← Business Models: Core (all topics)
Trading intermediation & disintermediation
What it is
Commodity and industrial trading houses buy from producers and sell to consumers, earning a spread on turnover while carrying price, credit and logistics risk. Authorised-agency franchises give exclusive distribution for a principal's products in a territory
Producers selling direct and digital marketplaces both remove the intermediary
Impact on industries
- Spreads are thin on large turnover, so a single counterparty default can erase the margin earned on many transactions
- Disintermediation is structural - producers sell direct and marketplaces match buyers to sellers, removing the information advantage trading rested on
- Authorised-agency franchises, canalised and government-linked trade, and regulatory or licensing requirements all create positions a marketplace cannot replicate
- Captive processing converts a trading spread into a manufacturing margin, but working capital funds both sides and inventory value moves with commodity cycles