Death Of Salesmen

Chuck Holstrom faced an easy choice in this decision: conduct business over the Internet or lose customers. In February Boeing Co. executives warned the national account manager for international distributor Graybar Electric Inc., St. Louis, that suppliers without a Web presence probably would be eliminated shortly. Then in March he heard much the same message from Motorola Inc. "The head of Motorola's electronic-commerce department gave us a two-hour presentation and said anyone not making the change to Web-based commerce within the next year would probably be locked out of their business for good," Holstrom recalls. Graybar, which put up its Web site in 1995 and introduced an extranet late last year, is ready just in time for the changes demanded by customers, but Holstrom remains awed by the speed and grip of Internet fever. "The implications of what's taking place are just immense," he asserts. Internet-based commerce is threatening the traditional business patterns of distributors, dealers, and field sales staffs. Pioneering customers are forcing suppliers to restructure sales processes and requiring salespeople to develop expertise in specific industries and hone new skills. The technology has lowered barriers to market entry so that almost anyone with a good idea can open a Web site to sell goods as Jeff Bezos did four years ago when he launched Amazon.com Inc. Traditional book sellers have been hit hard. Three years ago Encyclopaedia Britannica Inc. eliminated its 550-member North American sales force in favor of direct mail, television advertising, and its Web site. Last November a major U.S. book distributor, Ingram Book Group, was acquired by Barnes & Noble Inc., in no small part because of the online competition that had begun to shut Ingram out of markets. Auto dealers also have been impacted. At Queensboro Toyota in New York, the company's own Web site, as well as general listings with online distributors such as AutoBytel, has helped generate leads outside the dealership's traditional field of coverage. But the Internet also has hurt business. Approximately 10% of Queensboro's car buyers come in "having kicked tires on the Internet. They've looked at what a car costs, and then they try to tell us what a fair price is without accepting the laws of supply and demand. It's un-American," complains Al Louzoun, the dealership's general manager. Similarly, the financial-services industry is struggling to find its role in a world where e-commerce is encroaching into territory traditionally held by salespeople. When customers used to call brokerage firm Charles Schwab & Co. they would speak to a stockbroker who would buy or sell stocks on their behalf and earn a commission for doing so. Today customers can log onto www.schwab.com and complete the same transaction, but without human help, at a cheaper price. Business is booming. To compete with Schwab and other online competitors, Merrill Lynch & Co. Inc. began offering online trading to a select group of customers in March. Like Graybar, the firm had little choice. "They had a quandary," points out a stockbroker at a rival firm. "They have this huge sales force and don't want the tail wagging the donkey, but on the other hand, they were concerned about losing business, because without an online option some of their clients would have gone elsewhere." The giant brokerage had been trying to shift its 15,000 brokers from transaction-based business into fee-based money management for several years. The Internet is speeding up that move as it drives down the price of commissions. Merrill's army of brokers ultimately will be forced to pick up the new skills and behaviors associated with money management -- or exit the business. Additional industries in the throes of e-commerce-driven change include travel, computer hardware, steel, and other businesses selling products to well-informed buyers who know exactly what they want. U.S. companies are the first to grapple with the Internet's jolt to direct sales and traditional distribution, but others are catching up. "In Europe, customer-relationship management is one to two years behind the U.S., and Asia's a little behind Europe," points out David L. Taylor, group vice president of Business Applications at GartnerGroup Inc., a research firm in Stamford, Conn. Laws, long-term relationships, the occasional reluctant customer, and even a backlash against e-commerce may stave off the technology's effect on traditional sales channels, but no industry is immune forever. Legal challenges -- such as the now dismissed lawsuit by wine distributors in Massachusetts to stop Virtual Vineyards from shipping bottles to local residents -- may shelter some industries temporarily. Traditional distributors may be able to prevent manufacturers from selling to tiny online upstarts -- for a time. Some well-hyped e-commerce ventures will disappear during the next few years, doomed by unsuccessful business models, established companies with deeper pockets, or investors tired of sales without profits. "The Internet is a bubble, and it will burst, but at the same time it is changing a lot of things," says Taylor. For many people, the Web buying experience started out with a good book. Then consumers who began testing the waters of digital commerce at Amazon.com turned to the Internet for bridal gowns, airplane tickets, automobiles, even houses. Appreciating the Internet's 24-hour-a-day, seven-day-a-week access, and the opportunity it presented for price shopping, consumers brought their buying experiences to work. The result? Business-to-business e-commerce is taking off. As the digital waves sweep through the workplace, salespeople are feeling their force. Distributors are restructuring their businesses from the core, finds Greg Girard, research director for supply-chain management at AMR Research Inc., Boston, who authored a report on the subject last November. Companies that once bought product, stored it, and sold it when an order came in are adopting the Amazon.com model of "sell-source-ship." In this case, a distributor buys as little product as possible, and instead borrows it on consignment or tracks it down after receiving an order. "It's a sea change affecting practices with their vendors and customers," explains Girard. "Five years from now sell-source-ship will be the dominant model," he predicts. Graybar salesman Holstrom still spends a majority of his time in face-to-face meetings, but his message has changed. Instead of just covering prices and benefits of a particular product, every request for proposal that crosses his desk demands information on Graybar's Internet strategy and how customers can order online. "I had some concerns about e-commerce, that we would be inundated with 25 million $25 orders, but that hasn't happened. Instead, my biggest customers are asking about broad capabilities, such as electronic data interchange," he says. Similarly, at leading cherry-picker manufacturer JLG Industries Inc., McConnellsburg, Pa., salespeople now highlight everything the company has to offer -- including its online access to inventory and 24-hour turnaround on warranty information -- rather than just pitching product lines, explains Wade Jones, manager of parts marketing. For companies that refuse to acknowledge the power of the Internet, the technology and the upstarts it spawns will nibble away at market share. Neil Rackham, who coauthored Rethinking the Sales Force: Redefining Selling to Create and Capture Customer Value (1999, McGraw-Hill) offers an especially grim vision: "I have little doubt that the direct effect of e-commerce is to make more than half of sales jobs go away." Victims will include middlemen and middlewomen who once thrived on information about supply and demand, selling to customers who knew less. Through search engines and Web sites, the Internet allows buyers to come up with the same information at a much lower cost. Rackham sees "cybermediaries" -- third parties who help buyers and sellers come together -- replacing face-to-face pitchmen. Already cybermediaries populate certain online communities. In 1995 Internet computer and electronics company NECX Inc., Peabody, Mass., debuted its Office & Personal Technology Center Web site, billed as the hub of high-tech commerce. Today NECX offers buyers 60,000 products -- everything from personal digital assistants to motherboards. It has no factories, no inventory, no company delivery trucks, and no field sales force. "In our world, the role of the salesperson is to assist and educate and help people be more effective online. In many ways, we look at ourselves as buyers' agents. Our goal is to help them find right product," relates Brian Marley, general manager for online channels. The group most closely resembling a sales force at NECX is the company's "market makers," who perform a service function, looking at response time to e-mail inquiries, and how to fix "events" or mistakes occurring during a transaction. They also look for ways to attract new buyers such as plugging the NECX name in user groups online. NECX' results show that buyers will spend a good deal more money online than just the cost of a best-selling paperback. Its products cost hundreds, even thousands of dollars. The company counts orders as high as $25,000 and a growing number of satisfied buyers. Repeat customers account for 75% of revenues in its Office & Personal Technology Center division. Overall corporate revenues in 1998 reached $430 million. Ironically, although they advocate the virtual sales call over the face-to-face meeting, many executives running upstart cyber distributors have roots in traditional sales. Marley, for example, pitched Amway products door to door as a teenager. Later, he cold-called for Nynex, persuading companies to advertise in the Yellow Pages. After 16 years at Dow Chemical Corp., Alf Sherk launched E-Chemicals in 1998, in part to take advantage of inefficiencies he saw as one of Dow's traditional account managers handling 30 to 50 customers. "You'd have a few strategic accounts that gave you a lot of business, but the ability of a fair number of smaller accounts to contribute to your growth relative to resources spent on them was marginal," he explains. "You wanted their business, but the cost of interacting, the demands placed on you, were too much." At E-Chemicals, Ann Arbor, Mich., Sherk established a business model to supply the demands of those smaller accounts, but without devoting to them the kind of sales resources he did while at Dow. E-Chemicals lists standard chemicals and offers financing and competitive prices -- yielding savings of as much as 30% -- available because he does not employ a sales force. He compares his approach to the auto industry. "Twenty-five years ago, a buyer would specify an option, which would be relayed back to the factory and put into the car. The industry realized that individual negotiation on options was ridiculous so they put all options on all cars and satisfied 75% of customers and eliminated all that administrative work." Finding suppliers is not always easy for online newcomers such as E-Chemicals. Although Sherk buys from a number of blue-chip corporations such as Du Pont & Co., in other cases he has been turned down by manufacturers concerned about alienating traditional distributors. "The fear of channel conflict is a real issue, but most chemical manufacturers have competitors that make duplicate product lines so we can usually turn elsewhere," he says. Over time, Sherk expects the voice of the customer demanding the option of buying online will force businesses to sell to Internet marketers despite objections raised by traditional distributors. Channel conflict occurs not just between manufacturer and distributor. Corporate salespeople are affected when companies introduce Web-based commerce. In some cases, where a manufacturer's product is a standard commodity that can be listed in a catalog on the Web, Internet commerce proves a better way to distribute it than through an expensive field sales force. Salespeople, however, remain masters of the complex highly engineered sale, where problems come up and new ideas and fresh insight help to solve them. Peter Burr sniffs out his prospects. He knows when he drives into a town that's home to a rubber manufacturer by the pungently sweet wafts of acetophenone, a compound used to cure rubber. A rotting-egg-like whiff points to a paper-pulp mill. "In the chemical industry, smell and sight become major tools," describes the worldwide marketing manager of rubber chemicals for Middlebury, Conn.-based Uniroyal Chemical Corp., a $1.2 billion subsidiary of Crompton & Knowles Corp. Burr sees selling as an art. Calling on a customer means first looking for pallets by dumpsters and scraping off residue for a hint of what new products the company is making. It involves memorizing framed certificates in the office's entryway given out by trade groups for product quality or community awards for philanthropy. A good salesperson knows who won the bowling-league trophy that month and the golfer with the lowest handicap. He remembers the receptionist's first name and has time for a chat with anyone he bumps into in the hall. When customers visit him from out of town, he invites them to his house for dinner. That kind of interaction builds a relationship, which Burr relies on to break down barriers and persuade customers to reveal problems and strategies. Such ties are especially important now that the chemical industry is locked in a price war, thanks to a glut of material. "Low cost doesn't solve problems, people do. They develop new products or environmentally friendly forms of chemicals or solve shipping problems," he believes. His company's Web site offers detailed specification sheets and lists its sales offices around the world, complementing the face-to-face meeting, which Burr calls the backbone of his division's sales strategy. "Person to person, we can come up with solutions that benefit both the buyer and the seller. Computers [and the Internet] are great tools to give us more time to use our senses, but, hopefully, will never replace them," he says. In fact, dismal consequences can emerge when a manufacturer's Internet strategy impinges on a salesperson's territory or relationships with customers. Similarly, trouble can occur when a corporation throws up a Web site like it would a billboard and then fails to respond to inquiries. "Companies have to tie their e-commerce channel into the rest of the business processes, and a high percentage haven't," says Frank Burkitt, a director in the Costa Mesa, Calif., office of technology consultant Pittiglio Rabin Todd & McGrath. Cisco Systems Inc., San Jose, offers a model for integrating the Internet with other distribution channels. In 1994 the $8.5 billion data-networking giant started experimenting with the Web to serve customers when it introduced its online technical service, which included Web-based answers to frequently asked questions. Today 79% of all technical support is handled over the Internet. In 1995 Cisco launched a system that permits customers to check the status of their shipments online. In the past, customers would call salespeople to check delivery. Salespeople would be forced to stay in the office trying to reach order administrators and then reporting product status back to customers. Delays returning calls or collecting information frustrated customers. Now all of that tracking is done by customers over the Internet on their own time. Salespeople spend fewer hours in the office. Then, in 1996, Cisco began selling its products online. The idea was to free highly paid field sellers from as many transaction-oriented tasks as possible so they could act more as consultants and less like order takers. Picking out the right router or switch for a network can be complicated, and salespeople used to sift through orders listing detailed configurations, checking them for accuracy. Today that's all handled by a software program that allows buyers to select customized goods. If a Cisco product's specification doesn't match the customer's system, the software lets the buyer know. "A salesperson is needed when the purchase is significant, complicated, and the decision is uncertain," says David Cichelli, senior vice president of sales consultancy at the Alexander Group, Scottsdale, Ariz. "At Cisco, that uncertainty occurs with the first sale or the new application. After that most purchasing is done over the Internet."