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The death of the middleman

2005-03-11 13:49:20.261729+00 by petronius 3 comments

An interesting article in the Guardian about the Web's unfinished promise to eliminate the middleman in business transactions. The author tells of a website that might give banks a run for their money, by directly connecting people with cash to people who need loans, for a small fee. While it does sound a bit like a bookie laying off a large bet on other bookies, and the uninsured nature of these loans gives me the willies, this guy makes some good points. Amazon didn't eliminate the middleman (bookstore) so much as take over for a bunch of them. The last few items I bought through them were actually supplied by their smaller partners, which I suspect is far more cost-effective than running your own warehouse. Now its all middlemen, connected by the Web and UPS. And the small bookseller's biggest enemy might not be Borders or Barnes & Noble, but rather a bunch of guys running distributerships in their garage.

I am also intrigued by his suggestion of a community service bureau that might broker things like borrowing lawnmowers and power tools. Isn't Craigslist something like this? Maybe we havn't seen the end of the Web's development.

[ related topics: Books Technology and Culture Community Currency ]

comments in ascending chronological order (reverse):

#Comment Re: made: 2005-03-11 14:17:40.066565+00 by: meuon [edit history]

In many cases, people buy from small Mom and Pop web stores for the same reasons they buy from them in 'meatspace'. Product knowledge, selection, support.. and knowing their clientelle's needs. Not all of them are selling rocks on the 'net.

But.. Amazon.com was not really about selling books. They invested millions in building an Order Fulfillement company. Books just happened to be the first big product. Then other things followed.

And no. We definately have not seen the end.

#Comment Re: made: 2005-03-11 15:47:55.470895+00 by: ebradway [edit history]

The web does make it possible to eliminate the middleman, but most people creating products don't want the hassle of having to sell to individuals. It's easier to just ship big boxes of stuff to distributors. Even individuals find that it's easier to haul the boxes of crap from the attic to one of the dozens of eBay consignment shops that have popped up everywhere.

Another problem is managing payments. It's pretty costly for every mom and pop to have their own online payment processing system. So they either buy a Yahoo store (or something like it) or they just have others deal with it.

Finally, even information exchange uses middlemen to establish credibility. Anybody can publish their "research findings" on their own website, but getting a PDF of a referreed journal article from the journal says something about the content.

#Comment Re: made: 2005-03-11 20:04:03.249088+00 by: petronius

Is what Amazon is doing much different from outfits like those "buyer's clubs" the credit card companies are always pushing you to join? The one time I used one I called up to find a particular type of radio as a gift. They offered a good price, and it was delivered from The Nuck Twin's Discount World in South Hoboken. The difference is that Amazon gives you a lot more information, as to the name of the distributor, etc.

The big issue is that the middleman (or broker) is providing the guarantee. If the book is damaged, I deal with Amazon, not Hjalmer's Book Bin. If there is a problem with the billing, Amazon's reputation is riding on keeping me happy. I presume that by carefully screening their partners they can keep tabs on this. I haven't spent much time on Ebay, but reading some of the buyer's comments makes your hair stand on end. The pre-screening is obviously much less there. I predict that the management of this sort of commercial trust will become as important to these brokerages as any information structure they assemble. The possible pitfalls of that loan brokerage is daunting, indeed.