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Distribution Channels

The document discusses different types of distribution channels that companies can use to bring products to market. It describes direct sales, retailer distribution, intensive distribution which aims for wide availability, and selective distribution where companies tightly control the retail experience. It provides examples of companies using intensive distribution like 7-Eleven and Parle-G biscuits. Exclusive, dual, wholesaler, value-added reseller, and industrial channels are also overviewed along with automobile and furniture industry examples.

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Meenakshi Singh
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343 views

Distribution Channels

The document discusses different types of distribution channels that companies can use to bring products to market. It describes direct sales, retailer distribution, intensive distribution which aims for wide availability, and selective distribution where companies tightly control the retail experience. It provides examples of companies using intensive distribution like 7-Eleven and Parle-G biscuits. Exclusive, dual, wholesaler, value-added reseller, and industrial channels are also overviewed along with automobile and furniture industry examples.

Uploaded by

Meenakshi Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Distribution Channels

Different channels of distribution


1. Direct sales
• A direct sales business model eliminates any intermediary in the
distribution process, leaving the brand to sell products to customers
on its own. That means there’s no retailer or third-party outlet to
stock inventory and promote products.
2. Retailer
• Retail is the most common distribution channel for consumer brands,
using third-party outlets to bring products to market. Supermarkets,
big-box stores, convenience stores and department stores all act as
intermediaries and the point of contact for customers. You don’t go to
the Jif store to buy peanut butter, after all.

• Not all retail distribution strategies take the same approach, however.
Depending on the brand, product and audience, they may aim for the
widest market penetration possible, while others focus on
establishing exclusivity by limiting availability.
3. Intensive distribution
• When a range of acceptable brands is available for customers,
intensive distribution is required. It can be said that if one brand is
unavailable, a customer can simply choose another. In order to
distribute the product, all the possible outlets can be used in this
alternative.

• In products like soft drinks, distribution strategy is particularly useful.


In these products, distribution is the main success factor. For the
product to be easily available, the firms dispense their brands through
varied outlets.
Example – Intensive Distribution System
• 7 Eleven opened its 71,100th retail store in the world and crossed a
very important milestone on July 13, 2020. This store was inaugurated
in Seoul, South Korea. This brand has licenced stores and/or
franchises all over the world. Including the 11800 retail stores in
North America, they have stores in 17 countries.

• Joe DePinto, the president of the retail brand, says, “7-Eleven’s iconic
orange, green and red stripes are easily recognised in 17 countries
around the world,” In 1927, 7-Eleven was launched as convenience
store in Dallas, Texas.
Example
• Parle Products Private Limited is the owner of the well-known biscuit brand
Parle-G and is an Indian food products company. Around 5 million retail
stores across India sell a total off 1 billion Parle-G packets every month.
• People say that if the biscuits’ monthly production is arranged side by side, it
would cover the 7.25 lakh kilometre distance from the moon to the earth.
The first FMCG brand (Fast Moving Consumer Goods) that crossed the mark
of Rs. 5,000 crore retail sales in India was Parle-G, says a Nielsen survey.
• In addition to this, the brand has a huge consumer base in China and sells
more than any other biscuit brand there. According to the survey, at any
given second in India, around 4551, Parle G biscuits are being consumed.
4. Selective distribution
• Not all companies that sell through retailers are looking to achieve the
widest distribution possible. Luxury brands are often highly selective about
where their products are placed and how they are represented. You won’t
find Hermes handbags in a big-box store, for instance. For those companies,
the in-store experience is part of their brand and they tightly regulate retail
displays and even how clerks describe or demo their products.

• Selective distribution makes sense when brands and products cannot be


swapped out interchangeably. Target audiences are extremely
discriminating and are willing to travel to specific outlets where their
preferred brands are available.
Example of Selective Distribution
Cont..
• McDonald’s and its Franchisees. They serve a locally relevant menu of
exceptional quality food and beverages in a staggering 119 countries. The
business models and efforts of McDonald’s restaurants have made it a
household name all over the world.

• At the end of 2019, out of 38,695 restaurants, 36,059 were franchised. A


mammoth-sized share of 93% of total McDonald’s restaurants.

• In India, McDonald’s does not directly offer the franchise of its company. Two
people – Amit Jatia and Vikram Bakshi, have been given licensing authority to
sell franchises of McDonald’s in India.
5. Exclusive distribution
• An extreme form of selective distribution is Exclusive distribution. Here,
one or a maximum of two- wholesaler, retailer or distributor is used.
When a firm chooses to distribute its brand through just one or two
influential outlets in the market, it is said to be using an exclusive
distribution strategy. These outlets exclusively deal in that particular
brand and not all competing brands.

