August 18, 2017


















Article 8.4

WEB-SELLING TO, THROUGH AND AROUND DISTRIBUTORS

Toshiba USA unknowingly started an extranet arms race amongst copier manufacturers in the summer of ’97. Its initial selling site for dealers allowed the dealers to be their own order desk person. We will call this a "Stage I extranet" that webulizes the traditional buy-sell activity between two channel partners.

Toshiba has continually added more features to the site, many of which are only possible because of web technology. Dealers can check real-time, database generated statistics and do warranty claims without paper in hours instead of weeks. An on-line catalogue for all printed support materials is a big hit. Any factory or dealer person can search, order whatever they need, and have it mailed directly to end-users along with their personal notes. What a new sense of power, speed, flexibility and service! These "Stage II extranet" features have significantly improved the productivity between two channel partners in evolutionary ways.

Toshiba’s competitors have responded with their own sites that knock off Toshiba’s features and add more. Toshiba, in turn, has over 50 dealer-requested apps planned for their site in ’99. This web race is costing the manufacturers millions!

The ante is already too high for the bottom 80% of the manufacturers that mostly sell complementary goods to the same dealers as the big guys. They may need an industry-wide extranet solution like the one that has been developed by the Construction Industry Manufacturers Association (CIMA) and the Associated Equipment Distributors (AED). It is called the "construction equipment support network." Any equipment channel that has a post-sale, parts and service reality will follow this example sooner than most might think.

One copier manufacturer will soon go to a "Stage III extranet" that will sell the end-user almost directly. If an end-user should get to the point of entering an order, the site will ask the customer to choose a dealer through which the transaction will be billed. There are already Stage III case studies that illustrate this direct sell with distributor/dealer re-intermediation.

Some distributors may be paranoid about Stage II to III transitions, but the smart ones will realize that whichever producer-dealer partnership empowers end-users first will win more market share. And, Stage III is better than "Stage IV" when a producer decides to sell direct to the end-user without re-intermediating the distributor. Because Dell Computer, for example, has been ripping so much market share from the PC manufacturers that have been using two-step distribution, these manufacturers are now also selling direct via the web. Under the slogan of "expanding the market", Herman Miller is now selling their furniture line direct to the home office segment, because their authorized dealers substantially weren’t.

Manufacturers’ extranet transitions from Stage I to IV will happen quickly within many channels. The transitions will be dictated by what the target, end-user segments want. Successful distributors will embrace these realities and see them as opportunities to both reinvent themselves to be part of these web-enabled solutions as well as find other, new-order, needs that will emerge and need to be filled.

 

Article 8.4 Ó Merrifield Consulting Group, Inc.