Distribution Management

By: Shilpa Chadichal

 Marketing Channels are sets of
interdependent organizations involved in the
process of making a product or service
available for use or consumption.
 0-Level 1-Level 2-Level 3-Level
Manufacturer Manufacturer Manufacturer Manufacturer

Wholesaler Wholesaler

Jobber

Retailer Retailer Retailer

Consumer Consumer Consumer Consumer

 0-level 1-level 2-Level 3-Level
Manufacturer Manufacturer Manufacturer Manufacturer

Manufacturer’s Manufacturer’s
representative sales branch

Industrial
Distributors

Industrial Industrial Industrial Industrial

Customer Customer Customer Customer
 There are many strategic options for the structure
of a marketing channel:

 Exclusive Distribution:
 Exclusive distribution is the most restrictive type of
market coverage. Firms using this strategy give one
merchant or outlet the sole right to sell a product within a
defined geographic region.

 For example, BMW, Jaguar, and Mercedes typically grant exclusive

distribution to only one dealer in any given area.
 Selective Distribution

 Firms using selective distribution give several

merchants or outlets the right to sell a product in
a defined geographic region. Selective
distribution is desirable when customers need the
opportunity to comparison shop, and after-sale
services are important.

 For example, Kodak digital cameras are available at

Best Buy, Office Depot, Walmart, Target, and many
online merchants.
 Intensive Distribution
 Intensive distribution makes a product available at
the maximum number of merchants or outlets in
each area to gain as much exposure and as many
sales opportunities as possible.

 This distribution strategy is the option of choice for

most consumer convenience goods, such as candy,
soft drinks, over-the-counter drugs, or cigarettes;
and for business office supplies like paper and
toner cartridges.
 Vertical marketing
systems
 Corporate VMS
 Administered VMS
 Contractual VMS
 Horizontal
marketing systems
 Multichannel
systems
 Retailing
 Consists of the final activity and steps needed to place a
product in the hands of the consumer or to provide
services to the consumer.
 It is the set of business activities that adds value to the
products and services sold to consumers for their
personal or family use.

 A retailer is a business that sells products and/or

services to consumers for personal or family use.
 Retailers:
-Sears, McDonalds, Amazon.com, , PVR Theaters,
PANTALOON RETAIL INDIA LTD, LANDMARK LTD ,
RAYMOND LTD,etc.

