Dropping the dealers and building a direct-sales network (1965)

Not cutting out the middleman, but buying the customer’s voice

Set the 15–20% margin paid to dealers against the travel and lodging costs of bringing customers to Amada from all over the country, and by Amada Isamu’s arithmetic the second was cheaper. Worse, a sale through an agent ended at the sale: what came back was not the customer’s requirements but the dealer’s. The 1965 switch is better read not as cutting out distribution to recover gross margin, but as a purchase — the price of getting the customer’s voice onto Amada’s own drawing boards. Putting $27.8M (¥10bn) into a head office and showrooms, and running a school that charged nothing for training, follows the same logic.

A sales force held in-house, however, stays on the books as fixed cost. Investment did not slacken even in the late 1980s, when the number of companies coming to see the machines fell from 40,000 to the low twenty-thousands; $62.4M (¥8bn) went into training facilities alone — a log house at Asagiri and a new training centre at head office. Nor can a customer base that is nine-tenths small and mid-sized firms be re-pointed at will. That Amada Isamu, himself out of a back-street workshop, could dispense with dealers appears to rest on a conviction that nobody understood the wants of shops too poor to buy imported machines better than he did. The choice is a single piece — including the part where the source of the strength narrows the room to move.