Presentation on theme: "The Channel Participants"— Presentation transcript:
1 The Channel Participants Part 1: Marketing Channel SystemsThe Channel Participants
2 Major participants in marketing channels Why shift distribution tasks to intermediaries?Major types of wholesalersMajor Trends in Wholesale StructureMerchant Wholesalers Specialize in Performance Distribution TasksRetail structureRetail structure trendsDistribution Tasks Performed by RetailersRetailers’ Growing Power in Marketing ChannelsFacilitating Agencies in Marketing Channels
3 Major Participants in Marketing Channels 1* Commercial Channel* Target Markets
4 Why shift distribution tasks to intermediaries? 2Producers&ManufacturersIntermediaries• Lack expertise• Lack economies of scale• Spread high fixed costsover large quantities ofdiverse products• Achieve economies ofscope and economies ofscale
5 Example: Distribution of Crayons Manufacturer directto customers• Huge order processingfacility• Huge inventory• Several warehouselocations• Transportation ofproduct to consumers= costprohibitive
7 Large quantities of products Merchant WholesalersTasks Performed:BuyTake titleHold InventoryHandleLarge quantities of productsResell to:Industrial,commercial,orinstitutionalconcernsOtherWholesalersRetailers
8 Agents, Brokers, & Commission Merchants Involved in buying & sellingwhile acting on behalf of clientsCommissionsonsales or purchases
9 Manufacturers’ Sales Branches & Offices Separated from manufacturing plantsDistribute manufacturer’s products at wholesaleOwned & operated by manufacturersSome wholesale allied & supplementary products purchased from other manufacturers.
11 Trends in Size & Concentration Measured by:Types of WholesalersSize ofwholesalerMajority are small businessesSales volumeNearly 45% of all firms have annual sales of less than $1 million# of Employees per firmAbout 50% of firms had fewer than 5 employeesEconomic concentration in terms of % of total sales50 largest manufacturers’ sales branches & offices garnered nearly 63% of sales for this type
12 Merchant Wholesalers Specialize in Performance Distribution Tasks 5Provide market coverageMake sales contactsHold inventoryProcess ordersGather market informationOffer customer supportOperate at high levels of effectiveness and efficiencyAverage cost curves lower than those for their suppliers
13 Merchant Wholesalers’ Distribution Tasks Serve Customers Assure product availabilityProvide customer serviceExtend credit & financial assistanceOffer assortment convenienceBreak bulkHelp customers with advice & technical support
14 Agent Wholesalers’ Distribution Tasks Manufacturers’AgentsMarket coverageSales contacts
18 Alternative Bases for Classifying Retailers Retail Structure6Alternative Bases for Classifying RetailersBy Ownership of EstablishmentBy Kind of Business (Merchandise Handled)By Size of EstablishmentBy Degree of Vertical IntegrationBy Type of Relationship with other Business OrganizationsBy Method of Consumer ContactBy Type of LocationBy Type of Service RenderedBy Legal Form of OrganizationBy Management Organizations or Operational Technique
19 Kind-of-Business Classifications Retail TradeMotor vehicle & parts dealersFurniture & home furnishings storesElectronics & appliance storesBuilding material & garden equip. & supply dealersFood & beverage storesHealth & personal care storesGasoline stationsClothing & clothing accessories storesSporting goods, hobby, book, & music storesGeneral merchandise storesMiscellaneous store retailersNon store retailers
20 Retail Structure Trends 7Decreasing number of establishmentsIncreasing sales= increase in size of retail establishmentsmeasured by average sales volumeper store
21 Concentration in Retailing 4% of all retail firmsaccounted for nearly 80%of total sales!!
22 Distribution Tasks Performed by Retailers 8The role of the retailer in the distribution channel, regardless of his size or type, is to interpret the demands of his customers and to find and stock the goods these customers want, when they want them, and in the way they want them. This adds up to having the right assortments at the time customers are ready to buy.— Charles Y. Lazarus
23 Distribution Tasks Performed by Retailers Offer manpower & physical facilities close to consumers’ residencesProvide personal assistance to help sell productsInterpret and relay consumer demandDivide large quantities into consumer-sized lotsOffer storageRemove risk by ordering in advance of the season
24 Retailers’ Growing Power in Marketing Channels 9Increased size & buying powerBecome power retailers&category killersApplication of advancedTechnologiesInformation technology & the Internet; threetailingUse of modern marketing strategiesModern techniques; relationship marketing
25 Facilitating Agencies in Marketing Channels 10Transportation agenciesStorage agenciesOrder processing agenciesAdvertising agenciesFinancial agenciesInsurance companiesMarketing research firms
26 Discussion Question #1Wrigley is the world’s leading manufacturer of chewing gum, producing literally millions of packages of gum every day. It is a large, financially strong company whose manufacturing technology for producing gum is state-of-the-art. It sells its products to millions of gum-chewing consumers all over the United States and many other countries around the world. Still, Wrigley has never attempted to sell its chewing gum directly to consumers, but instead uses a wide variety of intermediaries at the wholesale and retail levels.Why do you suppose Wrigley has chosen to use intermediaries rather than sell direct to consumers? Explain the underlying economics of the company’s policy.
27 Discussion Question #5Best Buy is by far the largest consumer electronics retailer in the world with sales of over $45 billion and almost 4,000 stores world wide. Best Buy enjoys tremendous power in the marketing channels within which it operates. All manufacturers and other suppliers providing products to Best Buy have to pay close attention to what this 1,000 pound gorilla of a retailer wants. But even when suppliers go out of their way to meet the demands of Best Buy, they are finding that the giant retailer could block them from getting their products to consumers because Best Buy may favor certain suppliers with which it can make especially attractive deals. In addition, Best Buy is increasing its emphasis on offering its own private brand products such as the thinnest laptop on the market and an all-electrical motorcycle. Some of Best Buy’s own products may even compete directly with famous supplier brands, such as Apple and Sony.Why do you think Best Buy is flexing its muscles in the channel? Do you think this type of behavior is inevitable on the part of giant dominant retailers?
28 Discussion Question #6 needs of their clients. Jacobson Companies, headquartered in Des Moines, Iowa, describes itself on its Web site as a “can do” third party logistics company. The company is indicative of the new breed of logistics services firms that can do it all. If a company, whether a manufacturer, wholesaler, retailer or other type of firm, needs logistical help, they can find “one-stop shipping” for logistical services if they deal with 3PL firms. Along with the availability of an almost unlimited range of services, is the capability of many 3PLs to custom tailor the logistical services they provide to fit the particularneeds of their clients.Why do you think 3PLs have become such an important type of facilitating agency in market channels? Do you expect this trend to continue?