Eliminate The Middleman

Thrifty consumers have tried so hard for so long to eliminate the middleman from a business transaction, it's amazing this guy still has a job. For the most part, the middleman is always portrayed as the bad guy in every deal. Sure, he moves the product you manufacture, but only after tacking on a little something extra for his efforts. How can consumers get better prices? Eliminate the middleman.

In the movie "Goodfellas," entrepreneurial mobsters eliminated the middleman by hijacking a truckload of cigarettes and selling the cartons directly to smokers. And, buying Rolex watches on the streets of Manhattan is exponentially cheaper than going to a jewelry store. (Those are real Rolex watches, aren't they?) The ultimate middleman eliminator, however, is the Internet. Most consumer goods manufacturers have never had the opportunity to sell direct. But, the Internet changes that - big time. If your company has traditionally sold products to consumers through catalogs or direct mail, then the Internet will only enhance those processes. However, if your product works its way to consumers through distributors or retailers, the Internet will transform that model.

What Is The Purpose Of Your Site?
We recently featured Serengeti Eyewear in the pages of Integrated Solutions (April 2000), and the company was preparing to launch its new Web site. As a manufacturer and distributor of high-end sunglasses, one goal of the company's site is to educate consumers and direct them to the closest retailer that carries Serengeti Eyewear products. Many companies, ranging from apparel manufacturers to perfume makers, have followed a similar model.

Nobody is going online to purchase a gallon of bleach or a pack of gum directly from the manufacturer. However, consumers might be interested in direct purchases of such items as auto parts, clothing, and video games. The manufacturer also benefits from the direct sale by shortening its supply chain and gathering more detailed information about its consumers.

I recently spoke with representatives from Manhattan Associates, and they outlined their company's strategy for dot.com customers. It's a seven-week implementation package that includes Web-based fulfillment. Manufacturers like Mikasa and Yankee Candle Company are a couple of Manhattan Associates' customers that now sell their products online, as well as through retail establishments.

Answering To Your Partners
Eliminating the middleman may be good business for customers, but it can create a rift between manufacturers and their partners - even if you're not undercutting your retail outlets in terms of price. By selling direct to consumers online, you are essentially opening another store that will compete with traditional retailers. Also, some retailers/partners may also offer products through their own Web sites. These customers will not want to sit idly by and watch their supplier compete with them online.

Selling online direct to customers is not an impossibility for manufacturers. But, they should have a plan to handle relationships with their partners. Business may be business. But, your partners will have a tough time understanding why you're taking money out of their pockets as they continue to line yours.

Questions about this article? E-mail the author at EdH@corrypub.com.