The demise of the disintermediation myth
Jack Keough, Editor/Associate Publisher -- Industrial Distribution, 5/1/2007
It seems like just yesterday the word “disintermediation” was flying around the distribution world. Every industry seminar seemed to focus on the term, and countless articles were written about it.
I recall one purchasing executive telling me after such a seminar that there would be no need for industrial distributors in the future—that they would, indeed, be disintermediated from the purchasing process.
“We'll be buying products directly over the Internet,” he told me.
Other industry executives said outside sales positions would be eliminated because of the Web. But that hasn't happened, either. Distributors today are looking to add outside salespeople.
We've heard doom and gloom before. Remember “captive distribution?” Some manufacturers thought it would be easier to buy a distributor to service their plants than to deal with independent companies. It didn't work out very well, did it?
And then there were those that predicted the demise of distribution when buying groups entered the industry. At one meeting, throngs of distributors filled a room for a panel discussion about the first buying group in the business.
“Distribution will never be the same if this is allowed to happen,” said one panelist.
Meanwhile, buying groups had existed in the medical supply industry for years.
I couldn't help but recall these pieces of the past as we conducted interviews with some of our Big 50 executives, the results of which will be featured in next month's issue. Over and over, we heard about strong growth in 2006 and predictions of a good 2007. These executives told us they were increasing sales domestically and internationally, and that the Internet is not the threat it once seemed, but a tool that has helped increase sales.
There is no distribution system in the world as efficient as what exists in North America. Distributors, for the most part, are better capitalized than ever before and the future has never been brighter. They've adapted to the Internet, are selling services instead of giving them away, have become more technically astute, and are working closer with their customers.
As Mark Twain once said, “The report of my death was an exaggeration.” So is any report of the death of distribution.
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