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Distribution & The Internet

(Editor’s note: This article was originially published on The MHEDA Journal Editor’s Blog in February 2010.)

In a conversation with Louis Coleman, sales and marketing manager at Autoquip Corporation (Guthrie, OK), we got to talking about an interesting topic, which can basically be summed up as, “What does the increasing use of the Internet for sales mean for traditional distributor territories?” 

I wasn’t sure what to make of it at first, but the more I think about it, it’s an issue that should have distributors, manufacturers and end-users all reconsidering the traditional sales territory structure. As certain distributors become easier to find on the Internet, those distributors are more and more likely to be contacted by end-users who are not in the distributor’s defined territory. What is to stop that distributor (especially a distributor whose sales may be struggling in the current economy) from selling to or servicing that customer?

An ethical distributor who knows exactly where the end-user is located may have the fortitude to recommend that user to another distributor in the customer’s area. But customers who are anxious to buy don’t really want to hear “I can’t help you.” In today’s instant-gratification world, they want to buy now once they find what they’re looking for.

It’s not that difficult nowadays for a distributor with Internet savvy to set up shop with no inventory and just have the manufacturer drop ship to clients. It’s difficult to tell where those types of distributors are, and they may sell right over the top of other dealers.

The situation becomes complicated further when a lead comes to a manufacturer’s Web site. There are manufacturers out there who would love to have links between their own Web site and their dealers’ Web sites. Of course, distributors are concerned—and very appropriately so—that when they link to the manufacturer’s site, a customer can go from the dealer’s site to the manufacturer’s site and hit ‘Contact Us.’ The manufacturer doesn’t necessarily know where that person is located. If the customer is in that dealer’s territory, there’s no problem. But he may not be, and the manufacturer doesn’t know which distributor to give the lead to. I can see how this would be cumbersome and confusing for everyone involved.

Some distributors are becoming huge online and score wonderfully in the search engines. What keeps them from selling anywhere in the nation? Are we on our way toward master dealerships online? What can smaller dealers do to defend themselves? There are customers who value face time and personal contact, but are those dying out?

The answer to all these questions is, of course, “I don’t know.” It’s tough to know the right approach. Distributors often don’t want to talk about it amongst themselves because they most likely fall into one of two categories: big ones who have a strong presence already and are poised to grow their market share, or smaller ones that don’t have much of a Web presence and are upset that the other people are stealing their business. For their part, most manufacturers don’t seem have a good solution, either, so they really don’t want to address it with their dealer networks.

It’s a complex issue. Maybe all e-commerce platforms need to be ZIP code specific so it’s clear which projects belong to which distributor. On the other hand, if getting people to find you online is the goal, then it doesn’t seem fair to punish a large distributor who has the resources and skill to be featured prominently in search results.

As Coleman says, “I don’t know if all products can be sold online, but I do know that there was a time when I swore I would never use the Internet to book a flight. Now I can’t imagine using a travel agent. We may find out that the Internet selling model isn’t sustainable because the good customers really do want face time and that local service presence. I think some of that is true, but that’s what travel agents said, too.”

Time will tell. What do you think? Is the traditional geography-based model endangered? Will it go extinct?

Material Handling Equipment Distributors Association

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