June 27, 2017


















"ZERO SALES REPS BY 2000!"

The title is a quote that was attributed to me by a speaker, unfamiliar to me, who was addressing a distribution association meeting last January. I saw the quote in a magazine article in March. "All publicity is good," but I did have both a minor and major problem with the quote. My minor concern is that I have never said such a sensational statement either in print or to a public audience. The extinction of a business species ("zero") is actually quite rare. There still are, for example, some blacksmiths, milkmen, mom-and-pop appliance dealers and one US buggy whip manufacturer.

My major concern is that the majority of the members in the distribution community might think "zero" is so unbelievable that they will then choose to ignore the rest of my forward looking story. This could delay their efforts to both see the future and reinvent themselves in time to become part of it, and there is little time to waste. I believe that we are in the third year of about a ten-year electronic commerce revolution that will significantly change distribution channels as we have known them.

My concern for lack of industry foresight grows when I see articles from the defenders of the past who reason that they will always be needed for obvious historical reasons. Some "letters to the editor" of publications that have reprinted some of my website ramblings have insisted that I am just personally "against sales reps." This "for or against" false dichotomy seems to include an emotional pitch for loyalty to the past. It isnít good logic, but maybe it is good politics Ėall three contributors were (coincidentally?) rep firm presidents. But, how many people looking for reassurance might listen, concur and relax?

WHAT HAVE I BEEN SAYING?

As a business strategist, I am dedicated to trying to help businesses and individuals increase their value-added proposition by anticipating and being ready to fill the next big customer need as they gracefully harvest those solutions for which there is a fading demand and profit potential. Over the past 18 months, I have often stated to audiences that in most distribution channels there will be at least a 50% to 80% reduction in the traditional activities of both outside and inside sales personnel by the year 2000 because of two major forces:

  1. The electronic commerce (EC) tidal wave which is bigger, moving faster and closer to our distribution shores than most want to see or believe, and
  2. The accelerating trend of all big buyers to reduce the number of wholesale vendors and make that purchasing as paperless and people free as possible.

Although the specifics for new emerging selling models are unpredictable, channels with application selling may look for ideas in how some of the 1980 computer-store operators transformed themselves from product-centric volume pushers into todayís "value-added reseller" (VAR). They currently receive about 30% of their margin dollars from markups on goods bought from master distributors, but the rest comes from fees billed to the customer. The VARís product margins continue to erode because more user-friendly products and more experienced customers require less assistance, and the low-cost fulfillment channels sell the same products for less.

Currently the VARís two-step channel for PCs is starting to lose another chunk of margin income due to the acceleration of direct web selling by Dell. Compaq, IBM and others have now announced that they must offer a similar web-based, electronic channel to the end-user.

The trend is obvious. The model for product-centric selling that is 100% markup dependent will collapse. If there is some residual pre- or post-sale application selling that the customer truly values, then they will begrudgingly agree to pay for them through unbundled fees. This will allow traditional sellers to have lower prices that are competitive with low-service discounters.

 

OUR RESPONSE TO BIG CHANGE?

As we look objectively at the vendor consolidation trend and the potential impacts of electronic commerce, what will we chose to be?

  1. Deer frozen in the face of change waiting for a how-to recipe solution that wonít be known until it is too late?
  2. Blacksmiths admitting that some of our business may be lost to new ways, but certain that we can still survive on whatís left?
  3. Ostrich politicians who sell the virtues of the past more loudly over the roar of the oncoming water?
  4. Or, surfers who are excited about riding the waves of change instead of resisting them? It will take overtime and lots of wipeout experiments to develop the new tools (the surfboard) and the skills to catch this wave, but what a ride it could be!

If change is real and revolutionary, then organized resistance, wishful thinking and happy talk donít work for long. Instead, these defenses just cause a greater collective cost to society and especially the gullible followers who bought the ostrichesí party line and didnít adjust in time.

CONCLUSIONS / QUESTIONS

We canít let vocal industry traditionalists lull us to sleep. We must do our own thinking about the exponential progress of EC in general and how it will specifically help to consolidate and erode away traditional channel activities and jobs.

If some percent of traditional activities will still be needed, how will their delivery be reorganized and compensated? Are we skillful enough that customers would judge us to be in the top 10% in a traditional value-added sense? If we arenít in the top strata, we canít afford to be delusional about it. It is time to both improve on the past and change for the future. Every individual must be responsible for their own reinvention.

Electronic commerce will give rise to new "infomediary" roles that we might fill, but these roles will be part of new business models that are not yet fully formed. We need to work to see these opportunities first, so that we can fill them before industry outsiders do it for us. To do this, we should already be web fluent Ė checking out successful sites in leading-edge channels; leveraging e-mail; and designing our own information delivery systems on the web. We should poll our best, most progressive suppliers and customers about what their web visions and intentions are every quarter. Their plans will change that often, because of the rate of change in both web technology and usage.

From a change management view, if anxious, open, seeking minds are a pre-requisite for re-invention learning, how do we create that state of mind with all managers and sales personnel? We have a huge, sales coaching challenge ahead if we must generally downsize, upgrade and unbundle outside sales reps as some distribution channels have already done. How can we re-deploy some of our old talent into new web roles? What will those roles be?

If we wait for the final answers to all of these questions, we wonít have a place in the on-coming digital economy. We have to immediately launch and learn with flexible guiding theories. We donít have to have the perfect final solution. If we can experiment our way to a roughly right solution, we will far surpass the majority of our traditional competitors who wonít choose to surf.

 

Ó Merrifield Consulting Group, Inc., Article # 4.8, D. O.#17