Knocking Down Supply Chain Walls

I have often times questioned the thought process behind the chain of how products get from the manufactures to the customer and where the money goes in between the two.

Some years ago I worked at a business that was not doing so well financially and was pondering on how to make more money off their products. To me it made no sense to sell our product exclusively to a middleman who then did whatever to get it to the store who then sold it for at least a 4:1 markup on what we were selling it to the middle man.

I as a young and inexperienced service tech I asked why we didn't set up a factory direct sales system where the customer could come and buy our products at 3x middle man's paying price but still a good deal below the off the shelf price in the local market.

I was told that to do so would have meant hiring at least 3- 4 more people plus setting up a storefront as well which would set the company back hundreds of thousands of dollars a year to operate.

Okay? We make ~6 million a year selling to one middle man company who then at some point turns our ~$6million a year in sales in ~$24 million of the local shelf.

Nope I never did figure out how hiring another 3 - 4 people and spending additional $500 K or less to make several million above and beyond our present sales didn't add up on paper.

Apparently someone else did figure it out some time in the last 20 years since online factory direct dealers selling off the shelf store goods for considerably less than what the local stores sell them for are everywhere.

My guess is the first step middle man figured it out that he could buy at factory price do a 3:1 markup directly to the customer and skip the store guy who was buying from him at only a 2:1 markup.