Internet drives new business model for distributors

With the Internet providing manufacturers with direct links to customers, wholesale distributors must reinvent themselves to remain in business, Gartner Group analysts say.

With the Internet providing manufacturers with direct links to customers, wholesale distributors must reinvent themselves to remain in business, Gartner Group analysts say.

"Most wholesale distributors are going to have to radically reinvent their business to survive," Art Mesher, research director at Stamford, Connecticut-based Gartner Group, says.

Distributors must do three things in order to stay in the game, according to Mesher:

* Enhance the flow of physical goods. Many companies will want to outsource some of their manufacturing-related activities, and distributors can step in here to gain new customers. For example, distributors can offer assembly, consolidation and in-transit inventory merging, such as putting together a keyboard, monitor and central processing unit to fulfill a specific customer order.

* Enhance the flow of information. Savvy distributors will manage the control and flow of information between customers and manufacturers by offering value-added services such as inventory availability, delivery and warranty terms.

* Enhance the rate of consumption. Viewing the sale of an item as the start of a relationship, smart distributors will focus on continued contact with that customer through post-sales services, such as introductory training programmes.

In fact, post-sales services are key to distributor survival, according to Mesher. By 2002, 60% of wholesale distributors will earn the majority of their profit from post-sale services such as delivery, installation, warranty and training, he says.

"This is a radical shift from today's wholesale model who typically buys low and sells high," Mesher says.

Gartner Group can be reached on the World Wide Web at http://www.gartner.com/.

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