If there were no distributors ....
A few posts back someone questioned the role of the importer/distributor. So this morning, we at Harbeth UK did some blue-sky thinking analysing a world without distributors. It may sound appealing to the consumer, but I can assure you that the overall consequence is unlikely to appeal.
Assuming that, overnight, all distributors and overseas retailers evaporated, and assuming that the end-user demand remained the same but now ordering direct, this is how we would have to cope with the new situation:
- We would have to recruit at least two full time, professional sales staff to 'nurse' (I quote) each and every user through the selection process, by email/phone guiding them on what we believe to be the best model/veneer for them without ever meeting them, seeing their room or knowing about their audio purchasing history, tastes etc.. We currently employ no sales staff.
- We would have to recruit at least two, full time logistics persons to arrange the packing, paperwork and despatch of each pair, pair by pair, and call-in various freight companies during the day to collect. This is a part-time function at present.
- We would need to recruit additional staff in the accounting department (currently one person) to handle payments in
- We would need to know about duty rates, commodity codes and the rules and regulations for individual regions as a mistake on any of these details could result in goods being impounded
- We'd need to employ a person to handle the inevitable transit damage, insurance claims and the like
- We'd need a completely new invoicing system of greatly expanded capacity as we moved from forty distributors to thousands of direct sales records
- We'd need a new telephone/email system to minimise on-hold time
- We would be unable to plan production more than a day or two in advance
- We would have to greatly increase our inventory to be able to satisfy any and every ad hoc order we received, regardless of model, veneer or quantity
- We would dissipate our cash over a mountain of inventory
- Our storage space would have to increase - as would insurance costs; we'd need a bigger factory
- We'd need more, flexible production staff who could turn their hand to any model at zero notice
- Maintaining QC would be extremely challenging as we moved from a batch production method to a series of one-offs
- The record keeping system would have to be completely overhauled to handle the volume of data, with ISO9000 implications
- We would have to negotiate carefully with our bank as to how they would handle the increased volume of activity and prove that our cash flow (v. inventory investment) was solid
That's just what we thought of in the first five minutes. It's the tip of the iceberg. None of this would come free. Efficiency would plummet. Waiting times would inevitably increase. Just to cover the extra staff costs we'd need to double our turnover (impossible). So clearly there is a vital buffer role performed by the importer/wholesaler/retailer, in addition to which he manages local reviews, after-care, exhibitions and so on. It looks easy - it may look like a gold mine but it isn't.
Alan A. Shaw
Harbeth Audio UK