Learning Objectives

By the end of this chapter, you will be able to:

  • Describe how e-commerce is changing the structure of industries.
  • Define disintermediation and its impact.

How E-commerce is Changing Business

E-commerce is not just a new sales channel; it is a disruptive force that is fundamentally changing how businesses operate and how industries are structured.

Industry Structure

E-commerce can change the competitive landscape of an industry by:

  • Lowering barriers to entry: It is much cheaper to start an online store than a physical one.
  • Increasing the threat of substitute products: The internet makes it easier for customers to find alternative products and services.
  • Intensifying competition: Businesses now compete with companies from all over the globe.

Disintermediation

Disintermediation is the removal of intermediaries in a supply chain. E-commerce allows manufacturers to sell directly to consumers, bypassing traditional retailers, wholesalers, and distributors. This can lead to lower prices for consumers and higher profits for manufacturers.

Summary

E-commerce is a powerful force for business transformation. It is changing the structure of entire industries by increasing competition and allowing for disintermediation, where manufacturers can sell directly to consumers. Businesses that fail to adapt to these changes risk being left behind.

Key Takeaways

  • E-commerce is a disruptive force that changes industry structures.
  • Disintermediation is the removal of intermediaries, allowing manufacturers to sell directly to consumers.

Discussion Questions

  1. Can you think of an industry that has been completely transformed by e-commerce?
  2. Is disintermediation always a good thing for the consumer?
  3. What are some of the challenges for a traditional retailer trying to compete with a new online-only e-tailer?