Is this the end of middle-men and middle-women?

I've been investigating, exploring, and discovering the possibilities of international trade lately.... Like the story from Joe Cossman I posted earlier.... The potential rewards look very exciting....

In my investigations of this, I was recently talking to someone who used to be involved in international trade in the 1960s, working for Connell Brothers, a US-based company with branches around the world. (And I'll be talking to an importer quite soon too, to get the ins and outs of the game....)

Essentially, the Connell Brothers company acts as import and export agents (that is, they don't carry any stock apart from samples), though sometimes they also act as importers and exporters (where they do carry stock).

Anyway, remember this guy was doing this back in the 1960s. He mentioned the possibility that the internet may be doing away with the middle-man or middle-woman, at least in international trade, since the internet has made it easier for the manufacturer to deal directly with the importer or retailer....

Do you think the internet will make "middle-men" and "middle-women" disappear from our system?

Is this another occupation that will disappear due to technology?

Will they become obsolete?

I'd appreciate your thoughts....

Dien Rice

Hi Dien,

Earlier this year, I used to work for an IT distributor for 5 years, here in Australia, so I'm aware of the difficulties facing the "middle-man".

The company specialized in hardware and software for the niche markets of digital video editing and multimedia applications. It had sole distribution rights for several large US, European and Asian manufacturers for Australia and New Zealand., It sold it’s products as a “middle-man” to around 600 retailers in these countries.

They would import and warehouse the products, and distribute them to chain stores, value added retailers and specialist computer dealers.

A trend we noticed that is gaining momentum is that the end users themselves can effectively by-pass the local retailers and often buy the same products cheaper on the Internet through overseas retailers.
Even after taking import duty, insurance and freight into the equation, the consumer could still end up with a better deal than buying locally, by not having to pay the distributor or middleman’s margin.

As more and more people start to do this, the retailers themselves end up ordering less stock from the local distributors. The irony of the situation is the consumer could get the product to his door quicker from the USA by ordering direct using 3-day FEDEX delivery, than ordering from his local computer store!

If the retailer did not have it in stock, he would have to place an order with the local distributor. By the time the distributor did the paperwork, sent the goods interstate to the dealer, and the dealer in turn forwarding it on to his client, it could take longer than the 3 day international delivery!

If the distributor themselves did not have the stock on hand, the whole process could blow out to several weeks, waiting for the container to arrive, clear customs, etc.

The manufacturers themselves, have wised up to this, and are beginning to realize the potential of dealing directly with retailers internationally.
Not only can they make more money by taking the distributor’s profit share and mark up, but they can also in many cases cut their overheads in having less local overseas branches and representation, etc.

Will middle-men become obsolete?
Well actually, the distributor is a hard link in the chain to replace completely, because there are other functions that require this ‘go-between”. For example local technical and after sales support, warranty claims, retailer training, co-ordination of local advertising, trade shows, promotions, credit accounts with retailers, etc.

Many of the bigger computer dealers and chain stores, also feel they can do a better deal if they get their buyers to deal direct with the international manufacturers or suppliers. In New Zealand for example, the government passed a law that allowed anyone to import goods and resell them, even though their may be a local distributor with sole distribution rights in place.
This is legalizing what is termed “Grey” marketing in the distribution business.

The government have allowed this “parallel importing” of goods to take place, as they feel, that the consumer is the one who benefits from the increased competition. There has also been some talk of Australia going down the same road in the near future.

What this means is that a small business or even an individual could import say Panasonic or Sony products into Australia and legally sell them to retailers and end users at a lower price, with their lower overheads. As long as you support the warranties on what you sell, etc. Sony or Panasonic in Australia could not legally stop you.

In the future, with products, which don’t require much technical support, warranty or maintenance, we could well see a downsizing in the number of local distributors because of the greater acceptance of buying online

Warmest Regards

Ricky Higgs




Sell Your Brain On The Net

Thanks Ricky, for sharing your experiences.... You seem to know a lot about this topic.... :)

It sounds like there are probably still opportunities, but that it would pay to be prudent, and that the opportunities which are there may also be changing....

As you said....

> In the future, with products, which don’t
> require much technical support, warranty or
> maintenance, we could well see a downsizing
> in the number of local distributors because
> of the greater acceptance of buying online

This makes it sound like it's important to choose the products you deal in carefully....

