What Is Disintermediation? How Disintermediation Works

There are a few ways to reach customers. Maybe you prefer selling via a large retailer to reach a wide network, or maybe you prefer selling products directly. For example, if you make eyeglasses, you can sell them through an optical retailer like LensCrafters or with optometrists’ offices to get your frames on people’s faces. This traditional supply chain ensures products are distributed nationwide, but it also means each intermediary takes a cut, and manufacturers stay one step removed from end users.

Alternatively, you could go the route of Warby Parker. The eyewear business that famously bypassed retail chains and offered $95 glasses online, reportedly saving customers $100 per pair compared to traditional retailers.

This is an example of disintermediation, an approach that can give companies more control over the pricing strategy, customer experience, and sales process. With more control, you also take on tasks intermediaries used to handle—from marketing and distribution to customer service and returns.

Here’s everything you need to know about disintermediation.

What is disintermediation? 

The term disintermediation refers to the practice of cutting out middlemen—such as wholesalers, distributors, or retailers—so you can sell directly to your customers. In the process, companies can maintain more control over their brand story (with a direct line of communication to customers) and customer data (they collect it themselves).

Disintermediation has been aided by the proliferation of the internet, which has made direct-to-consumer (D2C) a viable business model. Third-party logistics (3PL) companies and shipping infrastructure allow small companies to send products directly to buyers, instead of relying on intermediaries.

Disintermediation applies to service businesses, too. In industries like hospitality, companies can offer direct booking for hotel rooms through their own websites, removing intermediaries like Expedia or Trivago. In the financial industry, disintermediation eliminates the need for brokers and banks in the investment process, so people can buy stocks and handle investments and transactions themselves. 

How disintermediation works

1. Manufacturing a product
2. Establishing a direct sales channel
3. Managing fulfillment and delivery
4. Engaging with the customer

The execution of disintermediation can vary dramatically, from Dollar Shave Club’s viral video launch to Casper’s mattress-in-a-box invention. However, the underlying process follows a predictable pattern: 

1. Manufacturing a product

Direct-to-consumer brands often take charge of their product creation from design to manufacturing, rather than relying on wholesalers or middlemen to source or shape their products. Many founders begin hands-on. Gymshark’s creator famously started making gym wear in his mother’s garage to get the perfect fit before scaling up production.

As the business grows, production often shifts to hard-won manufacturing partners, with the brand staying heavily involved in material choices and quality assurance. DTC companies control manufacturing either in-house or via direct partnerships. This ensures products meet specifications and reflect their brand values without outside retailers dictating changes.

2. Establishing a direct sales channel

Once products are ready, a DTC business establishes direct channels to reach shoppers, typically through an online store rather than traditional retail outlets. The brand’s website (often powered by a platform like Shopify) becomes the primary storefront, allowing the company to present products and its story without third-party involvement.

Brooklinen built its following by offering premium bed and bath linens on its own site, meaning fans would get Brooklinen’s high-quality sheets and towels exclusively from the company itself.

3. Managing fulfillment and delivery

After a customer clicks Buy on a DTC website, the brand is in charge of getting the product to the customer’s door. DTC companies manage fulfillment by running their own warehouses or working with logistics partners, ensuring orders are packed and shipped according to their specifications. This means the brand controls everything from shipping and delivery speed to the unboxing experience.

Allbirds, for example, ships its shoes in cleverly designed boxes made from recycled cardboard. The packaging serves as both the shoebox and mailer, reflecting the company’s sustainable ethos in the delivery process. 

4. Engaging with the customer

In this business model, the brand handles all customer interactions, from marketing communications to service inquiries, creating a direct line of communication with the people who buy their products. Without retailers or middlemen in the way, feedback and questions go straight to the company. This close contact helps the brand understand and respond to customer needs more quickly.

Many DTC companies actively foster a community around their products. They engage customers through social media content, newsletters, pop-up shop events, and other direct marketing strategies so buyers feel part of the brand’s story.

