Direct insurers talk about aggregators in the same way that corner shop owners talk about Tesco. They’re the enemy – voracious entities bent on world domination, trampling everything in their path. They take advantage of consumer preference to squeeze competitors until they go out of business and suppliers until their margins are paper-thin. As is the case with Tesco, consumers have a very different view:
Aggregators are just one example of intermediator: a consumer’s dream bringing convenience, price transparency and wide reach within their grasp. As a result, most people in the UK today use an aggregator when shopping for car or home insurance. Using an aggregator, the process of comparing insurance quotes becomes scalable: that is, the same effort is required to compare 2 or 2000 prices. That places them in an enviable position – scalability is a discontinuity: a dramatic change of far reaching consequences from which it is impossible to recover. Things will never be as they were before. Prior discontinuities include the printing press, antibiotics, the Internet… you get the picture. Of course the impact of intermediators can’t be compared with antibiotics. The supermarket is a much more appropriate example, hence all the talk about Tesco.
Direct retail brands are right to be worried: a discontinuity fundamentally changes a marketplace, upsetting the status quo and introducing a great deal of risk and uncertainty. Established direct brands -particularly insurers – don’t like risk, but wherever there’s uncertainty there are opportunities. For direct brands that are quick to adapt to the new shape of the market, the sky is really the limit: Intermediators make the buying process scalable. In a scalable market there is no gravity, no restrictions on market share. It is now possible for a winner to take all. So, what’s the winner-to-be to do?
- Brand must understand and accept the main implication of the discontinuity, that there is no way back, to avoid wasting time exploring impossible scenarios. Intermediaries are now part of online retail’s DNA.
- Accelerate our understanding of the new situation: look for similar events in the past (supermarket?) to use as reference model, but
- Don’t be blinded by the reference model. What is different this time around?
- Transactions are completed on the brand’s website.
- Regulatory environment.
- Develop an aggresive change plan. If nothing is like it was before, neither should you.
- Go for it! and do it quickly. If the winner takes it all, the second may take nothing.