In economics, disintermediation is the elimination of intermediaries in the supply chain. Generally, it is the result of the transparency of the market by which the buyers know the direct prices of the manufacturer. Therefore, buyers will jump to intermediaries (wholesalers and retailers) to buy directly from the manufacturer and consequently pay less for the product. Buyers can alternatively buy from wholesalers the same product. Often, a B2C broker acts as a bridge between the buyer and a manufacturer.
To illustrate this with an example, a typical B2C supply chain consists of four or five elements (in order): Suppliers, Production companies, Wholesalers, Retailers
It has been argued that the internet modifies the supply chain due to market transparency: Manufacturer → Buyer
An example of disintermediation has been Dell Computers, which sells many of its products directly to consumers by skipping traditional retail chains. Outside the Internet, disintermediation has played a major role in many large retailers such as Wal-Mart that try to reduce prices by reducing the number of intermediaries between the supplier and the manufacturer.
Disintermediation is also associated with the idea of just-in-time manufacturing as eliminating the need to maintain a warehouse that actually performs the role of broker.
The existence of laws that discourage disintermediation have been cited as reasons for the lack of economic vitality of Japan and Germany in the 1990s.
However, disintermediation has occurred as a result of the internet to a lesser extent than many expected in the dot com boom. Retailers and wholesalers perform functions such as credit extension, aggregation of products from different suppliers and processing of returns. In addition, loading products to and from different manufacturers may be less efficient than loading them for a store in which the buyer will pick them up. In response to the threat of disintermediation, some retailers have attempted to integrate their virtual and physical presence as a business strategy.
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