The Middleman Strikes Back

The Middleman Strikes Back

One of the great promises of the Internet — a democratic, transparent, open network that would disintermediate entrenched industries, remove fee-taking middlemen and thereby lower the costs of goods — has seemingly been realized.

Priceline and Expedia mostly killed travel agents; Prosper and Avant are fast disrupting bank loan officers; and the car salesman has been diminished in favor of eBay, Autotrader and Craigslist.

And yet, just as surely as we thought they were gone for good, middlemen have come surging back to life — rebranded as our best friends: the personal concierge.

Case in point, personal shoppers were once a luxury — a sign of elite class and prestige. No longer: Hundreds of thousands of consumers are now communicating with personal stylists (or data-driven human/artificial intelligence hybrids) via next-gen fashion platforms such as Trunk Club and Stitch Fix — two platforms with demonstrative value (Trunk Club was acquired more than a year ago for $450 million, and few experts would reject Stitch Fix’s $300 million recent valuation).

And while fashion is an obvious use case, the concierge economy is thriving, spanning verticals from wellness to design, with a whole host of broad-based horizontal concierge services also trying to impress their worth.

Et Tu, Amazon?

The logical question is: why? Given all the advantages of a frictionless, democratic playing field, why are concierge services suddenly surging in popularity? I see three likely explanations: Amazon, too many SKUs and customer acquisition.

Amazon. If you sell practically any physical good online, Amazon, the Internet’s most powerful retailer, is a perpetual threat. With their distribution, leverage and logistics expertise, they have the wherewithal to undercut on price, and process and deliver products faster than practically any startup — not to mention, they can operate at a loss if necessary.

So where is Amazon exposed? On a services level.

Amazon’s operating margins — already tight at 1.3 percent — don’t allow for much room to train and mobilize a large human concierge force. Which means that building a human-focused, relationship-driven personalization platform actually provides for a tangible differentiator against Amazon — one of the few ways to effectively compete against the giant (and, perhaps more importantly, one of the few ways to build defensibility in a commerce segment traditionally dependent on “brand” as its only de facto moat).

One further point: Amazon is predominantly a destination for directed search – either on a specific product or specific category basis. But as purchasing increasingly shifts to mobile, it turns out that it continues to be difficult to search, discover and catalogue individual items. Concierges – especially when leveraged via a mobile interaction point – reduce that friction and enable a new purchasing behavior.

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