Sales & Marketing: Bill Keenan

Dec. 21, 2004
E-commerce impacts channel partners

The downside to e-commerce, many manufacturers find, is that it scares the hell out of many of their channel partners -- dealers, distributors, rep firms, retailers, and even salespeople who believe that orders placed through a manufacturer's Web site are orders that should have been placed through them, and involve commissions or sales credits that should have accrued to them. Many dealers and distributors are up in arms about the threat of disintermediation-- which is supply-channel jargon for "cutting out the middleman" -- and are seeking ways to protect themselves. Wine distributors are pressuring state legislatures to ban alcohol sales over the Internet. Automobile dealers have threatened manufacturer boycotts as a result of some dealers' Internet sales. And trade associations ranging from the National Assn. of Wholesalers/Distributors to the Manufacturers' Agents National Assn. are commissioning studies on the ways e-commerce will affect their members. For Bruce Merrifield, president of the Merrifield Consulting Group Inc., Chapel Hill, N.C., the threat of disintermediation is real. "A virtual channel will emerge that will parallel, control, and reshape the traditional physical distribution channels that have been perfected over the last 100 years," warns the coauthor of Electronic Commerce for Distribution Channels (1999, National Assn. of Wholesalers-Distributors and the Distribution Research & Education Foundation Publications). "The perceived value of the traditional channel, including many of the distributors, dealers, and reps that are a part of it, has collapsed." Some change in their role in the value they bring to the distribution channel is inevitable. If change is inevitable, says Merrifield, the goal of the manufacturer should be to encourage its business partners to embrace the change and be a part of the solution instead of part of the problem. But how? Cisco Systems Inc., a manufacturer of networking equipment, for instance, has demonstrated an open and straightforward approach in dealing with its business partners. Cisco President and CEO John Chambers says that the rise of the Internet means that "our business partners need to move to a more service-oriented model," and makes a sincere effort -- by offering training programs and free consulting advice -- to help partners make the transition to a service orientation. Herman Miller Inc., Zeeland, Mich., which manufactures office furniture, is careful to explain to its dealers that its online efforts are targeting the home-office market, a segment that its dealer network wasn't serving. Herman Miller executives also meet regularly with members of its dealer network to explain how the company's online efforts will help partners rather than hurt them. They argue that it will bring in new customers who might eventually grow into corporate accounts that dealers typically service and that the online channel gives dealers a low-cost way to handle customers that they might have turned away in the past. Manufacturers in general need to do a better job of communicating their online strategies to channel partners, says Bob Thompson, president of Front Line Solutions, a consulting firm specializing in customer-relationship management based in Burlingame, Calif. "Some manufacturers are afraid of alienating their channel partners, so they don't tell them everything, or they sugarcoat it." Instead, manufacturers need to lay out both the marketing and sales problems they face and the manufacturer's strategy for dealing with those problems, particularly if change involves a shift in business from one channel to another. In many industries, says Merrifield, business partners will evolve into more of an "infomediary" role where they are consulting on product applications, trouble-shooting, offering technical assistance, and performing other activities that help to move the sales process along even if they don't directly consummate the deal. In this model, manufacturers are offering market-development funds and co-op marketing programs that help compensate business partners for activities that don't directly result in sales. William Keenan Jr. is an IW contributing editor based in New Jersey and the former editor of Selling magazine. His e-mail address is [email protected].

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