The luggage brand Away, for example, treats its customers like collaborators. The company used dedicated Slack channels to collect customer feedback, where employees flagged ideas and teams collaboratively decided on next steps. When customers suggested ejectable batteries, Away rolled out the new design within months.

Best practices for disintermediation

• Build brand awareness
• Prioritize logistics and fulfillment
• Create multiple customer service options
• Establish trust and credibility
• Manage inventory and cash flow

Successfully navigating disintermediation requires more than just cutting out middlemen. It means taking on new responsibilities and mastering a range of business functions previously handled by intermediaries. Here are some best practices to help ensure you build strong customer relationships, maintain smooth operations, and foster long-term success:

Build brand awareness

Traditional brands could count on shoppers stumbling across their products while shopping in person, but DTC companies have to actively hunt down customers. At the start, nobody knows who you are, and you don’t have a Walmart shelf to introduce yourself.

To tackle this, define exactly who your target customer is and where they spend time. Focus on one or two channels you can excel at—perhaps influencer marketing, community building on Discord, or public realtions—rather than trying to do it all at once.

Take Goldilocks, an affordable cookware startup founded by Jessica Sheft-Ason and Minsuk Kim. The brand leaned into public relations and focused on finding journalists who actually covered their niche.

“Just like you would network at work, make sure that you’re networking in the industry and talking to reporters and sending them products,” Jessica explains on an episode of the Shopify Masters podcast. “If you’re selling teddy bears, for example, you’re talking to the reporter who’s specifically focused on teddy bears and has done tons of reviews about teddy bears.”

This approach helped Goldilocks build direct relationships that eventually landed features in Vogue and The New York Times.

Prioritize logistics and fulfillment

Packing boxes and printing shipping labels sounds simple until you’re doing it for hundreds of orders while trying to run a business. One wrong address or damaged package means an angry customer calling you directly. When your fledgling business suddenly gets 10,000 orders in a week, your garage or spare bedroom stops being a viable fulfillment center.

Once you prove the business works, explore a solution like the Shopify Fulfillment Network, which partners with third-party logistics companies that can take over warehousing and shipping. Look for 3PLs offering branded packaging and real-time inventory updates. Test their customer service response times and accuracy with small batches before committing to major volume. A 3PL that takes three days to respond to your urgent questions will also leave your customers hanging.

Create multiple customer service options 

If customers can’t assemble your product or their order arrives damaged, you can count on direct interaction. Every “Where’s my order?” and “How do I use this?” inquiry lands in your lap, and these can pile up fast. A slow or unhelpful response risks losing customers.

Effective DTC brands build help systems to solve problems before customers have to ask. Detailed FAQ pages, sizing charts, and video tutorials handle the obvious questions, while AI chatbots can deal with simple stuff like order tracking 24/7. Tools like Shopify Inbox, Zendesk, or Intercom help organize the flood of messages so you can focus on the issues that need personal attention.

Establish trust and credibility

Without the implicit endorsement of being sold in trusted retail stores, DTC brands must prove their legitimacy and quality through other means. Money-back guarantees, free trials, and transparent return policies help remove the risk for hesitant customers while demonstrating confidence in product quality.

To further boost credibility, you can feature customer reviews on product pages and share user-generated content (UGC) on your social media accounts and website (with permission, of course). 

Manage inventory and cash flow

DTC brands need to forecast demand and purchase inventory months in advance without the safety net of wholesale orders that provide predictable revenue streams. Overestimating demand ties up cash in unsold products, while underestimating means missing sales and disappointing potential customers. Seasonal fluctuations, viral social media moments, or supply chain disruptions can throw carefully planned inventory levels into chaos overnight.

Start with pre-orders or limited product lines to test demand before committing to large-scale production. Small production runs cost more per unit, and preorders mean customers wait, but these tactics help you avoid wasting cash on inventory that doesn’t sell. You can also invest in inventory management software to help track sales velocity and automate reordering based on historical data.