In my recent post I already mentioned how brokers are becoming more and more obsolete to facilitate deals in the PPE industry. While this certainly is an unpleasant truth for many (especially brokers) one cannot ignore the signs that clearly show why the PPE brokers are on their best way to become a remnant of the past.
Decline in prices and demand
The core concept why the industry got flooded with brokers and allowed certain people to make money boils down to two simple reasons: rising demand and prices. This was the core trend of 2020 when the pandemic first hit, and this is the trend that seems to be over now. Demand shifts from global to local thus decreasing, dragging the decline of the price with it. And this is bad news for PPE brokers: while a price of $10 for a 100-count box of nitrile gloves certainly gave some wiggle room for commissions, this cannot be said about the pre-pandemic prices. And the decrease in price gives another push to the decrease in demand (since it drives away those companies that only wanted to flip some money by buying and selling PPE) creating a spiral that will eventually result in stable and realistic market prices.
The lack of added value
The other reason why brokers might not have much of a future in the PPE industry is the lack of added value. What is it that most brokers do? Most of them sit all day in front of Whatsapp and blindly forward messages either among each other or to companies they perceive as “real seller / buyer”. And frankly, this is not an added value – this is nothing. There is no due diligence done on these offers, nor any consideration taken which offer would suit which client the best. I would consider this behavior akin to gambling, since the logic is the same: the more offers I forward the higher the possibility that one will eventually transact, and I will receive money. However, since 99% of these offers are coming via other brokers, there is only an astronomically small chance that one can make money this way.
The rise of platforms
Perhaps the most threatening phenomena for PPE brokers is the rise of online trading platforms in the industry. That is right, digitalization kills the intermediaries. Why? Let me demonstrate this theory via my favorite platform, hystrix medical.
- Sends you offers that are unvetted and often coming via a chain of other brokers.
- High commission (often ~10%)
- Can kill deals via NCNDA and other contracts made with sellers and buyers.
- Forgery of documents is a common phenomenon.
- Often zero expertise in areas of logistic, business, finance or even PPE / medical devices.
- Interest is to separate buyer and seller as long as possible.
- Offers available on the platform are coming from suppliers that have been previously vetted upon registration.
- Regulated, small commission (~2%)
- Progression of a transaction is entirely based on the decision of the buyer and the seller.
- All documents are kept confidential
- Creators of the platform are internationally recognized experts
- Buyer and seller know each other from step one.
And the list goes on why hystrix medical is a much safer alternative for buyers and sellers than working via brokers I just wanted to show a few examples.
Before someone would accuse me of having a broker-phobia, it is not true. I also brokered some minor deals, we also worked via brokers for our own supplies. However we had way more negative than positive encounters with intermediaries, and personally I am somewhat relieved that most brokers will leave the industry. Or, at least they won’t have such an impact on the supply chain anymore.