1. Distribution and Retailing Issues
week
Distribution and Retailing Issues

2. 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
For further details about this topic see page396 2

3. Contact Efficiency Notes:
Exhibit 12.1 demonstrates the purchase of a television set by four consumers. Without a retail intermediary like Circuit City, the individual television manufacturers would have to make four contacts to reach the four buyers. With Circuit City as an intermediary, each producer only has to make one contact, and the consumer buys from one retailer.

4. Overcoming Discrepancies
Discrepancy of
Quantity
Assortment
The difference between the amount of product produced
and the amount an end user
wants to buy.
The lack of all the items a
customer needs to receive full satisfaction from a product or products.
Notes:
Marketing channels help overcome discrepancies of quantity, assortment, time, and space created by economies of scale in production.
Discrepancy of Quantity: Efficient production for lower unit costs creates a much larger quantity produced than the end user wants to buy. Marketing channels store and distribute the product in appropriate amounts, and make the products available in quantities that consumers desire.
Discrepancy of Assortment: Marketing channels assemble in one place many of the products necessary for a consumer’s needed assortment.

5. Overcoming Discrepancies
Temporal
Discrepancy
Spatial
A situation that occurs when a product is produced but a
customer is not ready to buy it.
The difference between the
location of a producer and the location of widely
scattered markets.
Notes:
Temporal Discrepancy: Marketing channels overcome temporal discrepancies by maintaining inventories in anticipation of demand. This is particularly true of seasonal/holiday merchandise.
Spatial Discrepancy: Marketing channels overcome spatial discrepancies by making products available in locations convenient to consumers. For example, automobile manufacturers franchise dealerships close to consumers.

6. 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
For further details about this topic see page398 5

7. Channels for Consumer Products
Producer
Consumers
Retailers
Wholesalers
Agents or Brokers
Wholesaler
Channel
Retailer
Direct
Agent/Broker
Notes:
Exhibit 12.4 illustrates the four ways manufacturers can route products to consumers.
Direct channel is used to sell products directly to consumers. No intermediaries are used. Examples are telemarketing, catalog shopping, on-line shopping, and television shopping networks.
At the other end of the spectrum, an agent/broker channel may be used in markets with small manufacturers/retailers that lack the resources to find each other. The agents or brokers bring the manufacturers and wholesalers together for negotiations, but they do not take title to merchandise.
Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel.

8. Hybrid Marketing Channel
Catalogues, telephone
Consumer
segment 1
Retailers
Consumer
segment 2
Producer
For further details about this topic see page
Distributors
Dealers
Business
segment 1
Sales force
Business
segment 2 13

9. Channel Intermediaries
Retailers
Merchant
Wholesalers
Agents
and
Brokers
Take Title to Goods
Take Title to Goods
Notes:
The most prominent difference separating intermediaries is whether or not they take title to the product. Taking title means they own the merchandise and control the terms of the sale.
Do NOT Take Title to Goods

10. Conventional marketing
Conventional versus Vertical & Horizontal Marketing Channel
Conventional marketing
channel
Horizontal marketing
system
Vertical marketing
system
Manufacturer
Man1
Man2
Manufacturer
Wholesaler
Wholesaler
Wholesaler
For further details about this topic see page400
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer 11

11. Channel Behaviour Channels are complex behavioural systems
Interaction between people and companies
Formal and informal
All members interdependent
Each member a specialist
For further details about this topic see page
Individual - Company - Channel goals 9

12. 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
For further details about this topic see page400 10

13. 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.
For further details about this topic see page 14

14. Levels of Distribution Intensity
Intensity Level
Objective
Number of Intermediaries
Intensive
Selective
Exclusive
Achieve mass market selling.
Convenience goods.
Work with selected
intermediaries.
Shopping and some
specialty goods.
Work with single intermediary. Specialty goods and industrial
equipment.
Many
Several
One
On Line
Radio Shack
How does Radio Shack use its Web site to promote its exclusive distribution of the products listed on this page? Do Sprint, Compaq, RCA, and DirecTV reciprocate? Explain what you discover.
Notes:
Exhibit 12.7 compares the three options for intensity of distribution.
Discussion/Team Activity:
Discuss product examples in each of the intensity levels.

15. Market Factors That Affect
Channel Choices
Customer Profiles
Consumer or Industrial
Customer
Size of Market
Notes:
Market factors include the target customer considerations, such as these questions: Who are the potential customers? What/where/when/how do they buy?
Also important to channel selection is the distinction between consumer or industrial customers. Consumer buy in small quantities and don’t require much service, whereas industrial customers purchase in larger quantities and require more customer service.
If the target market is concentrated in specific areas, direct selling is appropriate. If widely dispersed, intermediaries would be less expensive.
A large market requires more intermediaries.
Geographic Location

16. Product Factors That Affect
Channel Choices
Product Complexity
Product Price
Product Life Cycle
Product Delicacy
Notes:
Products that are more complex, customized, and expensive benefit from shorter and more direct marketing channels and through a direct sales force. Standardized products can be sold through longer distribution channels with greater numbers of intermediaries.
The choice of channel may change over the life of the product. As products become more common, producers turn from a direct channel to more alternative channels.
Perishable items and fragile products require fairly short marketing channels.

