We all know about the barter system when producers and consumers used to transact directly. As we civilized and innovated better ways of production were developed. This was only accessible to few- the innovators or the rich guys, thus giving them an upper hand. By reducing cost and at the same time investing in advertising these producers were able to sell more and this lead for the need to scale their business and to reach out to more audience, crossing geographic boundaries.

This might be the way how the concept of middlemen or resellers or distributors and dealers was born. By being able to make uniquely products companies were being born with branches or franchises required to scale to multiple countries, cities and even small localities.

Rise of e-commerce and its future

With the advent of the internet and rising competition among these producers the need to to find ways to reduce costs came up, real estate being one of the biggest contributors. Not only people could sell with better product descriptions online through sites like eBay, etc there was no need to have any infrastructure as well. Few visionairies saw the opportunity to eliminate the mom-pop shops and be the online middlemen. However, if you know a little on how “people” work this is not so easy to achieve. All major brands and companies have been relying on their trusted network of distributors and dealers to sell their products and this didn’t always worked in their favour, they couldn’t bypass them. Thus you couldn’t come up with an online site and ask the company to directly sell through you, they wouldn’t agree. You would need to procure from a distributor/dealer to be able to sell.

Here comes the clever thought- if you already established a major customer base online, the brands would start to depend on you instead of their dealers. They could possibly start selling to you (read through you) directly, after all now you too are a distributor now – only with more advanced technologies and a much wider reach. Maybe that’s what Amazon and Flipkart did? They used heavy cash burn to discount and get a good customer base, developed technologies to scale and worked on their biggest hurdle yet – logistics and now clearly the brand are relying on them to sell. Take for example smartphone launches like Moto G or Redmi or OnePlus that are now happening exclusively on these online sites. Or newer companies that are establishing without having any distribution hassles and directly selling online or even well established brands like Sony directing customers from their sites to these e-commerce portals for purchases. (Remember when brands used to warn you of purchasing from these same sites saying your warranty would be void, that’s clearly in the past now). With the ongoing research taking place in robotics and machine learning the cost of logistics is also set to reduce drastically.

 

What’s next?

Will the ecommerce sites be the last middlemen we see? Or will the brands be able to sell us directly too?