Going for Broker

30 Apr 2014
POSTED BY Y Magazine

In an age of enhanced international communications and online businesses, Tom Robertson asks if there’s still a need for the old-fashioned middleman 



By the age of 15, a young British boy, Londoner Dominic McVey, was a millionaire having started with virtually nothing. When he was just 13, he spotted a scooter on the Internet that he wanted to buy from a company in America.  Raising funds from organising school discos, he then bought five, which he sold to friends and family.

Soon after he bought another ten and then quickly won the distribution rights for the whole of Europe. “I saw these scooters and I thought, I should have one, in fact my friends should have them too,” says McVey. “Over the next two to three years, I sold eleven million of them. Things went crazy, they spread like wildfire.” 

By 15, he had become one of the world’s youngest self-made millionaires. And all by positioning himself between the European customers and the American manufacturers. It’s no wonder that playing the ‘middleman’ is seen as a prime role in the word of business.  But why exactly are they needed? 

As long as there has been trade, there have been middlemen. While goods may be produced locally they’ve been exported globally, as Oman’s history attests to. As far back as 5000BC, traders in Dhofar were buying and exporting frankincense in return for spices from India. 

The frankincense traders were, in fact, simply responding to the basic conditions of an international market that creates the demand for importers and exporters; products aren’t available locally, the goods are cheaper when sourced from other places, and some items have a higher value when sourced from specific locations, such as Russian caviar or Egyptian cotton.

But according to experts, the need for such in-betweeners is disappearing as enhanced digital communications between producer and purchaser closes the gap once occupied by the middleman.

When, for example, was the last time you used a travel agent to book a flight or holiday? Or how about the time you last walked into a record store? Online music distribution services such as iTunes and Spotify have essentially done away with the physical intermediary between us, the customer, and the record producers. 

However, the web has also opened up new possibilities for enterpreneurs to bring together those with a service to offer and the customers who want to purchase it.

Scroll through the pages of AirBnB.com, and you’ll see a host of people offering a room direct to travellers, without any recourse to a bricks-and-mortar booking service. Charging a small commission for each booking made, AirBnB has become that intermediary. 

Like so many online businesses, it’s the perfect business model for the founders, roommates Brian Chesky and Joe Gebbia from San Francisco – low start-up costs, immediate feedback from users and ample advertising opportunities that connects individuals with fledgling wannabe catering businesses.

So do we still need that old-fashioned distributor, who’s sat in an office identifying potential manufacturers on one side of the world and pitching their products to markets on the other side of the world?

“Since time immemorial, companies and end buyers alike have been looking to cut out the resellers, or middle people, to save money and sell more. This is to be expected,” says Ira Kalb, a professor of marketing at the Marshall School of Business at the University of Southern California.

 “What too many forget, however, is that if you cut out the middle people, you still have to provide their function. When you bypass them, you eliminate the benefits of their locations, marketing, and sales efforts.”

So what can middlemen do to avoid being cut out of the deal between customer and supplier in an increasingly interconnected business world?

“Own the customer,” says John Warrillow, author of Built to Sell: Creating a Business that Can Thrive Without You. “The most important thing distributors can do is to ensure the customer wants to buy from them, not the manufacturer. Your customers’ loyalty to you, not to the manufacturer, gives you leverage.”

Above all, says one local importer, make yourself the first choice, whether national or international. “The key to winning orders is to be competitive.” says Maggie Jeans, who own a Muscat-based company specialising in importing books.

 “Much of our work is competitive tendering where the end user gathers a minimum of three quotations and the order is awarded to the lowest bid. Most of our competition comes from outside the Sultanate but we are the preferred supplier for most of the major international publishers so can usually offer the lowest prices.” 

Looking to be the next millionaire middleman? Ask the following:

  1. What products are in demand in the target market?
  2. Can a demand for your chosen product be created?
  3. Who manufactures the goods that you want to import   or export?
  4. Can the products be sold at a price which would still   give you a profit?
  5. Are there any competing products which would   impact upon your sales and why would your offer   be better?

WHAT THE EXPERT SAYS:

Challenges and Opportunities

maggie-jeans

It’s true that the Internet can sometimes cut out the middleman but it can also be an opportunity. For example, we offer an Amazon shipping service where customers can place their own orders and ship via us, which is very popular and economical. The Internet can also be good for individuals purchasing single items but it is difficult for bulk purchasing because payment and transport may be complicated.” Maggie Jeans, Al Manahil Books

Business Buy

business-buy

You’re travelling the world looking for the next big consumer craze to import but your suit is crumpled and your trolley bag is more junk than jet-set. Instead, look the bee’s knees when you’re collected from the airport with this Longchamps Veau Foulonné garment holder for both men and women. Made from small-grain supple leather, it’s both classy and durable. RO285


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