Who’s afraid of disintermediation?

As manufacturers found success selling directly to the end user via the Internet, a general “aha” reverberated throughout the business community. Why bother with costly middlemen when you can sell direct and get the full profit margin?

The answer: because disintermediation isn’t always as efficient and cost-effective as manufacturers first suppose. While it may be simple enough to give the end user access to the manufacturer via the Internet, it is quite another feat to provide timely fulfillment and customer service.

David Lorsch, president/CEO of Scottsdale, AZ-based DBL Distributing, which sells consumer electronics to retailers, tells the tale of a major electronics manufacturer that provided a much-needed battery to a business customer by shipping it overnight – three days after the order.

Indeed, “the typical manufacturer has 300-400 customers vs. thousands if they sold direct,” says Martin Brodsky, vice president of marketing at Lincolnshire, IL-based cataloger A. Daigger & Co., which sells science equipment to schools and other institutions. “They would have to build the infrastructure to service these direct accounts.”

Instead, many of Daigger’s key suppliers link their Websites directly to Daigger’s site. In some cases, customers who try to order directly from a manufacturer are routinely referred to Daigger’s site instead. Daigger’s site offers a comprehensive cross-referencing system that allows customers to key in a competitor’s stock number and pull up Daigger’s price.

Nicole Edmund, vice president of marketing for Edmund Industrial Optics, points out that the typical vendor’s business model is to sell volume, so when they can’t handle small orders, vendors refer these orders back to their dealer network. But Edmund worries that customers who come from a manufacturer’s Website may forsake the dealer for the manufacturer when it’s time to place larger – and more profitable – orders.

So in hopes of avoiding this scenario, Barrington, NJ-based Edmund Industrial Optics – a division of $43 million cataloger Edmund Scientific – will make its informational site completely functional by year’s end. Nicole Edmund says that in addition to ordering, customers will be able to check the production and shipping status of orders.

Perhaps resellers’ greatest defense against disintermediation, however, is simply that they carry products from multiple vendors. DBL Distributing, for one, offers 5,300 products from more than 200 manufacturers. “What makes us valuable is that we are a single source and can provide what a single manufacturer cannot,” Lorsch says.

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