Distribution & Retailing

Unit 4 Subhajit Sanyal

P = Location

• Convenience

• Distribution

• Availability

• Accessibility

• Usability

• Where and when necessary

• Size and portability

Product Classes - Place

• Convenience Products - have to be in convenient places - small stores, vending machines

• Shopping Products - have to be where shoppers go, malls, superstores etc.

• Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and where you can park easily

Place and PLC• PLACE must be considered in terms

of the Product Life Cycle

• In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying

What is it?

• Distribution - the where when how and why products and services are made available to potential customers

• Physical distribution - the activities concerned with the physical flows through producer to intermediaries to consumers and customers

Objectives of Distribution

• Appropriate and adequate distribution

• Access to markets and target customers

• Relative cost effectiveness in access, transaction value and distribution

• Reseller motivation

• Revenue returns from channel members

• Competitive representation

• Customer service

Marketing / Distribution Channels create- Time- Place- Possession/ownership utility

• Delivered at the right time - time utility• Delivered to the right place - place utility• With appropriate legal requirements -

possession / ownership utility

Product Classes - Place

• The different Product Classes have different PLACE situations

• Place decisions can be aided by knowing about the product classes

Product Classes - Place

• Convenience Products - have to be in convenient places - small stores, vending machines

• Shopping Products - have to be where shoppers go, malls, superstores etc.

• Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and where you can park easily

Place and PLC

• PLACE must be considered in terms of the Product Life Cycle

• In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying

Discrepancies

• Discrepancy of Quantity

• Discrepancy of Assortment

Discrepancies

• Discrepancy of Quantity• the mfg. Makes much more than

individual consumers want to buy each time

• middlemen, wholesalers and retailers break this amount down into smaller amounts for individual consumers to buy

Discrepancies

• Discrepancy of Quantity

• … the difference between the quantity of products it is economical for an individual producer to make and the quantity normally wanted by individual consumers or users...

Discrepancies

• Discrepancy of Assortment• the difference between ALL the product

lines a mfg. Makes, and what the wholesaler wants to sell, and what the consumer will buy

• middlemen, break this amount down into different selections which the wholesalers want

Discrepancies

• middlemen, break this amount down into different selections which the wholesalers want

• EG. KRAFT makes many many different types of salad dressing

• A no-frills store just wants to sell 7 types cause its customers don’t buy the fancy kinds

Accumulation - combining products from several different producers. “… make it more convenient for companies to buy and handle…”

When farmers collect food, and sell them to buyers who gather large amounts for shipping to processors

The Accumulating Process

Breaking Bulk - take all the product and physically move it into small containers so it can be shipped to wholesalers. “… divide larger quantities into smaller quantities…”

Separating products into grades and qualities desired by different target markets.

Eg. Food products, small onions, large onions,

or white eggs, brown eggs

or …

Sorting

Taking heterogeneus commodities and sorting them into homogenous categories

Eg. All apples into red apples and green apples

Sorting

The process that helps producers,

• who produce different amounts,

• and different types,

• organize their products

• into categories/assortments

• to make it easier for the consumer to buy.

Sorting

“… putting together a variety of products to give a target market what it wants…”

ie. In this video store, mostly Asian films

ie. In this record store, mostly hip hop

ie. In this jewelry store, mostly chains

Assorting

Some stores cannot take the full range of a company’s product line - they do not have the shelf space or floor space - so they carefully select the brands of several mfgs to sell.

Assorting

Marketing / Distribution Channels create- Time- Place- Possession/ownership utility

• Delivered at the right time - time utility• Delivered to the right place - place utility• With appropriate legal requirements -

possession / ownership utility

Channels and key players

• Channel of distribution

• Intermediary

• Merchant

• Functional middleman

Channel design decisions

• Analyse customer service needs - marketing channels deliver appropriate value to the customer

• Defining channel objectives and constraints - which segments to serve and which channel to use for each

• Identifying key channel alternatives - direct marketing, broker, agent, intermediary, wholesaler, retailer, e-commerce

• Evaluating alternatives - economic, control, level of flexibility criteria

A vertical marketing channel

A vertical marketing channel

Members

Manufacturer

Wholesaler

Retailer

Consumer

Functions

DesignMakeBrandPricePromoteBuyStockDisplaySellDeliverFinance

Manufacturer

Wholesaler

Retailer

Consumer

A conventional marketing channel

A conventional marketing channel

Members FunctionsDesignMakeBrandPricePromoteSell

BuyStockPromoteDisplaySellDeliverFinance

BuyStockPromoteDisplaySellDeliverFinance

Figure 12.5 Comparison of a conventional marketing channel and a vertical marketing system

SOURCE: Adapted from Strategic Marketing, by David J. Kollat et al., copyright 1972. Reprinted by permission.

