Did E‑commerce Truly Eliminate Middlemen? Analyzing the Shift from Physical to Algorithmic Intermediaries

E‑commerce originally solved an efficiency problem

In traditional commerce a product travels through multiple layers—manufacturer → wholesaler → distributor → retailer → consumer—each adding storage, transport, labor, and profit margins. For example, a product costing 80 yuan that incurs two 10% mark‑ups and a final 15% retail markup ends up at roughly 111.3 yuan.

E‑commerce shortens this chain to manufacturer → platform → consumer. If manufacturers only bear logistics and platform fees, final prices can drop significantly, and consumers benefit from dramatically lower search costs. Online shoppers can compare hundreds of sellers instantly, and small factories gain nationwide reach that was previously impossible.

Thus describing e‑commerce merely as “stealing brick‑and‑mortar business” is incomplete. While it creates genuine efficiency and lower prices, the influx of merchants onto platforms creates a new scarce resource: digital exposure.

Rent hasn't disappeared, it became traffic cost

Physical stores pay high rent for prime locations because they buy foot‑traffic. In the digital world, merchants purchase algorithmic exposure—search rankings, ad slots, and recommendation positions. The limited real‑estate of the first page, homepage recommendations, and live‑stream slots forces sellers to buy attention, turning “paying for foot‑traffic” into “paying for algorithmic traffic.”

The platform thus acts as a new middleman, controlling search rankings, recommendation logic, advertising systems, payment entry points, and promotion rules—far more influence than a traditional landlord could wield.

But this doesn't mean physical stores should be protected

If e‑commerce is more efficient, some low‑efficiency brick‑and‑mortar shops will exit, which is not inherently harmful. Consumers choose between online and offline not only on price but on total cost:

Consumer total cost = product price + waiting cost + search cost + experience cost

For a box of tissue paper, a 10 yuan online discount with a two‑day delivery is acceptable because waiting cost is low. However, if you are thirsty at 3 p.m., a 2 yuan bottle from a nearby convenience store is preferred over a 1 yuan online offer that would arrive tomorrow, highlighting the importance of waiting cost.

Therefore, after two decades of e‑commerce, physical retail has not vanished; instead, only those lacking price or experience advantages and unable to provide instant value are most affected. The market is redefining which goods and services belong offline.

Why is Zhong Shanshan especially concerned?

For a beverage company like Nongfu Spring, logistics costs constitute a large share of product value, and instant availability is crucial. With many nearby stores selling competing brands, visibility becomes a decisive factor, turning nationwide convenience‑store networks into a long‑standing competitive moat.

Consequently, a reduction in traditional retail channels could erode Nongfu Spring’s distribution advantage. Zhong Shanshan’s interest stems from this direct stake, not from neutral observation.

Should we limit “capability” or “power”?

Platform “capability”—high logistics efficiency, easy search, price comparison—is a technological benefit. Limiting it to protect inefficient brick‑and‑mortar models would be counterproductive. The deeper issue is platform “power”: control over transaction entry, traffic allocation, ranking, promotion rules, fees, and penalties. When a platform becomes both marketplace and rule‑maker, the discussion shifts from efficiency to market dominance.

Restricting platform power is therefore distinct from curbing e‑commerce growth; the former concerns transparency, fair competition, and preventing rule‑making monopolies, while the latter could simply protect outdated business models.

E‑commerce hasn't eliminated middlemen, it just changed them

The early internet narrative promised “no middlemen taking a cut.” In reality, any system where consumer attention is limited creates intermediaries that filter, match, and allocate visibility. Previously, physical distributors and prime storefronts held this scarce resource; today, algorithms and platform slots do.

Thus, middlemen have not disappeared—they have migrated from geographic space to algorithmic space. A healthy market does not require the absence of intermediaries, but it does require that no single intermediary can monopolize market entry. Previously, a shop’s survival depended on securing a good street location; now, an online store’s fate hinges on whether its products can be seen amid opaque algorithmic rankings.