The Disadvantages of Intermediaries for B2B
Intermediaries take on many guises in business. A business broker is the intermediary between the buyer and seller of a business. A sales representative is the intermediary between the company and the customer. A distributor is the intermediary between the manufacturer and retailer. While using an intermediary does have its positive points, it also brings disadvantages.
If you are not working with the customer or buyer directly, you may not know why the customers buy -- or, if they don't, why they didn't. The intermediary may blame your price point when the real reason is the failure of the intermediary to explain your product's benefits effectively. Lowering your price may result in a greater number of sales, but not necessarily more revenue or profit. Having no direct contact with customers also may limit new product development or the ability to add enhancements to your current products or services.
Intermediaries usually represent more than one supplier, manufacturer or company. Your product competes with the others the intermediary represents, even if the intermediary doesn't represent a direct competitor. For example, if your company is a book publisher, the distributor most likely represents other publishers. When the bookstore seems disinterested in your titles, the distributor likely offers titles from other publishers rather than pushing yours. The intermediary also may lose interest in your products if they don't sell well immediately, since she won't want to waste time on products difficult to sell if she has other options.
You control every step in a direct distribution system, from the initial sales call to the product delivery. Using an intermediary means you lose that control. While the intermediary is motivated to make a sale, he is not necessarily motivated to sell your products in particular. Some intermediaries require that you use their company exclusively, meaning you can't choose who you sell to or don't sell to. Another disadvantage is if the intermediary doesn't renew their contract with you, you've lost your sales channel and have to start from scratch. You may not even know which stores carry your products if the intermediary is a wholesaler.
The intermediary buys the merchandise from you and resells it at a higher price to the customer. You receive less revenue than if you had sold the product directly to the customer. Another alternative is paying the intermediary a commission, which results in higher selling expenses. If you sell your company through a business broker, you'll owe the broker 10 percent of the sales price, which is 10 percent less for your own bottom line.