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In shaking up wholesale and retail distribution systems, the Internet gravely
threatens many a small or medium-size business. But it will be the
salvation of some. Let me tell you how two companies with which
I am associated have made substantial gains through Net-based partnerships.
One company wholesales contact lenses--a competitive business if ever there was one. We sell lenses to ophthalmologists, optometrists and opticians. About 60% of contact lens sales are routed through these "O's." As a customer you get high-touch local service from the same optometrist who wrote your prescription. O's benefit, too, getting regular contact with their patients and a steady source of incremental income. But the process is cumbersome. There are 300,000 lenses in the market--different size, correction, curvature, color, manufacturer and so forth. It is impossible for the doctor to stock the lenses you need. So either the doctor or a clerk in his office calls the order to a wholesaler like us. We pick, pack and ship him the lenses. A day or two later his office calls you and tells you to pick up your lenses. A time-consuming process for you, a labor-intensive one for the middlemen, especially when it comes to billing. No surprise that direct sellers have been making inroads on the O's. They take your order by phone, mail the lenses to your house and let you pay by credit card. Our response: We offer to provide a custom Web site for each O in the U.S., all 50,000 of them. The sites are highly personalized to the doctor's practice, with his or her content, logo, photo and interactive messaging capability. We get no branding from any of this: The doc gets that. The patient gets a refill with a mouse click. But when you click on the site, the order doesn't go to the doc. It goes directly to our warehouse, where we pick, pack and mail to your home that same day. The doc keeps the retail markup and maintains the relationship with you, the patient. The professional can also use the customized Web site to schedule appointments and to expose patients to marketing material. It's a partnership from which everyone gains. It wouldn't have been possible without the Net. My second example is in an even more low-tech business: picture frames. We own a company that manufactures picture-framing materials in a factory in Mississippi. We sell these products to art publishers and framing shops. We also sell through a chain of company-owned shops and through leased departments in department and hardware stores. With our own factory and centralized, electronic fulfillment capability we can sell at lower prices and offer faster delivery times than local frame shops. Still, it's a slow-growing business. Or was. We are now forging a partnership with a prominent company that owns an enormous catalog of digital images. You search our partner's database using keywords to select a reproduction for your wall. Then you type in a credit card number and buy the right to download the image for your personal use. Selling the images is a great business. Marginal costs are close to zero. There is no inventory to finance. You can sell the same image thousands of times, but for one problem. Some customers don't want to buy images. They want to buy pictures to hang on their walls. Now what? You could tangle with a balky printer and then schlep the output to a frame shop and maybe wait two weeks or more for the finished product. But if you are a typical I-want-it-now consumer, you might just skip the whole transaction. Yet the last thing this image company wanted was to get into the picture-framing business. Solution: You pick not just an image but a mat and a frame on the image company's site, and you can view the finished product on the screen. Click on the site and the order goes to our mail-order operation in Memphis, where we print, mat, frame and mail the reproduction to your home. Because the art is digital, it is even scalable. You can specify dimensions to fit the space above your sofa. Now think about your own company. Can you identify Net-based partnerships that could revive a sluggish sales curve? Can you identify investments where similar clicking partnerships could create new value? Just look around and let your imagination work.
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