CUT OUT THE MIDDLEMAN HOW TO

Today, many people order through one of a handful of apps, even though the high fees that those apps charge eat away at restaurants’ profitability. When I was growing up, when we wanted takeout, we called the local pizza place and its delivery person brought us our food. Yet the number of sellers that use Amazon also continues to grow.ĭoorDash and Uber Eats, which dominate food delivery, show how the internet has contributed to new types of middlemen-disrupting direct connections rather than facilitating them. According to the Institute for Local Self-Reliance, Amazon’s cut of third-party sales increased from 19 percent in 2014 to 34 percent last year. Amazon, which started out as just a virtual version of the classic bookstore, has evolved into a middleman among middlemen rather than set up their own e-commerce systems, smaller producers and resellers sell on Amazon-but doing so costs them. More online shoppers start their search on Amazon than on any other website, including Google. Meanwhile, the internet has transformed some classic intermediary industries-most notably retail-in ways that empower a small number of supersize middlemen. Because real estate-not stock-is the primary store of wealth for the typical family, the internet’s failure to render these expensive middlemen obsolete is a genuine loss for the American middle class. Yet both buyers and sellers continue to use full-service real-estate agents and continue to pay very high fees-an average of about 5 percent of the value of the home sold.

All of this information is now readily available online.

CUT OUT THE MIDDLEMAN HOW TO

Sellers relied on their knowledge of recent sales to know how to price their home. Traditionally, buyers needed real-estate agents to help them identify available houses. Surprisingly, some long-established middlemen whose role seems comparable to travel agents have found ways to persist. Far more common are the persistence of middlemen whom technology should have rendered obsolete and the rise of new types of middlemen, draining yet more money and power from creators and their customers. But travel agents’ fate is the exception, not the rule. The number of travel agents dwindled as Americans got used to booking their own flights, hotels, and rental cars online. The internet has swept away some intermediaries. In his 1995 book, The Road Ahead, the Microsoft co-founder predicted that the internet would become “the universal middleman,” and that “often the only humans involved in a transaction will be the actual buyer and seller.” In other words, why pay a middleman to help you find what you needed when you could find it yourself?ĭerek Thompson: The booming, ethically dubious business of food delivery The internet, people such as Bill Gates insisted, would be a disruptive force that shifted power into the hands of makers and consumers. The 2000s wave of direct-to-consumer companies, for example, ended up paying massive amounts to Facebook and others for the targeted ads they depended on to reach new customers. Even when we try to buy directly from the manufacturer, internet-empowered middlemen still play a big role.

When summer hits and we go online to find new swimsuits and stock up on sunscreen, we might go to Amazon, which now relies, for the majority of its retail sales, on independent vendors that use its e-commerce platform. Instead, we might order through Uber Eats or DoorDash, which take a cut of the sale and charge us a delivery fee. Although this isn’t usually a face-to-face transaction, in other ways it can be more personal for the buyer as they are dealing with the people who know most about the product they are buying.ĭealing directly with consumers offers you a priceless understanding of your buyers and allows you to narrow down your target market and stay on top of your customer service.īy Rebecca Hanley, Amy Molloy, Melanie Dimmitt.When we order takeout from a neighborhood restaurant, we are less and less likely to call the restaurant directly. The producer wins by having a competitive price advantage against its competitors in the market.Ĭonsumers deal directly with the source of the product – the company. The consumer wins by having access to products at a considerably lower price than alternatives of comparable quality. “The model involves a producer essentially cutting out independent retailers by selling directly to the public either through an online store, physical store, or a melding of the two.”Īccording to Alain, cutting out the middleman means you’ll… “The direct-to-consumer model is disrupting the retail landscape,” says Alain Guglielmino, director and co-founder of Pacifico Optical eyewear.

Cut out the middleman