The useless middleman

An awful lot of companies are in the business of re-selling other people’s stuff. They are middlemen.

Department stores, grocers, the little bike shop on Main Street–all middlemen.

The rapid rise of digital commerce has rendered quite a few middleman models useless. Gone (or going) are video stores, book stores and physical re-sellers of DVD’s, CD’s and games.

Nearly universal price transparency is turning higher cost physical stores (Best Buy) into showrooms for more convenient, lower cost middlemen (Amazon).

Powerful manufacturer brands are by-passing multi-brand retailers to aggressively open their own stores and websites to sell directly to consumers–think Apple, Louis Vuitton, Michael Kors–thereby cutting out the middleman.

Before the rise of digital commerce–and more efficient direct to consumer business models–neither the consumer nor the product or service creator had much choice. The middleman provided the only practical way to connect brands and consumers. Today? Eh, not so much.

When you occupy a position in between consumers and the products and services they want, the one thing we know for sure is that you add costs–tangible and otherwise. The key question: are you doing something valuable enough to be rewarded by either a price premium and/or enough volume to justify your costs?

In some cases middlemen are going away. In most cases, more useful models come to dominate the increasingly useless: Orbitz and Travelocity crush the traditional travel agent, iTunes makes physical stores irrelevant.

Deep insight into how your customer sees your brand’s utility in their value equation is a great way to understand whether you are truly useful or in the early stages of decay.

Every once in a while some radical innovation comes out of left field to quickly and irreversibly make a once compelling business model useless. Most of the time, it happens more slowly and sneakily.

Either way–for you to stay useful–you need to get to where the customer is going (or will be led) before somebody else does.

I’d hurry if I were you.








One thought on “The useless middleman

  1. Bravo sir. My family and I are done with retail stores due to a sad string of incidents where we were unable to get any after purchase service from retailers.

    I’m not even exaggerating when I saw that retail customer service these days consists of only ‘I don’t know’, ‘it’s not in stock’ or ‘you need to contact the manufacturer’. Many stores are even staring to refuse defective returns.

    Because of that we started buying online a couple years ago and now do so almost exclusively and we save immensely on the price and most purchases are delivered to the door care of the free and speedy shipping.

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