New Business Channels Using the Internet
Channel structures refer to the way a manufacturer or selling organization delivers products and services to their customers. The simplest channel structure is a direct channel where the business deals directly with the customer without the assistance of any intermediaries. With more complex channel structures, intermediaries such as distributors and retailers are used. Think about buying car insurance – this may either be direct using the phone or the Internet, or indirect where it involves buying through a broker who will find the best deal.
“The Internet can dramatically alter the relationship between a company and its channel partners. This occurs because the Internet offers a means of bypassing some of the channel partners. This process is known as disintermediation or ‘cutting out the middleman’.” as explained by internet marketing consultant, Guy Galboiz.
The removal of intermediaries such as distributors or brokers that formerly linked a company to its customers
The creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation
The other main options of changes to channel structures is reintermediation. Reintermediation is the creation of new intermediaries. One of the best known is Lastminute.com which sells travel and entertainment at a low price when suppliers such as hotels have inventory which they want to sell and are prepared to offer a discount for this. For someone buying insurance from a service such as ScreenTrade they can purchase by visiting a single web site to find the best price and offer rather than visit say 5 different insurers and then return to the one they decide to purchase. So here Screentrade is acting as a broker.
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