Throughout the 80’s and early 90’s my family business suffered from what is called disintermediation, the elimination of middle men precipitated mainly by increased global trade and advanced information technology systems. As a distributor who bought from manufacturers and sold to retailers we were a much sought after link in the distribution chain in the 60’s, 70’s, and early 80’s. Manufacturers from Canada and around the world knocked on our doors hoping to convince us to stock and sell their product to the more than one thousand retailers our salesmen visited regularly.
The benefits to the manufacturers were considerable: only one client to deal with instead of hundreds, more leverage over the client, fewer and larger orders, and a client committed to their product’s success. However the retailers didn’t see it that way. They united to form buying groups, combining their purchases to increase their buying power. These buying groups viewed the distributor as a middle man who prevented them from having access directly to the manufacturer.
Then a dramatic shift occurred. Sometime in the early 1980’s the power shifted from the manufacturer to the consumer and thus to the retailer. Prior to this shift the manufacturer had determined and even dictated what the distribution channel would be, and they preferred selling through independent distributors where they enjoyed their greatest leverage and thus their greatest profits. After this shift it was the retailer who dictated what the distribution channel would be, and they wanted direct access to the manufacturer.
There were several causes for this power shift, among them the increased demand for consumer products, expanding global trade, and affordable information technology specifically in the area of inventory control. The result was the rapid expansion of the ‘big box’ retailers such as Home Depot, Costco, Toy R Us, Wal-Mart, Bureau en Gros, etc.
The result was exactly what our free market economy is designed to deliver, cheaper products and greater choice for customers. Today it is possible to purchase many products at lower prices than 20 years ago in constant dollars. The result however was the elimination of the wholesale distributor and the rise of the ‘warehouse’ retailer.
Read how it felt, emotionally, to close a family business after 75 years here.