Control of resources

Size of company

Reward power

Expert power

Referent power

Legitimate power

Coercive power

Economic sources of power

Non-economic sources of power

Level of power

Dependency of other channel members

Willingness to lead

Channel leadership

Figure 12.8 Determinants of channel leadership

SOURCE: R.D. Michman and S. D. Sibley, Marketing Channels and Strategies, 2nd edn (Worthington, Ohio: Publishing Horizons, Inc., 1980), p.413. Reproduced by permission.

ACTIVITY DESCRIPTION

Table 13.1 Major wholesaling activities

Wholesale Management

Negotiating with suppliers

Promotion

Transport

Inventory control and data-processing

Planning, organising, staffing and controlling wholesaling operations

Serving as the purchasing agent for customers by negotiating supplies

Providing a sales force, advertising, sales promotion and publicity

Arranging and making local and long distance shipments

Controlling physical inventory, book keeping, recording transactions, keeping records for financial analysis

Warehousing and producthandling

Receiving, storing and stock keeping, order processing, packaging, shipping outgoing orders and materials handling

Security Safeguarding merchandise

Pricing Developing prices and providing price quotations

Financing and budgeting Extending credit, borrowing, making capital investments and forecasting cash flow

Management and marketingassistance to clients

Supplying information about markets and products and providing advisory services to assist customers to sell

Producer Buyers

Producer Buyers

Middleman or

intermediary

Figure 12.1 Efficiency in exchanges provided by an intermediary

Marketing channel activities that intermediaries performMarketing channel activities that intermediaries performTABLE 12.1TABLE 12.1

CATEGORY OF MARKETING ACTIVITIES POSSIBLE ACTIVITIES REQUIRED

Table 12.1 Marketing channel activities that intermediaries perform

Marketing information

Marketing management

Facilitating exchange

Price

Physical distribution

Analyse information such as sales data; perform or commission marketing research studies

Establish objectives; plan activities; manage and co-ordinate financing, personnel and risk taking; evaluate and control channel activities

Choose and stock product assortments that match the needs of buyers

Establish pricing policies and terms of sales

Manage transport, warehousing, materials handling, inventory control and communication

PromotionSet promotional objectives, co-ordinate advertising, personal selling, sales promotion, publicity, direct mail and packaging

Classifying heterogeneous supplies into homogeneous groups

Developing a bank or stock of homogeneous products to provide aggregate inventory

Breaking down homogeneous stocks (inventories) into smaller units

Combining products into collections or assortments that buyers want

Sorting out Accumulation Allocation Assorting

Figure 12.2 Sorting activities conducted by channel members.

E F G H

Producer Producer Producer Producer

AgentsAgents

Business-to-business distributors

Business-to-business distributors

Business-to-business buyers

Business-to-business buyers

Business-to-business buyers

Business-to-business buyers

Figure 12.4 Typical marketing channels for industrial products

“A person, or company, that helps direct the activities of a whole channel, and tries to avoid, or solve conflicts…”

However, some older products don’t have such a position.

Can be,,,

• A strong wholesaler

• a market oriented producer

• a large retailer

Sometimes Middlemen have a clear picture of what the customer wants, and who the producers are, so they arrange for producers to be in contact with the retailers, so more product can flow in the channel. The Middlemen makes more money by making nore commission on stuff sold.

• The whole channel focusses on the same target market at the end of the channel

• sometimes a large firm will buy up the smaller companies in the channel to have more control over the distribution

The paths goods follow from consumer to manufacturer or to marketing intermediaries.Common in the recycling industries.

Eg.

- Empty glass bottles

- used batteries

- used tires

- used printer cartridges - Canon

Reverse Channels

Also used for product recalls or for broken products that need to be fixed under Warranty - especially cars, tires and some expensive electronic consumer items.

Reverse Channels

Important to maintain consumer satisfaction and confidence.

STRATEGIC ISSUES IN RETAILINGSTRATEGIC ISSUES IN RETAILING

•Location•Property Ownership•Product Assortment•Retail Positioning•Atmospherics•Store Image•Scrambled Merchandising•The Wheel of Retailing

Recent Trends in Retailing

• Customisation

• Larger outlets

• Own label brands

• Customer expectations

• Category stores

• Relocation of businesses

• e.shopping

• Home delivery

e-commerce

• Basics of doing business

• Market opportunities & the future

• Media

• Branding

• Business to business

• Regulations

• Internet and Society