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To: The Phoenix who wrote (66652)	9/22/1998 1:15:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Gary, I've thought long and hard about this problem because I initially didn't appreciate the subtleties involved. So the parameters I laid out are these: 1. A direct model is aimed at corporate customers; 2. A direct model is aimed at savvy retail customers who are at least second time computer buyers; 3. JIT manufacturing does not work without the establishment of a direct model. Therefore, I eliminated the retail market as a consideration. The problem that the indirect model created is that the connection between the company and the customer is the channel. The channel is acting as the salesman. That is where a great deal of trust is built. So when a company tries to eliminate the channel the channel can respond by either building its own box (didn't Ingram take this route?) or switching its representation to another manufacturer. In either case the original manufacturer would take quite a hit for at least the short term. You made one suggestion which is quite workable, and in fact is being implemented: emulate the model in emerging markets. Compaq is doing just that. But that will continue to leave the major established markets in the hand of the resellers. Gary, I firmly believe that the more detail you bring to bear in thinking about the transition (and detail is the key!), the more you will be convinced that a conversion to direct marketing does indeed have formidable barriers. TTFN, CTC

To: The Phoenix who wrote (66652)	9/22/1998 7:00:00 PM
From: mrknowitall	Read Replies (1) \| Respond to of 176387

Gary, this is highly reminiscent of the issues manufacturer's reps and smaller manufacturers face and reface (if that's a word) every day. One real problem arises, IMO, in the manufacturer's reputation over the longer haul. Channels have memories. If a strategic shift away from channels is detected, it creates tension. As any real shift begins, the Channel is almost immediately focused on replacing the revenue stream and keeping their customer base. That is perfectly normal. What a vendor sometimes neglects to recognize is what may happen a year or so down the road when some market paradigm shifts again and the vendor is now faced with trying to get back in the good graces of the channel - usually with a new product aimed at a market that the channel is particularly suited to deal with. Having the channel relationship keeps the doors open for the appropriate distribution of new products into new markets. There are some manufacturers out there that are all but blacklisted because of their uneven performances with channel partners, and they make strategic "let's not do it" errors because they can't accurately assess their potential to move a product. Mr. K.