The Death of the Gatekeeper

Sun Apr 4 2013 Michael McQueen

Of all the shifts and changes that the coming year will bring, I suspect that 2013 will be looked back on as the year that marked the Death of the Gatekeeper. Known technically as 'disintermediation', recent years have seen the viability and necessity of middlemen significantly eroded – an erosion that will gather pace in the coming 12 months.

From travel agents to financial planners and stockbrokers, modern technologies and the Internet in particular have seen a profound change in the nature of distribution. The gates have been blown wide open – consumers can now connect directly with service providers and have access to ample information with which they can make intelligent buying decisions.

Consider the impact this trend is already having on the travel and tourism sector. According to a survey of 12,000 consumers across 12 countries in 2010, 2/3 of respondents said that the Internet is the first port of call when looking to book a holiday. In a world of Expedia, Trip Advisor and Last Minute travel deal websites, travel agents who simply facilitate the booking are less necessary than ever before.

This trend however is far from limited to the service sector. According to a recent report from global accounting firm Deloitte, one-third of our economy faces 'imminent and substantial disruption' by digital technologies. The traditional revenue models and distribution channels of entire industries are crumbling before our eyes.

Look at the retail sector. As consumers have greater access to wholesalers and suppliers online, retailers are scrambling to respond.

Perhaps the most insidious and confronting element of the online retail trend is the growing incidence of 'showrooming.' This recently coined term describes the trend by which shoppers visit a physical store to see, touch and feel a product only to then go online and make their purchase – often via a smartphone before they've even left the store!

In a recent poll of 1000 people, 61% of respondents had tried an item on in a store only to buy it later online – with almost half of this number admitting to doing so more than five times.

Even fresh and innovative digital distribution channels like iTunes may fall prey to the very shifts that helped them usurp music industry giants 10 years ago.

The emergence of Spotify and music videos on You Tube may well mean that paying to listen to music will become a thing of the past. Validating this threat, a recent Nielson study found that nearly two-thirds of teenagers use You Tube as their primary medium for listening to music – and are paying nothing to do so.

In response to these shifts, many businesses have gone into control and protectionism mode. Take for instance the retail stores now charging shoppers a 'try-on' fee to use change rooms – a fee only refunded upon purchase of the item. Others still have turned to legal means by pressuring governments to restrict imports or change legislation in order to penalize those who circumvent their distribution channel (think new copyright laws in the US or the push for sales taxes for online purchases).

While these measures may work in the short term, the marketplace will never stay willingly controlled for long – a lesson Apple would do well to learn. Markets want to be free; consumers want to have choice – and they will always eventually get their way.

Rather than fight the death of the middleman, businesses and industries must re-define their role if they are to stay relevant in the years to come.

The future value proposition of gatekeepers will be derived in three ways:

1. Experience

Retailer stores must become more than transaction location. They must be places where customers have a brand or product experience they simply cannot have online.

America's largest cosmetics and skin-care brand Clinique has started experimenting with new store formats and approaches in an effort to respond to changing customer preferences. As Clinique's VP of global store design and merchandising Anthony Battaglia said "it is the end of 'do not touch'. We had to remind the customer that our product is here to play with and experience."

2. Expertise

A second way that middlemen can offer unique value to customers is by offering expertise that Google simply can't. While there is an abundance of information in the marketplace, consumers will always compensate companies and individuals who can help take that information and turn it into advice which is personalized and relevant to their needs.

This is certainly the case in the financial services sector. Simply generating 'boiler plate' statements of advice for clients that crudely link their needs with financial products will not be enough – they can do this on their own with a bit of research. However, advisers and brokers who can drill down to understand the true needs of a consumers and can leverage expertise to craft tailored solutions will have a path beaten to their door.

3. Expedience

Consumers are time-poor and option-rich. As such, the role of middlemen and gatekeepers in the future will center on convenience more than ever before.

In the travel and tourism sector this is of particular importance. While consumers are unlikely to visit a travel agent to book a simple return interstate flight, they are far more likely to continue relying on travel agents to help save the time and headache of book a complicated multi-country itinerary.

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While middlemen and gatekeepers will always exist, 2013 will see the death of those who define themselves by these titles. Simply standing in the middle of consumers and the products or services they require is no longer viable or necessary. In the same way, guarding the gates of access to the providers of these products and services is futile. In the years to come, such intermediaries must provide unique value through experience, expertise or expedience if they are to stay relevant.

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