#The middleman economy how to#

Kozmo, the dot-com era darling that promised one-hour delivery of everything from DVDs to Starbucks coffee, famously went bust after raising $250 million in funding, expanding to 11 cities and filing for an IPO. And they allowed people to shop at any time of day, from anywhere with a Web connection, and then delivered the goods straight to their home.Īdvances in technology have only created more opportunities for enterprising companies to cut down on the friction in the process of buying and selling. First, they offered a wider selection of goods for less money than their brick-and-mortar counterparts could afford to. “Instacart’s product is the ability to order your groceries online.”ĭuring the dot-com boom, successful companies like eBay and Amazon reduced transaction costs in two chief ways.

#The middleman economy how to#

“What Instacart did was figure out how to leverage existing services to provide better service at a better price and better convenience,” said Jeff Jordan, the partner at venture capital firm Andreessen Horowitz who brokered its investment in Instacart’s $44 million Series B funding round in June. And chains like Whole Foods have welcomed Instacart because it expands the reach of the physical stores, giving them an online presence - without the cost of having to figure it out themselves. For the convenience, shoppers pay a delivery fee of $3.99 as well as a markup on store prices. The company inks deals with retailers like Whole Foods to deliver goods to customers who place orders online through Instacart’s website or app. Instacart, the 2-year-old San Francisco same-day grocery delivery startup, is a prime example.

A middleman, in other words, does nothing to improve the actual product for sale, but instead sells an improvement in the process of buying and selling that product - either offering it for less money or making the purchase of it more convenient. Middlemen are often viewed as scalpers - those who employ a seemingly parasitic business model of buying up a resource (like concert tickets), then selling it for a much higher price.īut economists tend to think of middlemen differently, as people or companies that sell a reduction in the total cost of a transaction. The Web’s most successful retailers, eBay and Amazon, functioned as online brokers, charging a fee to help buyers and sellers connect with one another. It turned out that the opposite happened. In 1997, the New Yorker ran a now-famous cartoon, depicting seven business people seated around a conference table with a caption that read, “On the one hand, eliminating the middleman would result in lower costs, increased sales, and greater consumer satisfaction on the other hand, we’re the middleman.” “You could plausibly call it the middleman economy,” Munger said.ĭuring the dot-com era, as people tried to figure out what impact the Internet might have on commerce, a dominant assumption was that it would wind up eliminating middlemen, creating instead opportunities for direct links between buyers and sellers. Such companies, in other words, have the potential to drastically change commerce. “It may be as big as the Industrial Revolution.” “There is something big happening in the way we organize transactions,” said Michael Munger, an economist at Duke University. The middle, it seems, is where the money is. Rising interest in instant gratification has encouraged companies like Curbside to crop up with increasing frequency - there are startups vying to hit the local Whole Foods for you (Instacart) or even hand-deliver cash from the nearest ATM (Nimbl). What Curbside has done is create another step in the transaction, a new layer between consumer and retailer, both through the app and in real life. All of the businesses it works with already let customers place orders online and pick up in store. It doesn’t do the shopping for its users, or deliver items to their door. In a way, Curbside is the ultimate middleman. For each deal, Curbside receives a commission from the retailer.Ĭompanies from Amazon to Instacart are all rushing to solve the last-mile delivery problem, but Curbside is more concerned about that first hundred feet.

So Curbside offers something in between - through its app, users place orders for in-store pickup at brick-and-mortar establishments and the service dispatches a Curbside employee to haul the stuff to the curb in front.