The role of intermediaries in electronic marketplaces: Developing a contingency model

Abstract

Early research in electronic markets seemed to suggest that e-commerce transactions would result in decreased costs for buyers and sellers alike, and would therefore ultimately lead to the elimination of intermediaries from electronic value chains. However, a careful analysis of the structure and functions of electronic marketplaces reveals a different picture. Intermediaries provide many value-adding functions that cannot be easily substituted or 'internalized' through direct supplier-buyer dealings, and hence mediating parties may continue to play a significant role in the e-commerce world. In this paper we provide an analysis of the potential roles of intermediaries in electronic markets and we articulate a number of hypotheses for the future of intermediation in such markets. Three main scenarios are discussed: the disintermediation scenario, in which market dynamics will favour direct buyer-seller transactions; the reintermediation scenario, in which traditional Intermediaries will be forced to differentiate themselves and reemerge in the electronic marketplace; and the cybermediation scenario, in which wholly new markets for intermediaries will be created. The analysis suggests that the likelihood of each scenario dominating a given market is primarily dependent on the exact functions that intermediaries play in each case. A detailed discussion of such functions is presented in the paper, together with an analysis of likely out-comes in the form of a contingency model for intermediation in electronic markets.