How Business Middlemen Can Navigate The Trend Of Disintermediation

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Eran is the CEO and cofounder of ingredient brothers, a natural ingredients importer.

Even though “intermediate” has commonly been defined as “to mediate” (i.e., to simplify and smooth things over) since the 1620s, it seems appropriate that modern society has come to accept the early 1600s definition of the word, according to the Online Etymology Dictionary, which is “to interfere.” Because intermediaries—the middlemen of service delivery—have a stake in the game as well.

As a business that also has to consider its own longevity, it’s easy to lose sight of the conducive role you play and put your business’ objectives and growth ahead of those of the businesses you’re connecting. And that’s exactly why disintermediation has become so popular in the “Amazon age.” Because now businesses like Amazon can reach their goals without having a middleman stand in the way. What does this mean for intermediaries like me and the businesses we serve? Let’s take a closer look.

Why Companies Are Embracing Disintermediation

As a concept, disintermediation is not a new thing, having spread through the marketplace since its introduction to the banking industry in the 1960s. But the full reach of its possibilities has been put under the microscope thanks to Amazon’s continued commitment to going it alone. From its Kindle and e-book strategy to the multitudes of private-label brands the company owns, right down to taking over its own logistics in recent years, Amazon has taken “removing the middleman” to new heights.

Without a mediary between buyers and sellers, the most immediate results are improved margins and increased delivery speed. But the impact goes deeper. Intermediaries can have a disproportionate impact on a brand’s identity when they steer businesses toward trends and sellers without true consideration of whether it aligns with the brand identity a business is trying to establish. And if companies are free to choose and abandon vendors and partners as they see fit, without having to run the decision by an intermediary that may dissuade them either way, they get the flexibility to take their business’ future back into their own hands.

With so many large enterprises that don’t need middlemen now investing in their own private-label brands, these benefits are shifting the scales in my industry: the food industry. But the food industry isn’t logistics, and it isn’t ebooks. It’s perishable goods that require stringent quality assurance and due diligence.

How Disintermediation Could Affect Compliance

With the extensive supply chain that exists around consumer packaged goods in the food industry, cutting out extraneous parties and replacing them with a direct line between the vendors and buyers seems like a wise choice. But it also narrows the window where compliance is maintained and where fraud is detected.

The extensive sampling and quality assurance processes that go into ingredient sourcing and manufacturing are often sustained by the intermediate parties, and disintermediation cuts out of the equation.

In direct answer to this compliance question and offering a valuable foundation for compliance in the future, many established companies and enterprises have come to utilize the security of blockchain technology in their supply chains. Which may indeed be the future of food security compliance, but not yet.

Why The Middleman Is Still Part Of Food Supply Chains

Unfortunately, smaller businesses and startups who don’t have the capital to invest in blockchain can far too easily be exposed to a weakened compliance landscape in the face of disintermediation.

Intermediaries in the food industry can act as a buffer between buyers and the risks of the industry, increasing immediate compliance assurance without the need for extensive capital investments. As such, the short-term costs are lower, and the security benefits are valuable.

Yet cost-savings and compliance aren’t the only reasons why intermediaries are still a part of the food industry. Intermediaries can bring an established bargaining power and an extensive network of connections to the table, helping startups and small businesses gain access to opportunities they wouldn’t have been able to access on their own.

But is that enough to ensure intermediaries a place in the food industry in the long term?

How To Become More Than A Middleman

In her article, “How To Avoid Disintermediation (And Other Business Lessons From My Middle Child),” communications executive Laurie Wang makes a powerful case for the intermediaries of the world. One thing she advises is for intermediaries to be a “forgotten” party. And while her article focuses on the communication industry, its lessons are a reminder to intermediaries in other industries as well. Because the truth is, middlemen so often stick out like a sore thumb.

The secret to middlemen’s continued place in the world is becoming a truly integrated, natural part of clients’ landscapes, living up to the value we could offer by basing our decisions on our clients’ best interests instead of our own. With that mindset, startups and small companies can retain the control and flexibility they need to build the brand they want because the intermediary now becomes a part of that journey.

It sounds drastic, I know. But that’s where the future of us middlemen lies, in providing behind-the-scenes insights and being truly service-driven, enabling and nurturing relationships that wouldn’t have existed without us.


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