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Optimizing Distribution Channels for Market Success

Learn about the functions, concepts, and recent trends in distribution channels, including logistics modes, channel conflicts, and types of wholesalers and retailers to maximize sales and efficiency in different industries.

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Optimizing Distribution Channels for Market Success

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  1. CHANNELS DIRECT INDIRECT e.g. services Consumer goods Industrial products Convenience - location Advantages: - assortment - greater control - size of purchase - feedback Funds/Risks (credit) Specialization

  2. Functions of Channel Member • Information • Financing/Risk • Distribution • Matching: Grading/sorting Bulk breaking Assembling Assorting • Promotions

  3. Market Exposure: • Intensive distribution - Timex • Selective distribution - Espirit • Exclusive distribution - Piaget, McDonalds

  4. Other Concepts Dual distribution Wheel of retailing Reverse channels - recycling Gray markets – unauthorized channels Inventory turnover rate = Sales/average inventory

  5. Physical Distribution or Logistics:Movement/Handling of Goods Modes of Transport __________________________________________ Rail Road Water Pipe Air Volume 36.5% 24.9% 16.3% 22% .34% Speed 3 2 4 5 1 (Rank) Cost 3 4 1 2 5 (Rank)

  6. Recent Trends: Containerization JIT - Just in time EDI - Electronic data interchange

  7. Channel Conflict: Horizontal: Mail order vs. retailers Vertical: GM - dealers/Coke - bottlers Solutions Channel Captain: - Manufacturer: P&G - Middleman: Sears, K-Mart

  8. VMS: Vertical Marketing Systems Corporate: The Limited, Gap, Sherwin-Williams Administered: Informal agreement Contractual: Franchise (500,000*1/3rd sales) Wholesalers: IGA - Independent Grocers Association/Western Auto Co-Ops - True Value Hardware

  9. HMS: Horizontal Marketing Systems Pillsbury - Refrigerated dough sold through Kraft Lamar Savings bank - Safeway Stores H&R Block - Hyatt Legal Services

  10. Wholesalers Industries Types of Wholesalers (W/S)Functions Hardware, Full line W/S All functions Drugs Assortment Auto parts Limited line W/S Seafood industries Health foods Hoisery, toys, HBA Rack Jobber Furnish racks Consignment Bill for sold material

  11. Wholesalers Industries Types of Wholesalers (W/S)Functions Office supplies Cash & Carry W/S Electric supplies No delivery Groceries No credit No info Bulky products Drop shipper e.g., coal, lumber Get orders Ship-mfr.- customer

  12. Wholesalers Industries Types of Wholesalers (W/S)Functions Meat, diary, bakery Truck jobbers Auto parts, footwear Agents Selling Light engineering Real estate Brokers Dating services Food

  13. Types of Retailers: (1) Speciality - High quality; exclusive (2) Department store - Dillard’s, Harrods $17m sales = 40% “margin - profit” (3) Mass Merchandisers (MM) High volume = profit K-Mart, Walmart $20m, 60,000 sq. ft. Supermarkets 2/3 food sales, $11m, 230 Catalog showroom Jewelry, gifts Discount houses Cameras, computers

  14. (3) Mass Merchandisers (MM) - continued Hypermarkets 200,000 sq. ft. Warehouse clubs 8-10% Single line MM: Toys R Us, IKEA, Circuit City “Category Killers” (4) Convenience stores 7-11, Stop-N-Go (5) Vending machines High cost 41% (6) Direct mail (7) Home shopping • Door-to-door • E-retailers – Amazon.com Wheel of retailing

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