• The manufacturer expects to have control over the intermediary’s price,


promotion, credit inventory, and service policies as a common form of
distribution rights. Aggressive selling by such outlets benefits the firm.
Example – Exclusive Distribution System
Cont…
• Ranging from luxury, bridge to luxury, high–premium, and high–street lifestyle;
Reliance Retail has a portfolio of over 45 international brands. Reliance Brands
Limited possesses the rights to run super-premium global labels in India.

• Some of these premium brands include Diesel, Gas, Superdry, Brooks Brothers,
Burberry, Coach, Giorgio Armani, Hamleys, Jimmy Choo, Kate Spade New York, and
Steve Madden. Ranging from luxury, bridge to luxury, high–premium, and high–street
lifestyle; Reliance Retail has a portfolio of over 45 international brands. Reliance
Brands Limited possesses the rights to run super-premium global labels in India.
• Some of these premium brands include Diesel, Gas, Superdry, Brooks Brothers,
Burberry, Coach, Giorgio Armani, Hamleys, Jimmy Choo, Kate Spade New York, and
Steve Madden.
Example – Dominos and Jubilant FoodWorks
Limited
• In India, Sri Lanka, Nepal, and Bangladesh; the Master Franchisee of
Domino’s Pizza, is Jubilant FoodWorks Limited.
• They possess the sole and exclusive rights to own and operate
Domino’s Pizza restaurants in all these territories.
6. Dual distribution
• Dual distribution is where a manufacturer sells its product directly to
customers and indirectly through third-party distributors and
retailers. They use more than one distribution channel to reach the
end customer and it allows the product to reach a larger market.
• In the case of Coach, they sell their luxury handbags through the
“shop-in-shops” method, online, specialty stores, factory outlets, and
regular retail stores.
6. Dual distribution
Example
• Apple uses direct distribution when they sell their product out of their
Apple stores, but they also use indirect distribution when they sell
their phones out of stores like Sprint.
7. Wholesaler
• wholesalers act as middlemen that buy products from manufacturers
and then sell those goods to end users at an increased price point.
The biggest differences between these business models are scale and
audience.
• Restaurants, for instance, buy their equipment from wholesale
providers. Certain retailers may purchase products in bulk from a
wholesaler and then sell those goods to consumers individually at a
higher price point.
8. Channel partners or value-added resellers
• Many B2B companies sell through the channel. That is, they don’t sell
directly to end users, but work with channel partners that buy their
wares, repackage them and then sell to their own customers.

• How is that any different from the wholesaler models discussed


earlier? As the name suggests, value-added resellers (VARs) include
new features and services to improve a product and appeal to their
target audience. The manufacturer provides a basic foundation to
work with, and the VAR adds the secret sauce to distinguish its
offerings from the competition’s goods.
Automobile Dealerships
• Automobile dealerships most commonly offer value-added products
and services in the forms of extended warranties and service
contracts, or custom-made accessory parts or engine enhancements.
Not all value-added services directly produce additional revenue for a
company.
• For example, included within the value-added services offered by
automobile dealers are typically things such as offering a free rental
car for a customer's use during a period when the customer's car is at
the dealership for repairs. Such a service is solely aimed at developing
customer relationships for repeat business.
Furniture Companies
• Some home furnishing companies offer consultations with interior
designers who will visit the customer's home, take photos, measure the
space, and make design recommendations based on the customer's budget
and style preferences. Some designers will use computer modeling tools to
help the customer visualize what the furniture will look like in their space.

• Companies that specialize in selling office furniture to large corporate


clients will include space planning as a value-added service. They'll work
with the client to create drawings that map out the office space with the
exact placement of the furniture for reception areas, cubicles, executive
offices, workspaces, and conference rooms.
The Industrial Channel Structure
The Industrial Distributor
• The Industrial distributor is like the wholesaler in the consumer
channel. The distributor takes care of sales, stocking and providing
the product to the end customer.
• Mostly in the Industrial channel, the distributor also takes care of
service and is known to be technically sound about the product. Here
the sales are in huge volumes and repeat buying is more than
individual purchases.
Flow of Industrial Distribution Channel
Flow 1- Producer to industrial user
Flow 2- Producer to industrial distributor to industrial user
Flow 3- Producer to agent to industrial user.
Flow 4- Producer to agent to industrial distributor to industrial user.

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