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Net Prophet - by Dylan Tweney

September 22, 1997

Using the Web to help, hinder your resellers

Earlier this year, there was a lot of talk about how the Internet could "eliminate the middleman." The idea was that the Web would allow manufacturers of products to sell their goods directly to consumers.

Sure, companies have sold direct for a long time, using phones, faxes, and even snail mail. But the Web is global, instantaneous, and available around the clock. To the proponents of this theory, that adds up to a big threat to traditional middlemen and middlewomen -- the distributors, wholesalers, and even retail outlets that have historically stood between most large companies and the end-users of their products. The result, it was claimed, would be lower prices for purchasers, bigger margins for manufacturers, and just desserts for those nasty middlemen.

In the parlance of I-commerce gurus and analysts, this process is known by the buzzword "disintermediation." But recently, a lot of those gurus and analysts have been changing their tunes. Apparently, eliminating the middleman isn't quite as simple as it seems.

In fact, there seem to be a whole new crop of middlemen popping up in the Internet arena -- Internet presence providers, I-commerce hosting services, and mall operators. All of these outfits provide a service that's essentially that of the middleman: connecting manufacturers and their customers.

Not only that, many traditional middlemen show no signs of disappearing with the advent of the Web. Some of them, like electronics distributor Marshall Industries, have seized on Web technologies as a way of increasing the efficiency of their operations, improving customer service, and offering innovative new services and products.

As a result, the term that's now in vogue is "reintermediation." It means, in short, "bringing back the middleman."

Stuck in the middle with you

Of course, the middleman never went away, except in the minds of over-enthusiastic industry pundits.

It reminds me of a recent cartoon in The New Yorker. A group of business executives are sitting around a table, and one of the suits is standing up addressing them. "On the one hand," he says, "cutting out the middleman would result in lower prices, increased customer satisfaction, and bigger profits. "On the other hand," he continued, "we are the middleman."

The middlemen, regardless of the industry, have too much to lose to take the I-commerce boom sitting down. In fact, they stand to gain many of the same benefits as manufacturers.

That's not necessarily a bad thing for manufacturers or for customers. After all, I don't care whether my CD comes directly from Sony, from a Web reseller like CDnow or Music Boulevard, or, for that matter, from the bricks-and-mortar record store down the street. What I'm concerned about, as a consumer, is price, service, and the quality of my shopping experience.

The truth is many middlemen offer services that manufacturers can't -- or won't -- offer themselves. For computer resellers, this can be technical support, or the ability to deliver customized, integrated solutions that are hand-crafted for the buyer's needs. For other companies, it may be a detailed understanding of small markets that aren't profitable for the manufacturing company to track. In such situations, it actually makes sense for a company to delegate part of its customer relationships to its channel partners.

On the other hand, if the middlemen are doing nothing more than slowing the movement of products to end users and jacking up prices, then the company owes it to its customers (and itself) to eliminate these channel inefficiencies any way it can.

Helping out your channel online

Just because you're dependent on distributors and resellers doesn't mean you can't play the I-commerce game, of course. You just need to concentrate on building solutions that take into account the way you do business.

For an example, look at 3Com. Their 3Com Shopping Network, at http://www.3com.com/3sn/, lets customers browse a catalog of 3Com products, collecting items they want to buy in a Java-based "shopping list" application.

3Com even provides a nifty Network Designer application. It's basically a wizard that helps you determine what equipment you'll need for your particular network environment. The Network Designer generates a quote that lists 3Com products matching your needs; you can then add these items to the Java shopping list.

Once you're done shopping, 3Com hands you off to one of its authorized resellers. There's no real integration between 3Com's shopping application and the resellers' sites, which is inconvenient. But the principle is there: 3Com is using their Web site to drive business to their resellers, and in the process it's providing a handy application to its customers.

And that means everybody wins: 3Com, the middlemen, and the customers.

Dylan Tweney is the editor of InfoWorld's Focus on I-Commerce section. He welcomes your comments at dylan@infoworld.com.

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Copyright © 1999 InfoWorld Media Group Inc.

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