Article:
Supply Chain
Synergies
Is it possible to preserve your dealers and
distributors in the age of the Internet?
A recent article I wrote, “Satisfying Your
Sales Channels with Collaborative eCommerce”
generated numerous requests for more ideas
on how the Internet can increase efficiency
in distribution but also how can these
increases in efficiency enhance the role of
local distributors?
Let's look at how the Internet actually
increases the importance of distributors.
Some manufacturers think that building one
big website will be an effective way to
bring customers and potential customers to
that website. Unfortunately, this style of
website design has been shown to be both
costly and ineffective. Relying on a single
website to reach customers will necessitate
spending a lot of advertising money to bring
customers to that site and a lot of money
updating the site frequently to keep
customers coming back.
Once customers have been attracted to that
site, as a manufacturer you would have to
ensure that the site is very informative and
interesting so as to prevent customers from
clicking over to reach a competitor. Both
the advertising to drive the site and the
functionality required to make the site
sticky are expensive. Estimates are that
converting from selling through distributors
to going direct necessitates an increase in
marketing expenses as high as 30 percent.
Having a website from which customers can
order and from which potential customers can
learn about your products and services stops
well short of establishing a business
relationship with those customers and
potential customers. It certainly ensures
the destruction of your dealer network.
The best scenario is one in which the
customer has the convenience of ordering
over the Web and the support of a personal
relationship. This is where the combination
of the Internet and local distributors
significantly increases the value received
by the customer.
As a Manufacturer you sell through
distributors for a reason. Selling through
distributors lowers marketing and selling
costs. It makes sense to maximize the
leverage of your marketing dollars. If a
company sells through distributors and each
of these distributors has a website, the
company's marketing presence is greatly
enhanced.
This is how the Internet can work to provide
your end customer with a great buying
experience that emphasizes your customers'
relationships with their local distributors.
For you the manufacturer, there are many
advantages to utilizing local distributors.
One is that the service to the end customer
can truly be customized. For instance, your
local distributor can take advantage of
product synergies and increase market share
for each of several manufacturers by showing
the customer how a combination of products
(including yours) can do a better job of
solving the customer's problem. The
knowledge of the customer that can only be
gathered through a personal relationship
lets the distributor create a better buying
experience for the customer, which leads to
a more satisfying, and a longer lasting,
buying relationship.
The Internet and the kind of relationship
described above have another set of
advantages that can help both you and your
distributors increase market share. When you
both realize the unique way that each of you
adds value for the ultimate customer you can
combine knowledge and pursue business
jointly.
The two keys to successful marketing in the
information age are mass customization and
customer relationship management. We all
have to understand what our customers need
and give it to them when and how they want
it. Local distributors play a very
significant role in ensuring that the
customer continues to receive this kind of
service.
The power of the Internet can and should be
used to cut out unnecessary costs and keep
the marketplace competitive. As we use the
Internet to bring us closer to our customers
we should take advantage of the unique
capabilities of an integrated supply chain
using an integrated Web presence.
However, as you
go about this process you should make sure
that the part of the supply chain closest to
your customer remains closest to your
customer. People will always prefer to buy
from people. -
John Shenton - August, 2002
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