This is a major problem for my employer. Our manufacturers are not only selling direct, they are also starting to charge exorbitant drop-ship fees. Meanwhile, they also benefit from all the money we spend advertising their brand through pay-per-click ads.

On the other hand, many manufacturers who have not started selling direct online are stuck in the past when it comes to their distribution models. They get hung up on the concept of “territories” and can’t fathom that having an online business means you can sell nationally.

They scoop up the wholesale business that they can, because that money pays material, packaging, and overhead costs for producing the lines. This, in turn, allows them to cut the throats of their distributors, using these profits directly against them, because of the massive direct to retail profit margin that just kills distributors. This manufacturer controls over 40% of the retail market and it is climbing.

However, this practice also damages the brand and the market by narrowing what is already a specialty niche. A raft of motivated distributors can sell far more product than they ever will develop on their own. Everybody loses in the end. We would very much like to get into these product lines, and see real potential for expansion of the entire market. Their are areas to significantly expand the niche. However, if the manufacturer can kill us on price, and offer exclusive product not even available to us - we just don’t know how to make this deal happen. The ethics of the manufacturer totally violate the idea of win-win. We are their customers, and they are aggressively targeting ours.