4 Reasons why dealers rule in the age of the Internet

Dealers have always been an integral part of the supply chain in any trade. They make it possible for manufacturers to reach every nook and cranny of the country to tap a maximum number of customers and play a vital part in the communication and business networking process between manufacturers and buyers. On the other hand, one cannot deny that the Internet has its positive attributes as well and may give serious competition to dealers in the future, owing to its burgeon­ing popularity. At the moment, however, dealers are still ruling the roost, where the supply chain is concerned. The Internet provides accessibility to every part of the country and is certainly more economical, leading to increased margins for manufacturers. “The Internet is a hassle-free tool, with which, one can interact with clients directly. It makes the entire process very smooth and uncomplicated,” affirms L R Katrat, CEO, Katlax Enterprises.

Nevertheless, despite all odds and the many assets of the Internet, dealers still hold the maximum importance for manufacturers in the furtherance of their businesses. Here are four reasons why they are still the preferred op­tion for manufacturers.

By EB Bureau

Tuesday, June 16, 2009: The need to stock

Dealers have the capacity to store large quantities of products and hence, have an edge in the market. They minimise the lead time and increase buying options due to which, buyers prefer purchasing from them. Ravi Jhingani, vice-president, marketing, Kusum Enterprises, states “A dealer must have a capacious holding capacity to attract customers in this market, otherwise it is tough for them to survive.” Ample holding capacity provides another advantage—a product which is no longer being manufac­tured, may still be found if the dealer has a large stocking facility. Another major advantage of having a good holding capacity is that one can cope with fluctuating prices by buying in bulk when prices are low and providing products to consumers at the same price even after the cost of the product has increased, attracting more clients and, hence, revenue. The Internet, however, lags behind the dealer on this parameter because it can never offer the benefits that go along with having a physical warehouse.

Different strokes for different folks

The demand for merchandise varies from customer to customer. Some buy the product in bulks and others purchase it in small numbers. Catering directly to the bulk-buying clients is possible through direct communica­tion but catering to the small-scale buyers is not possible directly. Dealers, on the other hand, can take care of all kinds of orders. This spares enterprises the expense of tap­ping small customers. Naveen Goel, Insel Rectifiers India Pvt Ltd, shares, “We cannot afford to cater to the needs of every individual customer but dealers can manage to address every customer need adequately. Employing deal­ers helps in meeting the demands of various categories of buyers.”

Live demonstration

The dealer plays a key role by giving live demonstra­tions of the product to buyers. “Not all products can be purchased online as they have to be tested for their quality and performance before purchase and it is not possible for a manufacturer to provide demonstration of each and every product to buyers individually—only a dealer can take care of this issue,” explains Goel. Plenty of companies are buying imported products through dealers. These dealers help conserve the resources of foreign manufacturers, who do not have stores in the Indian market, yet the demand of their products is good in the market. They also spare the buyers inconvenience as they ensure the regular supply of products, owing to their holding capacities. “Even though foreign companies can market their product through the Internet, it wouldn’t work as wonderfully as it does with dealer distribution because customers prefer testing the product prior to purchase,” expatiates Jhingani.

Retail shops made redundant

There is no need to set up retail ventures if one has a dealer network, the biggest benefit of having dealers deployed in different cities. “It is not feasible to establish a retail outlet everywhere as it requires a lot of capital and manpower, which every manufacturer may not be able to afford,” says R K Asthana, marketing manager, Radius Industries. Dealers save the cost of opening retail shops, especially in regions with less demand, where a retail shop would not be able to cover the cost of investment.

It is evident, therefore, that dealers are and will remain an indispensable element of the supply chain in years to come. The Internet can never encroach upon their turf, notwithstanding its growing usage and popularity. “Deal­ers are a pivotal part of the supply chain. They are too deep-rooted in the business mechanism to ever become obsolete,” Asthana concludes.

Vantage Point

Advantages of having dealer network

• Remove need for retail shop. Dealers save the cost of setting up retail shops, especially in regions with less demand, where a retail shop would not be able to cover the cost of investment.

• Can stock both old and new products owing to large holding capacities, minimising lead time and increas­ing buying options.

• Can cater to the individual needs of buyers. Dealers can take care of all kinds of orders. This spares enterprises the expense of tapping small customers.

• Give live product demonstrations. It is virtually im­possible for manufacturers to provide demonstration of each product to buyers individually— a dealer can take care of this issue.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine