Question

Swagelok uses a network of exclusive distributors to sell their products. What are some of the disadvantages of Swagelok using distributors as channel partners compared to using its own direct sales force? Be specific and give 2-3 disadvantages.

Answer 1

Swagelok is a private MNC which is headquartered in Solon, Ohio, United States. Arthur F. Anton is the CEO of this company and it deals in manufacture and sale of gas and fluid systems components, such as tubes and fittings, valve components, tubing materials, hoses and gauges, etc.

The disadvantages of Swagelok using distributors as channel partners compared to using its own direct sales force are:

• Revenue Loss

Having a middleman in between always proves to be costly for the companies. Swagelok will have to sell its products to the distributers at a lower cost so that they can earn profit on it. The physical delivery of the products to the distributers also will also add up the in the total product costs to Swagelok which will result in less profits. By implementing its own sales force Swagelok can sell the products directly to the customers at the final price and therefore earn more profit.

• Lack of control

As distributers which are being appointed by Swagelok may not show the same ownership as its employees would show and the distributers may not care for providing superior customer experience to the buyers. The retailers will be more concerned with their profits than helping Swagelok manage its brand and deliver its message to its customers. A direct sales force would have been answerable to the management of Swagelok and thus they would have shown more ownership of the brand Swagelok thus providing more control to the company.

• The revenues cannot be predicted correctly

As distributers generally will not share the entire sales pipeline with Swagelok, the company may be unable to predict its revenues correctly.

• The quality of products may be diminished

As Swagelok sells its products through distributers which means the company loses control over how the products are physically handled once it is being delivered to the distributers. Having a distributer means having an extra set of hands on your product which could hamper the quality of products which is being sold to final customers. This could have been controlled by the company by employing the direct sales force.