The Good, The Bad, and the Ugly: Internet Only Distributors

Internet Only Distributors: The Tip of the Iceberg! And there other peak poachers emerging!

No Swiss neutrality here! Picture mountains in Europe or the green fields in horse country. These great visual representations are the economical tip of an iceberg that portends grave consequences that will ultimately sink local distribution. BUT! The internet distributors that are above the cost of overhead are the symptoms, not the cause!

The first betrayal is committed above the clouds, at the manufacturers’ roost, at the highest point of the control food chain. This is the only place where the distributor’s role in the business can be so taken for granted, because the distributors and their contractors are presumed to be locked in. So, the manufacturer’s create a one-plus feature for themselves by giving non-inventory, low-margin brokers the chance to poach easy commodity commercial components business at the expense of the territorial ground forces who specify, quote, stock, and support!

Good: Some of the most notorious corporate colors are listening, responding, and re-enforcing the two-step channel. Thank you Honeywell, Johnson and other controls companies that are thinking longer term and not taking the easy buck.

Bad: This is a growing threat They are in your neck of the woods, too!

Ugly: They are eroding the margins and to survive, they are probably are getting better pricing than the distributors!

The Really Ugly: Stocking no inventory, having manufacturers ship direct to customers,providing no technical support, and bragging about it. Really ? Give us a break, even Clint knows there is no free lunch. One way or another you get what you pay for. Not to name names, but if you are using these guys you have A lready L ost P erspective and S ensibility.

The Unforgiven: Those manufacturers who reward internet only distributors with better prices and abilities to bypass full service distributors, who invest in local inventory, training local support staff, local websites, and building market share by training and paying local sales people. Ironically, the number one enabler also makes one of the best products in the market place. I love your Orange actuators: Please stop the insanity !!

Consequence: Contractors: Wake up! The brick and mortar that you jump into your trucks and rely on to pick up immediate materials and accurate instructions on how to do things in a pinch, will become little ghosttowns because of your split loyalties and rush for a few dollars more!

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5 Responses

  1. In fairness to the “orange actuator ” company, they seem committed to dealing with the internet only distributors, I have seen very positive changes in their policies. I would hope other manufactures would follow their lead.
    I think the real message is for consumers who are just looking for the lowest price, they are the ones who might wake up one day with no full service distributors and no where to go for support.
    It would seem that one possible solution would be to give full service distributors better discounts than internet only distributors. Volume only discounts are an incentive for distributors to lower prices. This works in favor of internet only distributors who have a much lower cost structure, in that they offer no inventory or tech support and in detriment to the full service distributor. I do agree with Clint that the insanity must stop.

  2. Eric:
    Stripping out the costs of inventory, Sales, Sales Training, exposure in our individual Marketplace to our Customers , Newsletters, Education, re-training ourselves on product knowledge, programming actuators at our counters, warranty handling and other costs is something we all strive to do as true distributors of the Orange product. If little value distributors remain in the Marketplace, what place does the value-add company have for the manufacturer? I feel the Orange actuator company has made significant strides in protecting value add distributors in the past few years. I hope the obvious information you present on your website is some sort of mistake or oversight. Let’s give them a chance to adequately respond with proper reasoning. Best, Pat

  3. Internet only distributors do not go to the job site and help!
    As a distributor we have considered lowering our prices and charging ala carte for all of our value added services. Some of our customers know and appreciate the services we provide, others expect us to help them troubleshoot parts that they did not buy from us. Some manufacturers can provide specific assistance with a certain control, provided you can get to the right person. The local distributors know the entire system and are the best resource! Let’s hope we can all afford to continue supporting our local markets.

  4. The momentum reflected here is substantial and has caused some attention. But more collective commentary from the controls community is needed to cause corrective action! Use whatever forecast modeling you want, there is a tipping point ahead.

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