Death of the middleman (Act 1)

Shortening the supply chain

Cutting out the middleman, bagging a bargain by moving closer to the source, disintermediation - pardon?  Yes, horrible term but perhaps some very good news for the consumer.

Traditionally us consumers are a fair way down the supply chain.  Typically we see suppliers who feed the manufacturers with raw materials.  Finished products then pass to a wholesaler who may on-sell to a network of distributors.  Retailers (who may or not also be the distributor) take the products and offer on their store shelves to the consumer.  Quite a lot of people get to put their margin on that product before you get to buy it.

So, the chance to cut some of those players out is quite attractive, especially if you are happy to break out of this normal supply chain in order to save some money.  Bid welcome to the Business to Consumer (B2C) model.  Sometimes this may require a bit of adjustment, some inconvenience but by honing your web surfing skills, the experience doesn't need to be onerous.

There are various ways this has developed and I may look at a few of the models over a number of posts.

Local success story, Off The Back

Probably the most in-your-face example of 'direct to customer' selling comes from the explosion of daily deal sites, like 1-day, Off The Back and Treatme.  These no-frills web sites have replaced the retail store (and the distributor) to bring you enticing deals, executed directly through a simple web based shopping basket and card payment process.  Delivery is swift and easy through nationwide courier services.

Cut out the middleman with FirstIn

Most of these sales are spur of the moment, impulse buys, so the goods offered are chosen carefully to satisfy this desire for instant gratification.   Kiwis appear to love this daily fix, as borne out by the rapid proliferation of these services.

The best ones offer excellent service and customer guarantees.  Personally, I've found them to be very accommodating when a product fails, with great after-sales services and a no-nonsense refund or replacement.  Easier actually than a bricks and mortar store maybe.

These new players must have sucked a fair amount of discretionary spending away from the traditional shopping mall or high street store.  They have some distinct advantages over the normal retailer in that they snare the potential customer with a totally different approach.  For a start, these offers land in your email box during the day when you are probably looking for a break from your daily slog.  Secondly, they create a sense of urgency.  Generally these offers are good for just one day and only then if there's sufficient stock.  A ever depleting gauge shouts out that stock is almost gone so make that decision before it's too late.  

They may also offer you things that you are not going to find in any retail store - a cut price housecleaning services, discounted meals at a neighbourhood restaurant,  a too-good-to-pass-up round of golf.  Some sites, like FirstIn, specialise in bringing in overseas refurbished or end of line brands that aren't even sold in the New Zealand marketplace.

Aggregator site, Dealshrimp

There are now so many outfits in the market for daily deals that services like Dealshrimp have sprung up to aggregate these multiple providers into a single tidy 'go to' portal.

Big online retailers like Mighty Ape and professional traders within the Trademe portal have also joined the rush to offer a selection of limited time deals.

Daily deals are definitely a product of the internet age.  The ability to blitz the nation with a deal that lasts just 24 hours could only have come from the presence of internet connected devices in most households and the public's appetite to act fast on a same day basis.  The speed with which this sales model has been accepted here is quite astonishing.  It appears that everyone likes a bargain and people are prepared to trust a company they may little or nothing about to come through on their promise.

Clearly this new B2C model has found favour in business circles with bricks and mortar retailer, The Warehouse, deciding in March 2013 to take a major stake in Torpedo7, operator of the most high profile deal site, 1-day.

The Warehouse takes $33m stake in Torpedo7

A modern sales success story if ever there was one.