Thanks a lot Ricky. :) I think import/export sounds like quite an exciting area in general....

By the way, here's a true story that just came to my mind....

In 1995-1996, in Melbourne, Australia (in the suburb of Elwood), I used to share an apartment with a guy, Sean, who tried exporting once, though he did it in quite an usual way.... Here's the story....

Sean had a very good friend who was from Malawi (a country in southern Africa). Apparently, there was a need for more shoes in Malawi... Together, the two of them started a business exporting second-hand shoes to Malawi.... Sean's friend's brother-in-law was their agent in Malawi.

Anyway, what they did was they went around to the various opportunity shops in Melbourne -- charity stores that sell donated second-hand items, and use the money for charity. They went to these shops and bought second-hand shoes by the kilogram.... They got them very cheaply.

They stuck their cargo of shoes on a container ship and shipped it off to Malawi, for their agent there to sell....

Unfortunately, they heard back from their Malawi agent (the brother-in-law) that the shoes weren't selling.... After a few months of hearing this, they decided to check it out for themselves, because they felt that the demand was there.... So they hopped on a plane and flew to Malawi.

Upon getting there, they discovered that the shoes *were* selling -- just the guy hadn't been telling them the truth. He was living it up on the money, and by the time they got there the profits were mostly gone....

As far as I know, they never tried this again. I guess it shows the usefulness of doing your homework, and dealing with reputable people.... And also the usefulness of using some of the "safety" tools of international trade, like letters of credit (which my apartment-mate wasn't using)....

I thought it was an interesting story, though, when I heard it....

Thanks Ricky for sharing your experiences... :)

Dien Rice

Hi Dien!

While the internet may seem to put an end to being a middleman, it only seems that way.

In reality, it makes it much easier for anyone to get into the business. And that is perhaps the biggest problem.

In the old days (pre net) to be a middle man (importer/exporter or import/export agent or local wholesaler, or JV deal-maker - yes sourcing products from a supplier to offer to a retailer's customer list still sees you as a middle man) you had to be more phyically involved - more hands on.

Either you had to scour over interstate Yellow Pages' looking for suppliers whose goods you could represent at the local level, or you had to scour international Yellow Pages' for the suppliers, or go visit the international suppliers face-to-face.

This kept a lot of people out of the game.

The net has solved all those problems.

Now ANYONE can find an overseas or interstate supplier/manufacturer. They either search the online Yellow Pages' for each country, go to a search engine and search, or visit the international trade websites, such as Thomas Register (US and European versions).

They can then get samples sent to them, for free, or by paying either product or postage costs. And can then hire commission-only salemen to sell the product to the retailers, or do it themselves. Or find out what the retailers want and then find the supplier to match.

The retailers, generally speaking, do not have the time to source the products themselves. They're too busy with their shop and all the government paperwork they now have to do.

And if they do have the time, it'd be in your best interest to get the overseas or local supplier/manufacturer to make a commitment to you. That is, get them to agree that YOU are the sole supplier (wholesaler/rep/whatever) in your area/state/country. Then it doesn't matter who else finds them from your own area/state/country. They are forced to go through you.

I mentioned that the biggest problem is that everyone can now get in on the act.

Yep, it's sad, but the ease which allows you to start up a legitimate business is also the ease which allows illegitimate businesses and fly-by-night guys to start up - just look at all the instant internet marketing gurus to see what I'm talking about.

And that means the suppliers, wherever they are, could end up being swamped with offers from all over the place. Some real, mostly garbage offers put forward by people looking for instant wealth. Then the supplier will become very reluctant to consider any offers that cross their desk.

The saving grace in all this is the time it takes to get something done. It's not an instant thing. There's price negotiations to consider, shipping negotiations, volume negotiations, payment terms, customs, etc., etc., etc. And that's just for the "getting the product from the supplier" side. There's also the "getting the product into the retailers hands" side. And there can be a multitude of variable factors there as well. All in all, the process "could" take months. It could also happen very fast. No two negotiations are the same. And it can be a lot of hard work (hard work, of course, being a relative term) if you're serious about it.