 Firms that are retailers and wholesalers that sell to

other business as well as consumers:
- Metro, Wal-mart, Office Depot, The Home Depot ,
Staples etc.
 Breaking Bulk
-Buy it in quantities customers want
 Holding Inventory
-Buy it at a convenient place when you want it
 Providing Assortment
-Buy other products at the same time
 Offering Services
-See it before you buy, get credit, layaway
1. Specialty store –
A retail store that carries a narrow product line with a
deep assortment within that line. Eg Furniture stores,
florists, sports goods store, bookstores.
2. Department store –
A retail organization that carries a wide variety of
product lines-typically clothing, home furnishings, and
household goods; each line is operated as a separate
department managed by specialist buyers or
merchandisers. Eg Big Bazar, Walmart, Carrefour,
Macy’s, Bloomingdale’s, Nordstrom.
3. Supermarket –
Also called grocery store, Large, low-cost, low-
margin, high-volume, self-service store that carries a
wide variety of food, laundry, and household
products. Eg Food Bazar, Reliance Fresh, Nilgiris
4. Convenience store –
A small store, located near a residential area, that is
open long hours seven days a week and carries a
limited line of high-turnover convenience goods.
 Sells items such as candy, ice-cream, soft drinks,
cigarettes and other tobacco products, newspapers and
magazines, along with a selection of processed food and
perhaps some groceries. Eg In & Out
5. Superstore –
A store almost twice the size of a regular
supermarket that carries a large assortment of
routinely purchased food and non-food items
and offers services such as dry cleaning, post
offices, photo finishing, cheque cashing, bill
paying, lunch counters, car care, and pet care. Eg
Star Bazaar, Sears-Kmart.
Within Superstores different varieties are:-
i) Category killer –
Giant specialty store that carries a very deep
assortment of a particular line and is staffed by
knowledgeable employees.
i) Combination stores-
Combination of food & drug stores that average
55,000 sq feet of selling space.
iii)Hypermarkets-
range between 80,000 and 220000 sq feet and
combine supermarket, discount and
warehousing retailing. Product assortment
includes furniture, large and small appliances,
clothing and many other items.
6. Discount store –
A retail institution that sells standard
merchandise at lower prices by accepting lower
margins and selling at higher volume.
7. Off-price retailer –
Retailer that buys at less-than-regular wholesale
prices and sells at less than retail. (E.g. Catalog
showrooms).
i) Independent off-price retailer –
Off-price retailer that is either owned and run by
entrepreneurs or is division of larger retail
corporation.
ii) Factory outlet –
 Off-price retailing operation that is owned and
operated by a manufacturer and that normally carries
the manufacturer’s surplus, discontinued, or irregular
goods
iii) Warehouse club –
 Off-price retailer that sells a limited selection of brand
name grocery items, appliances, clothing, and a
hodgepodge of other goods at deep discounts to
members who pay annual membership fees.
 1. New Retail Forms and Shortening Retail Life
Cycles
 Wheel of retailing concept – A concept of retailing that
states that new types of retailers usually begin as low-
margin, low-price, low-status operations but later evolve
into higher-priced, higher-service operations, eventually
becoming like the conventional retailers they replaced.
2. Growth of Non-store Retailing
 Internet
3. Increasing Intertype Competition
 Different type competition
4. The Rise of Mega retailers
 Wal-Mart
5. Growing Importance of Retail Technology
 Cash register, scan
 Most common, employee theft, anti-theft
technology
6. Global Expansion of Major Retailers
 KFC
 McDonald in India (E.g. mutton)
7. Retail Stores as “Communities” or “Hangouts”
 E.g. Starbucks
 A wholesaler is an intermediary entity in the
distribution channel that buys in bulk and sells to
resellers rather than to consumers. In its simplest
form, a distributor performs a similar role but
often provides more complex services.
 The sale and distribution of goods to users
other than end consumers. Wholesaling
involves selling merchandise to retailers,
wholesalers and merchants, or to industrial,
commercial and institutional users.

 Wholesaling often occurs when large quantities

of merchandise are reassembled, sorted, then
repackage, and distribute in smaller lot
 Merchant

Full-service

Limited-service

Brokers and agents

Manufacturers

Specialized
 The Growth of Electronic Commerce
 Shifting Power in the Channel
 The Growth of Direct Distribution and Non-
store Retailing
 Catalogue and Direct Marketing
 Direct Selling
 Home Shopping Networks
 Vending
 Direct Response Advertising

 Outsourcing Channel Functions

 The Growth of Dual Distribution
 Connectivity
 The informational and technological linkages among firms in the
supply chain network. Connectivity ensures that firms can access
real-time information about the flow in the supply chain network.

 Community
 The sense of compatible goals and objectives among firms in the
supply chain network. All firms must be willing to work together
to achieve a common mission and vision.

 Collaboration
 The recognition of mutual interdependence among members of the
supply chain network. Collaboration goes beyond contractual
obligations to establish principles, processes, and structures that
promote a level of shared understanding.
 Channel conflict occurs when one member’s
actions prevent another channel from achieving
its goal.
 Types of channel conflict
 Vertical
 Horizontal
 Multichannel
 Goal incompatibility

Unclear roles and rights

Differences in perception

Intermediaries’ dependence
on the manufacturer
An integrated logistics system (ILS) includes
materials management, material flow
systems, and physical distribution, aided by
information technology.
 Sales forecasting  In-plant warehousing
 Distribution  Shipping-room
scheduling processing
 Production plans  Outbound
 Finished-goods transportation
inventory decisions  Field warehousing
 Packaging  Customer delivery
and servicing
 How should orders
be handled?
 Where should stock
be located?
 How much stock
should be held?
 How should goods
be shipped?
 Is the design, planning, execution, control, and
monitoring of supply chain activities with the objective
of creating net value, building a competitive
infrastructure, leveraging worldwide logistics,
synchronizing supply with demand and measuring
performance globally
 Managing flow of information through supply chain in
order to attain the level of synchronization that will
make it more responsive to customer needs while
lowering costs
 Keys to effective SCM
 information
 communication
 cooperation
 trust