Why Banning Middlemen Profits Leaves You Without Even a Cabbage

Misconception of “no middlemen profit” – The popular slogan is framed as an anti‑economic sentiment. The author explains that intermediaries do not earn a mysterious “price spread”; they provide professional services that reduce transaction costs by roughly 40% and assume market, inventory, and capital risks.

Digital era reinforces the role of intermediaries – E‑commerce platforms, live‑stream sales, instant retail, and AI‑driven logistics appear to “cut out the middleman,” but they are in fact new, data‑powered intermediaries. They use data insight, inventory optimization, precise delivery, and rapid response to transform the traditional “dirty work” of moving goods into value‑integration services.

Historical pattern of de‑intermediation – Each attempt to eliminate intermediaries has resulted in more layers and more efficient middlemen. The author cites Coase (1937) "The Cost of the Firm," which shows that firms and intermediaries exist to internalize transaction costs. Hicks (Economic History Theory) and Kotler (Marketing) are also referenced, emphasizing that merchants are the main drivers of market development.

Empirical observations – A 2023 industry survey reported that 78% of platforms that claim to “de‑intermediate” experience a surge in disputes and double the fulfillment cost. The author gives a concrete example: a farmer’s apples cost ¥2 per kilogram in Shandong but sell for ¥8 in Shanghai; the farmer cannot profitably transport the fruit himself because the hidden service costs would be many times higher.

Scale of the intermediary economy – Logistics, the largest intermediary function, accounts for about 10% of global GDP, with China’s logistics revenue reaching ¥14.3 trillion, ranking first worldwide for ten consecutive years. E‑commerce now captures roughly 30% of retail, pushing traditional distributors out while new players (Taobao, JD, Pinduoduo, Douyin, Meituan, Didi, Lianjia, etc.) become the dominant intermediaries.

Future trends and survival – The article warns that instant retail, AI‑driven delivery, and autonomous vehicles will create fresh intermediary roles, and that only those who adapt their service capabilities and digital efficiency will survive. Manufacturers should view intermediaries as partners, not enemies, and focus on strengthening their own service functions rather than attempting to eliminate the middleman.

Conclusion – Intermediaries are essential for economic division of labor; attempts to eradicate them ignore the fundamental role they play in reducing transaction costs and fostering market development. The correct question is not “whether” but “what kind of intermediary” is needed in the digital age.