Meet the new middlemen

cropped-blasting_frankfurt.jpg

IN the pre-Internet era there was an established supply chain from manufacturer/farmer/producer to the consumer. To make a purchase the consumer usually made a personal visit to a mall, a local shop, a grocery or department store, a bank, a travel agent, a record store, a government agency, a cinema, and many other bricks’n’mortar locations to pay for and pick up their items.

Throughout the years there was limited innovation, such as loyalty schemes, coupons and home delivery. Companies grew large and lazy as the middleman sitting comfortably between consumers and the products and services they bought. The costs for middlemen to operate their business included purchase/leasing of space, floor sales staff and paid media marketing. Some retailers, like Walmart, refined the formula so that they were able to effectively compete on price due to their low cost structure.

bp-uberThen the Internet happened. And paved the way for the greatest era of disruption and innovation since the factory assembly line concept heralded the Industrial Revolution.

Now we are witnessing the rise of a new breed of middlemen.  It began with eCommerce pioneers eBay (launched way back in 1995), iTunes (2001), and Amazon (2004). Buying books, music, clothing, etc. online took business away from the established middlemen, many who ignored this threat to their ‘old’ business model until it was too late.bp-airbnb

In the past couple of years we have seen emerging brands like Uber, airbnb, TaskRabbit, Kickstarter, and local startups like AirTasker competing with established brands from diverse industries. They are the new breed of middlemen.

These companies are redefining what it actually means to be a middleman. By putting more power in the hands of the customer: power to negotiate a better deal; to track the progress of a purchase/request; to be more environmentally conscious; to get more value from dollars spent.

bp-taskrabbitOnline-only middlemen have two key advantages over their predecessors: nil costs for a physical shopfront, and the ability to scale their business model to serve larger and larger audiences without the limits of geo-political boundaries. Amazon and eBay demonstrated how to build a ‘local’ customer base before launching country-specific websites to cater to local tastes.

The next wave has started to hit retailers and other industries, driven by the dramatic uptake of smartphones across the globe. The power of an Internet connection in your hand – or on your body as ‘wearable tech’ – has dramatically shifted consumer behaviour. Forever.

However, it’s early days for the new breed of middlemen, often taking a mobile-only approach, to prove their worth and longevity.

 

Advertisements

One thought on “Meet the new middlemen

  1. Dave Insull says:

    Good insight Tim. The “new middlemen” like AirBnB and Uber are innovative and offer additional choice to consumers**. They have transformed the way we do business and live. The thought of paying $200 for a night in a hotel room makes my blood curdle. Where is the value?? Or, offering $80 to an unhappy cabbie who hates his job and drives a wreck makes me dance into an UberX, offering a slight discount and a personalised service in a normal old car with a guy/girl who appreciates every dollar you give him/her?! No brainer.

    Caution: We need to beware. These “middlemen” will grow fat and rich. They will replace the status quo. But, what will we be left with? Another taxman. Taxing the global “consumer” base with little oversight or competition.

    Remember these companies are forming the foundation for the next 100 years. My advice, either get amongst, create your own disruptive technology, gain scale, become globally relevant – hit it rich. Or, simply serve another set of masters in the newest iteration of the global internet economy.

    A quick disclaimer, 90 Seconds is disrupting the the traditional video production model. I have a foot in both camps.

    Dave Insull
    http://90seconds.tv

    **Consumers – I don’t like to consider myself a consumer. It feels like a degrading term. It disconnects us from the environment, from cause and effect.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s