The supply chain is changing in front of our eyes. The growth of online, click & collect and convenience, is creating a seismic shift in supermarket thinking. But it doesn’t stop with the supermarkets.
This week, we report on a new strategy developed by Ella’s Kitchen that will see its entire range offered for sale via its website. It is as much a marketing tactic as a response to structural change in the supply chain, it insists. But there are many suppliers currently noodling away trying to figure out how to disintermediate. Or, in plain English, they want to cut out the middle man.
“Who needs supermarkets to sell goods these days? Or any retailers for that matter?”
Adam Leyland, Editor
This is not a new phenomenon, of course. Nestlé famously eschewed the retailers in developing its Nespresso mail order model a decade ago, and has jealously fought to prevent own-label Nespresso-compliant pods from selling in store. That there have been challenges from supermarkets to this tightly controlled operation in the past year (interestingly, The Grocer’s story about Nespresso-style pods being on sale at Waitrose was our biggest of 2013 in terms of website hits), goes to show how profitable and compelling disintermediation can be if, like Nespresso, you have a locked-down customer making regular orders and a lightweight, easily packaged product.
Yet as favourable as those aspects are for any brands considering a similar move, none are fundamental prerequisites for effective disintermediation. With an emerging consumer trend for buying the bulky stuff online already, it involves little stretch of the imagination for a determined household name to entice a regular customer into buying direct. Like Ella’s, it could also outsource the potentially problematic fulfilment side of things to a dedicated third party.
Suppliers of nappies and other household products are certainly working closely with the likes of Amazon, and P&G famously took a stake in Ocado. But disintermediation is not limited to ambient grocery or household goods. I know of at least one chilled ready meals supplier who is trying to figure out how to, if not cut the retailers out, then certainly to provide an alternative route to market.
And why not? With suppliers spending millions developing their products, and promoting them to consumers, if they can cut out the middle man, they can either lower their prices or increase their margins. And with more personalised supply chains developing independently of the retailers (whether delivery or via independently operated locker operators), it’s only going to get easier to do so.