Dennis Hessler of spyglass point http://www.spyglasspoint.com writes some good stuff about this - fly-by-nighters, or as he calls them, fax jokeys - and how it relates to import/export.

The fax jokeys NEVER last long. There's too much involved.

And yet, if you're willing to become as valuable a resource to your suppliers and retailers as possible, then the rewards can be very good.

In my post below - http://www.sowpub.com/cgi-bin/forum/webbbs_config.pl?read=1952 - which is a true story, you can see how relatively easy it can be. A few phone calls here a few phone calls there and BANG, you're a middle man.

But the dark side is represented by another story. I won't go into the details, but one of my overseas suppliers has taken about a month and a half to get some vital information to me. Why so long? Because he has been waiting that long for the information to filter through the supply chain - he gets it from the factory who gets it from their supplier who gets it from their supplier and so on. A long arduous process that'll see fax jokeys fall by the wayside, in this case. Not so in the case which I related in the post I linked above.

Seeing as it "could" take up to a month or more to get a deal in place, that very fact will see retailers shirk away from it. Remember, they're too busy running their business to do all that. Far easier to go to you, who's willing and has done it all, to get an instant solution.

And if you, as the middleman, decide to get something manufactured, then that's a whole different ball game all together. Then you've got to locate the manufactures, get prices, haggle over the prices, shipping terms, etc., etc., etc. Things a retailer doesn't have the time to bother with.

But again, if you're willing to do it, the risk is VERY SMALL and the rewards can be ASTRONOMICAL.

For instance, imagine getting a standing order for 4000 units per month and making only $1.50 per unit. Sounds like a small profit I know. But times 4000 it means $6,000 a month in your pocket. And as it's a standing order, the amount of work you do after the deal is in place is minimal.

After all is said and done, it's my opinion that,

dollar for dollar, there's nothing that beats being a middleman.

You make money just by having products pass through your business. And now with the help of the internet, getting into it is so much easier than before.

Of course, the big boy retailers, like k-mart, would like to by-pass you. BUT, with your valuable exclusive agreement in place, even they can't do it.

Michael Ross.


Practice being the middleman without risking your own money

Thanks Michael....

Great posts! (This one and your earlier one....)

What excites me about these prospects is that I know that many quite successful people have done this....

I first came to know about the possibility from reading some of Joe Cossman's stuff. (He has a company web page, by the way, at www.cossman.com .)

He's done quite a lot of this sort of thing.... While Cossman has produced his own products, most of the products he made money from are products he found elsewhere or which were manufactured by someone else, which he became the *exclusive* distributor for....

Another guy, mentioned earlier on the forum, is Harvey Brody.... Gordon spoke with him on the phone. He was a student of Joe Cossman (among others), and to my understanding his big money also comes from being a middle-man (all within the USA -- not importing or exporting) -- armed with various exclusive distribution agreements....

It seems like there's great potential in distribution and in import/export...!

Also, thanks for the link to Dennis Hessler's site.... I read his free report, which was excellent....

I know you're clearly doing this yourself, Michael, so your comments are very valuable.... Thanks! :)

Dien Rice

P.S. Check out Michael's web site regarding Market Forces.... I plan to write something about this excellent game very soon.... :)

I believe the middle-man will become an automated computer system, where buyers and sellers are matched via computer technology.

FOr example, there is already talk about software that will hunt down the best price for a product on the net.

Warmest Regards,

Jon Lawrance

> I believe the middle-man will become an
> automated computer system, where buyers and
> sellers are matched via computer technology.

> FOr example, there is already talk about
> software that will hunt down the best price
> for a product on the net.

Hi Jon, I agree with you that this could certainly be a big factor, perhaps especially for commodities, such as raw materials, and particularly through B2B sites....

But there are other factors apart from price which might not be so easily replaceable, as others mentioned.... Like quality of the product, and support services....

Though perhaps industry structures could change, at least in some industries....

This could actually lead to some more opportunities. I haven't really thought through what these could be yet, but changing industry structures usually leads to great opportunities, for those able to spot them and take advantage of them....

I'm not sure, though it's interesting food for thought.... I'm planning to talk to an importer soon and get some more insights on this too from someone who's currently in the business (or at least was until recently, he may have recently retired)....

Thanks for your views Jon!

Dien Rice