Abstract
Recent policies, aimed at reducing pension costs and improving consumer awareness, have contributed to the development of the Internet as a distribution channel within the pensions sector. This article critically evaluates the extent to which use of the Internet has facilitated and promoted pension distribution in the UK, as well as identifying the forces that are constraining or facilitating further change. Drawing on data gathered from pension providers, intermediaries and consumers the paper discusses the threat and implication of disintermediation, the capability of the Internet to empower those who use it, the resource implications of channel conflicts and the outcomes of shifts in responsibility for process enactment. The article reveals that the Internet has had some impact on the structure, geography and processes of pension distribution within the UK.
TopBackground
E-commerce technology is now viewed as an integral part of marketing channels and distribution systems (Rosenbloom, 2004). An e-enabled supply chain is perceived as having many advantages, for example increased business efficiency, enhanced information flows, improved transaction speed, wider geographical spread, increased temporal reach, cost reduction and competitive differentiation for e-enabled constituents (Hoffman et al, 1998; Zank and Vokurka, 2003).
In addition, “the Internet offers direct links with customers, suppliers and distributors…[enabling] companies to bypass others in the value chain,… to dominate the “electronic channel” and thereby control access to customers and set terms of trade” (Walters and Lancaster, 1999, p.800, original italics). Hence, e-commerce technology has the potential not only to enhance supply chain performance but also to change its structure and may even pose a threat to certain supply chain members, particularly the intermediary. However, intermediaries perform a number of functions including specialised information, professional advice, customisation to consumers’ needs, and reduction of uncertainty (Kimiloglu, 2004). Thus a company bypassing a distribution network to pursue commerce in cyberspace can be exposed to considerable risk (Ghosh, 1998).
In the context of pensions it is debatable to what extent the Internet is able to satisfy consumer requirements for advice and information due to the complexity, intangibility and deferred end benefit of the product (Ennew et al. 1995). The financial intermediary provides the consumer with the necessary “financial know-how” in order to make the optimum investment decision (Harrison 2000).
Key Terms in this Chapter
Supply Chain: A network of multiple companies (typically manufacturers/suppliers, distributors, transporters, storage facilities and retailers) that participate in the manufacture, delivery and sale of a product to the final consumer.
Disintermediation: The removal of a middleman or intermediary in a distribution channel so as to create a direct link between the producer/manufacturer and the final consumer of the product.
E-Commerce: Electronic commerce is any business transaction with customers, suppliers or external partners conducted via electronic systems such as the Internet, intranet or extranet or via proprietary systems.
E-Society: Electronic or information society. The study of the impact of digital technologies on the behaviours and processes of individuals and organisations.
Empowerment: Empowerment results from a combination of external assignation (the empowering environment) and internal realization of power (consumer perceptions). Hence, conditions must exist in the external environment that allows the transference or increase of power from one party to another. At the same time, the recipient must realise the increase in power and be in a position to benefit from this realisation.
Distribution Channel: A distribution channel or chain is a set of companies involved in making products/services available for sale to the final consumer. A distribution channel can be direct (from manufacturer to final consumer) or indirect (involving a number of intermediaries or middlemen).