The impact of internet exchanges on business-to-business distribution

The authors review an incumbent business-to-business distributor of electronic components faced with the entry of more than 50 Internet-based competitors and offer an explanation for why the distributor prevailed. Underlying the explanation is an assertion that the appropriate unit of analysis is the buyer-distributor-seller triad, not the buyer-seller dyad. In the case examined, the channel activities were interrelated such that when each party calculated the costs and benefits of the activities that occurred within this three-way relationship, they outweighed the net gains from disintermediation or Internet intermediation. Particular conditions favoring the status quo included existing activities for sharing customer identification information between the distributor and the seller, a high proportion of negotiated distributor-customer contracts, and new entrants’ reliance on open technologies. While no claims are made about the generalizability of this explanation beyond the case studied, the authors believe their assertion and hypotheses may have broader applicability. Das Narayandas is associate professor of business administration at the Harvard Business School. Mary Caravella is a doctoral student in marketing at the Harvard Business School. John Deighton is the Harold M. Brierley Professor of Business Administration at the Harvard Business School.