Home Depot tells vendors to stay off the 'Net
By Industrial Distribution Staff -- Industrial Distribution, 9/1/1999
ATLANTA, GA.--For once, Home Depot and the small, independent construction distributor are on the same page. Home Depot, the giant retailer seen as a fierce rival to small independents, has told its vendors to refrain from selling their products on their own Web sites.In a letter sent in May to manufacturers like Black and Decker and Rubbermaid, Home Depot, which plans to debut its own e-commerce site later this year or in early 2000, warned its manufacturer partners to think twice before selling their products directly to consumers on the Web. In part, the letter read as follows: "It is important for you to be aware of Home Depot's current position on its vendors competing with the company via e-commerce direct to consumer distribution. We think it is short sighted for vendors to ignore the added value that our retail stores contribute to the sales of their products. We recognize that a vendor has the right to sell through whatever distribution channels it desires. However, we too have the right to be selective in regard to the vendors we select and we trust that you can understand that a company may be hesitant to do business with its competitors."
With the Internet continuing to mature, distributors are becoming increasingly nervous about manufacturers going direct. Now it appears that one of distribution's biggest competitors -- $30 billion-plus Home Depot -- feels the same way.
"I would have to agree with Home Depot for once. They have the clout to influence manufacturers and, on this issue, they are our ally," said Marc Beerman, incoming STAFDA president and owner of Beerman Precision Inc., a construction distributor based in New Orleans, La. "I believe that competition and the market will ultimately dictate the proper way for manufacturers to market and sell their products. If other manufacturers become hugely successful with Internet direct offerings, like Dell Computer, and take large pieces of market share from others, there will be pressure to respond. The role of distribution is changing rapidly and this should be a wake up call to all who are not developing an Internet strategy."
Home Depot's Internet strategy is clearly to partner with its manufacturers by offering their wares on HD's site only, once it becomes available. By sending the letter, sources say the company hopes its vendors will think twice about marketing their goods from their own Web sites. Others say it indicates HD is far from ready to conduct e-commerce, and doesn't want its vendors getting a head start. The controversy resembles the initial fears of distributors, who petitioned their vendors not to sell into Home Depot when the big box started gearing up to become a billion-dollar player.
"We dropped several manufacturers when they went to Home Depot," said Norman Knief, president of Lincoln Contractors Supply, Inc. "It was obvious to us that they were selling HD at much lower prices than they were offering us. I believe that Home Depot is way behind in developing a Web site, and they fear loss of market share to their suppliers' direct online sales operations."
However, distributors are mostly sympathetic toward their newfound big box friend.
"I am not surprised by the position that Home Depot is taking," said Mark Knight, director of product marketing for Curtis Industries, Mayfield Heights, Ohio. "Industrial distributors have always refrained from using vendors that may be viewed as a competitor. Generally, this has not been a concern, in that most of our vendors do not have the operational processes in place to efficiently sell MRO supplies to end users. [However], we do see manufacturers dealing directly with end users on production supplies, which is an area that we avoid."
Knight also asks some other valid questions, like who will get credit for leads and sales that initiate on Web sites. Milacron, which announced it is selling its products online earlier this year, has already begun to work out similar issues. Distributors have issues with online sales, too. W.W. Grainger, for example, gives commissions to area sales reps when products are purchased from its Web site.
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
