Transcript week7-distribution and retailing

week 8- 11.08.04
Distribution and
Retailing Issues
Nature of Distribution Channels:
Why use marketing intermediaries?
 Definition : A set of interdependent organizations
involved in the process of making a product or
service available for use or consumption by the
consumer or business user.
 Greater Efficiency:
 Specialization (contact, experience, scale opera)
 Number of Contacts
 match Supply and Demand by transforming
assortments
Contact Efficiency
Overcoming Discrepancies
Discrepancy
of
Quantity
The difference between the
amount of product produced
and the amount an end user
wants to buy.
Discrepancy
of
Assortment
The lack of all the items a
customer needs to receive full
satisfaction from a product or
products.
Overcoming Discrepancies
Temporal
Discrepancy
A situation that occurs when a
product is produced but a
customer is not ready to buy it.
Spatial
Discrepancy
The difference between the
location of a producer and the
location of widely
scattered markets.
Number of Channel Levels
Producer and Final Consumer in channel
Flows between channel levels
 Product - Ownership -Payment
 Information – Promotion
Direct Marketing Channel
 Company sells directly to consumers
Indirect Marketing Channels
 Company sells through one or more intermediaries
More levels increase number of contacts,
less control & more complex
Channels for Consumer
Products
Direct
Channel
Producer
Retailer
Channel
Producer
Wholesaler Agent/Broker
Channel
Channel
Producer
Producer
Agents or
Brokers
Consumers
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Consumers
Consumers
Consumers
Hybrid Marketing Channel
Catalogues, telephone
Consumer
segment 1
Retailers
Consumer
segment 2
Dealers
Business
segment 1
Producer
Distributors
Sales force
Business
segment 2
Channel Intermediaries
Retailers
Take Title to Goods
Merchant
Wholesalers
Take Title to Goods
Agents
and
Brokers
Do NOT Take Title to Goods
Conventional versus Vertical &
Horizontal Marketing Channel
Conventional marketing
channel
Man1
Man2
Manufacturer
Wholesaler
Wholesaler
Wholesaler
Manufacturer
Horizontal marketing Vertical marketing
system
system
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Channel Behaviour





Channels are complex behavioural systems
Interaction between people and companies
Formal and informal
All members interdependent
Each member a specialist
Individual - Company - Channel goals
Channel Behaviour:
types of channel conflict
Horizontal Conflict
 Between members at same channel level
Vertical Conflict
 Between different levels in same channel
Keys to Overall Performance
 Each member’s role clear and specified
 Strong conflict management
Channel Design Decisions
Analysing consumer service needs
Setting channel objectives
Identifying and Evaluating major alternatives
 Type of Intermediaries.
 Number of Intermediaries:
Intensive, Exclusive and Selective
(mkt coverage, control, realationships…)
 Responsibility of members: Price, conditions of sale, territ, services.
Levels of Distribution
Intensity
Intensity Level
Objective
Number of
Intermediaries
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Work with selected
intermediaries.
Shopping and some
specialty goods.
Several
Exclusive
Work with single
intermediary. Specialty
goods and industrial
equipment.
One
Market Factors
Customer Profiles
Consumer or Industrial
Customer
Market Factors
That Affect
Channel
Choices
Size of Market
Geographic Location
Product Factors
Product Complexity
Product Price
Product Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
Producer Factors
Producer Resources
Number of Product Lines
Producer Factors
That Affect
Channel
Choices
Desire for Channel Control
Channel Management:
selecting channel members
What makes the best?
Years in business
Other lines carried
Growth and profit
Cooperation & reputation
Sales force size & quality
Retail customers, location
and growth potential
Physical Distribution &
Logistics Management
 Major impact on:
 Customer satisfaction
 Operating costs
 Handle - store - move products
and services
 Right product
 Right customer
 Right place and time
On Line
http://www.walmartstores.com
Electronic Data
Interchange
Information technology that
replaces paper documents
that accompany business
transactions.
Criteria for Ranking
Modes of Transportation
Lowest
Highest
Relative
Cost
Transit
Time
Air
Truck
Rail
Pipe
Water
Water
Rail
Pipe
Truck
Air
Reliability
Pipe
Truck
Rail
Air
Water
Capability
Water
Rail
Truck
Air
Pipe
Accessibility
Truck
Rail
Air
Water
Pipe
Traceability
Air
Truck
Rail
Water
Pipe
RETAILING
 All activities in selling goods and
services directly to final
consumers for personal, nonbusiness use.
 Most via retail stores
 Non-store growing fast
Retailing
Retailers Are
Classified By:
 Amount of service
 Product lines
 Relative prices
 Organizational approach
 Self-service retailers
 Customers are willing to selfserve to save money
 Discount stores
 Limited-service retailers
 Most department stores
 Full-service retailers
 Salespeople assist customers
in every aspect of shopping
experience
 High-end department stores
 Specialty stores
Retailing
Retailers Are
Classified By:
 Amount of service
 Product lines
 Relative prices
 Organizational approach
 Specialty stores
 Narrow product lines with deep
assortments
 Department stores (laundry,
household products).
 Wide variety of product lines
 Supermarkets
 Convenience stores
 Limited line
 Superstores
 Food, nonfood, and services
 Category killers
 Giant specialty stores
Retailing
Retailers Are
Classified By:
 Amount of service
 Product lines
 Relative prices
 Organizational approach
 Discount stores
 Low margins are offset by
high volume
 Off-price retailers
 Independent off-price
retailers
TJ Maxx, Marshall’s
 Factory outlets
Levi Strauss, Reebok
 Warehouse clubs
Sam’s Club, Costco
Retailing
Retailers Are
Classified By:




Amount of service
Product lines
Relative prices
Organizational approach
 Corporate chain stores
 Commonly owned / controlled
 Voluntary chains
 Wholesaler-sponsored groups of
independent retailers (IGA)
 Retailer cooperatives
 Groups of independent retailers
who buy in bulk (Associated
Grocers)
 Franchise organizations
 Based on something unique
 Merchandising conglomerates
 Diversified retailing lines and
forms under central
ownership(target)
Target Market and Positioning
 Define target markets and
Select positioning
 Variety?
 Depth of assortment?
 Convenience?
 Low prices?
Presentation of the Retail
Store
Employee Type & Density
Merchandise Type & Density
Fixture Type & Density
Factors
in
Creating
Store’s
Atmosphere
Sound
Odors
Visual Factors
Factors to Consider in Site
Selection
Economic growth
potential
Area competition
Geography
Non-Store Retailing
 Growing much faster
than store retailing
a third of all sales by
2005
 Direct Marketing
 Direct Selling
 Automatic Vending
The Future of Retailing
New forms and shorter
lifecycles
Non-store types growing
Growth of mega-retailers
Rising role of technology
Global expansion
Stores as “hangouts”