News Sept 01, 2000

Juergen Daum’s News Service about New Economy Management Best Practice

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Intermediaries are again becoming important – but now on the Net

News categories: enterprise and business strategy, e-commerce, value based marketing, digitizing the New Economy enterprise / Information Technology

Early Internet commerce trailblazers such as Amazon.com and Dell helped popularise the theory that direct-to-consumer would be the wave of the future. Out will go the middlemen that add little incremental value but lots of costs to the end-customer. So, goes the dis-intermediation theory. But some products are simply harder to sell and service than others, and that's where the theory loses its argument. Simply put, a hi-tech component part that has many variations requires a different sales process than a book or PC. And, the complexity isn't just limited to the complexity of the product itself. Added complexity can be found in providing the high level of personalized support to deal with such issues as processing warranty claims, managing tiered pricing structures and promoting after-market parts or services.

In the manufacturing sector, intermediaries such as distributors, dealers, and resellers provide tremendous value to end-consumers as well as to the OEM. These intermediaries provide training to end-customers, handle warranty claims, provide detailed information on products and specs, and are the primary provider of personalized, after-sales customer support. Therefore, its no surprise that these channels typically account for over 90% of an OEM's revenues and 75% of total consumer spending in the U.S (AMR Research).

The role of the "middleman" will become now even more critical as product cycles continue to decline and customer needs become increasingly complex. Simply put, very few companies, particularly manufacturers of information-intensive products, can economically ship quantities of one to end-consumers and deliver the requisite level of customer service, before and after the sale. Despite the early hype about the dis-intermediating impact of the Internet, we are actually seeing an increasing trend towards outsourcing and the creation of new partnerships across the commerce chain. Nowhere is this more applicable than in industries characterized by information rich products that change rapidly. Highly complex products require high-touch selling and service processes that strain OEM internal resources and divert attention away from core competencies in manufacturing and marketing.

Enterprise Channel Management - A core e-business solution:

In the Web-enabled world, the stakes are high for executing on this "last mile" of commerce. Manufacturers can derive enormous competitive advantage from automating synergies within the channel partner network to expand sales opportunities and strengthen brand loyalty. As such, the market opportunity for a new breed of e-business software vendors, or enterprise channel managers, is enormous. Companies such as Click Commerce, Comergent, and Entigo are transforming the way OEMs interact with their channel partners and, in the process, enabling these channels to provide better service to the end-customer. For example, Trane, the world's second largest maker of air conditioners, hopes to double its share of after-market parts by using Click Commerce's solution. How? By re-intermediating with their dealers using applications that enable dealers to better target promotions and prices to specific contractors. Similarly, Comergent has bolstered performance of Cisco's complex multi-tier reseller network by providing real-time integration into product pricing, configuration, and availability information. The result for Cisco has been greater efficiencies, channel visibility, and increased sales. And that's just the beginning. Interviews with over 300 dealers and distributors, conducted by AMR Research revealed that just streamlining the warranty claim resolution process alone would be worth the investment.

Tomorrow's e-enabled businesses will continue to rely on partners to capitalize on new growth opportunities and deliver superior channel service. So while the market may be small today - at $89 million in 1999 - we believe enterprise channel management solutions will emerge as one of the more attractive opportunities in e-business software.

Source: The B2B Analyst, Volume 1, Number 32 - September 1, 2000. To subscribe this free newsletter klick here

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