17. Producer Factors Producer Resources Producer Factors That Affect
Channel Choices
Producer Resources
Number of Product Lines
Desire for Channel Control
Notes:
Producers with larger financial, managerial, and marketing resources are able to use more direct channels.
Producers with several products in a related area choose channels that are more direct, and sales expenses can be spread over more products.
A producer’s desire to control pricing, positioning, brand image, and customer support may avoid channels in which discount retailers are present. Furthermore, manufacturers of upscale products may sell only in expensive stores to maintain an image of exclusivity.

18. 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
For further details about this topic see page411 20

19. 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
For further details about this topic see page413 24

20. Electronic Data Interchange
On Line
Information technology that replaces paper documents that accompany business transactions.
EDI
On Line: Wal-Mart
Is EDI a requirement for Wal-Mart suppliers? Go to Wal-mart’s Web site and read the “Supplier Information” pages. Does selling to Wal-Mart seem worth the effort? Why or why not?
Notes:
The order is often the step that sets the supply chain in motion, especially in build-to-order environments such as Dell Computer. The order processing system processes the requirements of the customer and sends the information into the supply chain.
As the order enters the system, management monitors the flow of goods and the flow of information.
Order processing is becoming more automated through the use of electronic data interchange computer technology. This information can be read and processed by computers.

21. Criteria for Ranking Modes of Transportation
Relative
Cost
Transit
Time
Reliability
Capability
Accessibility
Traceability
Highest
Lowest
Air
Water
Pipe
Rail
Truck
Notes:
Exhibit compares the basic modes of transportation based on the six criteria.

22. RETAILING
All activities in selling goods and services directly to final consumers for personal, non-business use.
Most via retail stores
Non-store growing fast
For further details about this topic see page 2 2

23. Retailers Are Classified By:
Retailing
Retailers Are Classified By:
Self-service retailers
Customers are willing to self-serve 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
Amount of service
Product lines
Relative prices
Organizational approach

24. Retailers Are Classified By:
Retailing
Retailers Are Classified By:
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
Amount of service
Product lines
Relative prices
Organizational approach

25. Retailers Are Classified By:
Retailing
Retailers Are Classified By:
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
Amount of service
Product lines
Relative prices
Organizational approach

26. Retailers Are Classified By:
Retailing
Retailers Are Classified By:
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)
Amount of service
Product lines
Relative prices
Organizational approach

27. Target Market and Positioning
Define target markets and Select positioning
Variety?
Depth of assortment?
Convenience?
Low prices?
For further details about this topic see page444 16

28. Presentation of the Retail Store
Employee Type & Density
Merchandise Type & Density
Fixture Type & Density
Sound
Odors
Visual Factors
Factors in
Creating
Store’s
Atmosphere
Notes:
The presentation of a retail store helps determine the store’s image and positioning in consumers’ minds. For example, positioning as an upscale store would use a lavish or sophisticated presentation.
The main element of presentation is atmosphere, with the most influential factors shown on this slide.
Employee type and density: an employee’s general characteristics such as friendly and knowledgeable, and the number of employees in the selling space.
Merchandise type and density: the type of merchandise carried and how it is displayed.
Fixture type and density: elegant, trendy, uncluttered. Technology may be added as a fixture.
Sound: music at a restaurant or store.
Odors: smells of pastries in bakeries, fragrances as a key design element.
Visual factors: colors can create a mood or focus attention.
4. Retailers are now adding an element of entertainment to their store atmosphere.

29. Factors to Consider in Site Selection
Economic growth potential
Area competition
Geography
Notes:
The retailing axiom “location, location, location” has long emphasized the importance of place to the retail mix. The retailer is making a large commitment of resources that reduces future flexibility, and the location will affect the store’s future growth and profitability.
Factors to consider in site selection are the area’s economic growth potential, the amount of competition, and geography.
Specific site considerations are the neighborhood socioeconomic characteristics, traffic flows, land costs, zoning regulations, and public transportation. Additional variables are the site’s visibility, parking, entrance and exit locations, accessibility, and safety/security issues.

30. Non-Store Retailing Growing much faster than store retailing
a third of all sales by 2005
Direct Marketing
Direct Selling
Automatic Vending
For further details about this topic see page440 11

31. 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”
For further details about this topic see page449 21