Getting Multi-Channel Distribution Right

CHAPTER 4Middlemen in Today's Channel Ecosystem and Their Functions

4.1 INTRODUCTION

The basic justification for the existence of middlemen is that they can simplify and streamline the process of connecting suppliers with consumers, as Figure 4.1 depicts. But search engines and their historical precursors, the Yellow Pages, also connect suppliers with consumers, so what value do middlemen in the distribution channel really offer? In the popular imagination, they are gatekeepers that control access to products and drive up their price, so “Cut out the middleman!” is a familiar refrain. Curiously enough, it is sounded even by middlemen themselves, as you can see in the sign in the figure, which was displayed at a Trader Joe's store.¹

Figure 4.1 Long live the middleman?

Upstream suppliers have long had the option of selling direct to their end customers. Historically, some of the better known direct-marketing organizations were encyclopedia publishers, the Fuller Brush Company, and cosmetics companies such as Avon. Today, most suppliers are using the web to build relationships directly with consumers, and often to transact with them. But they can't do it all themselves. The name of the person who first said, “You can do away with the middleman, but you can't do away with the middleman's functions,” has been lost to history. It is a shame, because that phrase has been repeated ...