Middlemen: Rebirth Of The Salesman

Brokers are carving out fresh territory on the Web. But experts say attrition may be inevitable

For most of his career, Jerry Whitlock chased smokestacks, making cold calls at every factory he could find to sell seals and gaskets. Often, Whitlock, the son of a Georgia truck driver, would log grueling, 14-hour days on the road--away from his wife and daughter--and snatch lunch and dinner while barreling down the highway. "I had a beautiful house I never saw, and when I'd come home, it would be dark," he recalls.

Today, Whitlock, 44, is still selling seals and gaskets, including hard-to-find industrial O-rings. But he has joined the cybergeneration, doing some 40% of his $1 million business over the Internet, mostly from his home--and often while watching daytime television on his office computer. "I'm now a Space Age broker," he drawls. "I'm sitting here in a pair of golf shorts, taking sales calls. I'm the envy of almost everyone I know in the business."

Whitlock is among America's small but growing army of cybermediaries--thousands of middlemen who, by choice or necessity, are carving out fresh territory on the Web. With its potential to match buyers and sellers regardless of geography, time zones, or language differences, the Net is reinventing the role of the traditional broker and forcing changes on even the most tech-wary.

DISPLACEMENT. It's the death--and rebirth--of a salesman. No one knows exactly how many middleman jobs have been wiped out or created by the new electronic marketplace, or how many have yet to be affected. Experts are just now studying the impact of the Net on employment, though some already predict the Web will, at least in the short term, eliminate more middlemen jobs than it will create.

The theory: The Net allows buyers and sellers instant, easy, and direct contact, diminishing the need for, say, travel agents, insurance brokers, and real estate agents. "In the E-commerce world, we're going to see displacement in spades begin to happen very soon," predicts Michael Smith, a financial services analyst with Mercer Management Consulting Inc. Mercer predicts that the Net will only accelerate economic and technological trends which have, since 1995, led to a 20% fall in the number of insurance agents.

That doesn't mean middlemen will vanish from the Net. Indeed, go-betweens will be needed to help people gather and decipher the vast quantity of information that's piling up on hundreds of thousands of Web sites. Ward Hanson, an assistant professor at Stanford University's business school who is conducting a study of the Net's impact on jobs, figures some 100,000 cybermediaries may already have cropped up. "Opportunities for new middlemen will be everywhere information is the product," Hanson says.

"SLOW SWEEP OF CHANGE." Japanese startup Aucnet, for example, has a Web site for auctioning used cars to wholesalers--and the service is a hit: Aucnet inspectors, like cyber-age consumer advocates, scour the Net and other sources to provide buyers with statistics on cars sold--in addition to physically examining each car and assigning them quality ratings.

The message: Ignore the Web at your peril. Whether it's travel agents being squeezed by Web sites such as Travelocity and Expedia, or new market-making opportunities popping up on sites such as FastParts.com--which links buyers and sellers of surplus electronic parts--big changes are afoot. Says Paul Saffo, director of the Menlo Park (Calif.) Institute for the Future, a tech think tank: "The Net is starting a slow sweep of change through the workplace, rebuilding the order of things, creating whole new middlemen, forcing changes on others, and leaving some behind."

For some, Net commerce already has taken a toll. Just ask Laura Kleiman, one of 800 salespeople laid off when Egghead Software, citing stiff competition from computer superstores and online rivals, closed all 156 of its brick-and-mortar stores, changed its name to egghead.com Inc., and became a Net-only dealer in March. "We were one of the first groups of workers to be digitized right out of work," says Kleiman. She has returned to school, while some co-workers took sales jobs elsewhere--not a problem in a good economy, she says, but potentially difficult in turbulent times.

So far, the middlemen most affected by the Net have been book dealers and travel agents. Both are easy targets: They sell commodities that don't need to be tried on, tested, tasted, or touched. And thanks to the Net's ability to let sellers distribute goods more cheaply--and allow consumers to comparison shop--bargains can be found. The result: Some $800 million in plane tickets will be sold over the Web this year, a figure that could climb to $8.9 billion in 2002, predicts market researcher Jupiter Communications. Online book sales could grow from $216 million to $2.2 billion in the same period.

Travel agent Phil Davidoff, 57, is feeling the heat. Over the past few years, Davidoff, the owner and co-founder of Belair/Empress Travel in Bowie, Md., has seen airline commissions drop from 62% of his revenue to 30%. Now, Davidoff is starting to explore ways the Internet could reverse his fortunes--perhaps through a Web site featuring specialty vacation cruises. "E-commerce is a two-by-four hitting smaller agents over the head, getting our attention, and making us do things differently," he says.

COMMUNITY KNOWLEDGE. Not everyone, though, is embracing the Net. Judy McLoughlin, owner of Reading in the Park, a children's bookstore in suburban Detroit, says she knows the Net may be cutting into the book business, but "I don't want to buy or sell a book I cannot touch." She and co-workers read most of the books they stock and pride themselves on the individualized attention they give to each customer.

For insurance agent Tom McDonald, whose Grosse Pointe (Mich.) business has been in the family for three generations, Net-driven change is hard to predict and difficult, at times, to fathom. He says he doesn't know "how to turn the Internet on." His business just went online in May--for E-mail messages only. McDonald has no plans to become a cyberbroker, and he, too, prefers face-to-face contact with customers: "There never will be a substitute for the handshake or the knowledge of a community and the people who live there."

Maybe so, but the waves of Net-spurred changes have only begun to roll through the workplace. Experts say the middlemen next in line to feel the squeeze will be sports-equipment salesmen and car dealers, as cyberguides pop up to help consumers make sense of the gaggles of athletic gear and the range of cars.

THE RUBBER OR THE ROAD. At this pace, many middlemen won't have a choice but to go digital. As more people go online, and a generation familiar with the Net grows up, the number of online consumers is likely to skyrocket--something McDonald's son, Martin, will have to address when he takes over the insurance business from his father some years from now.

Those who already have made the leap couldn't be happier about their Digital Age careers. For Hans Koch, a former commercial property manager, cutting out the old-style broker is the whole point of his owners.com site. Launched in 1995, the site provides home listings and photographs and, in some cases, the lowdown on neighbors. Koch charges sellers $115 to list a property and predicts that sites like his, with their savings to users, eventually will boost the number of homes sold without an agent to 40%, from a longstanding 20%--and will "change the economics of the deals for the remaining 60%."

The lesson here, says Saffo: "Middlemen aren't dead. They're just reinventing themselves." As more consumers start shopping online, any broker who doesn't weave the Web into a business plan is almost certain to run into trouble. Agrees gasket and seals broker Whitlock: "If you don't know how to use the Net yet, learn. Because if you're not part of the rubber, you're part of the road." Still not convinced? Just ask Whitlock's wife, Rita. "Now," she says, "Jerry's home for dinner."