need an escrow service
LEARNED to ensure the transactions. Thus, new types of intermediaries
might be needed, and services might be provided by new or
The following are representative issues and problems (and by traditional intermediaries. This new activity is called
some lessons learned from them) that need to be addressed reintermediation. It is pictured in part C of Figure 3.4. An
when conducting B2C EC. example of a company that provides these new roles of
intermediation is Edmunds (edmunds.com), which pro-
vides consumers with information about cars (e.g., price
Disintermediation and Reintermediation comparisons, ratings, and the dealer costs). Another exam-
ple would be travel agents who can arrange complicated
Disintermediation refers to the removal of an intermediary trips, provide longer periods for holding reservations,
that is responsible for certain activities between trading arrange special tours and spot deals. Such new role playing
partners (usually in a supply chain). As shown in part B of companies can grow rapidly while traditional intermediaries
Figure 3.4, a manufacturer can bypass wholesalers and retail- decline.
ers, selling directly to consumers. Thus, B2C may drive reg-
ular retailers out of business. According to Lieber and Resistance to Change
Syverson (2012), half of the U.S. travel agencies went out of
business between 1997 and 2007 due to online competition. Intermediaries that may be eliminated, or their status and
For a vivid case of such disintermediation, see the Blue Nile pay may decrease, might resist the change. One example is
case in Chapter 2. For bypassing intermediaries see Miller the computerization of the Chicago Mercantile Exchange
and Clifford (2013). (CME) and the Chicago Board of Trade (CBOT). The
However, consumers might have problems selecting an resistance by brokers there has been going on for a long
online vendor, vendors might have problems delivering time.

a Simple Traditional Supply Chain

Supplier Producer Distributor Retailer End Consumer

b Supply Chain, with Examples of Disintermediation

Supplier Producer Distributor Retailer End Consumer

c Supply Chain, with Examples of Reintermediation

Supplier Producer Distributor Retailer End Consumer

Intermediary
Intermediary
Intermediary
Key:
Disintermediation
Reintermediation

Figure 3.4 Disintermediation and reintermediation in the B2C supply chain