Distribution Management, Need for Marketing Channels,Decision involved in setting up the channels, Management Strategies, Introduction to logistics Management, Retailing, wholesaling, Multi Channel Marketing.

1. DISTRIBUTION MANAGEMENT
Prepared by Ms. Shery Asthana
Asst. Prof. (Greater Noida Institute of
Management)

2. Marketing Channels and Value
Networks
Successful value creation needs successful value delivery. Holistic
marketers are increasingly taking a value network view of their
businesses. Instead of limiting their focus to their immediate suppliers,
distributors, and customers, they are examining the whole supply chain that
links raw materials, components, and manufactured goods and shows how
they move toward the final consumers.
• Most producers do not sell their goods directly to the final users; between
them stands a set of intermediaries performing a variety of functions. These
intermediaries constitute a marketing channel (also called a trade channel
or distribution channel).
• Formally, marketing channels are sets of interdependent organizations
participating in the process of making a product or service available for use
or consumption. They are the set of pathways a product or service follows
after production, culminating in purchase and consumption by the final end
user

3. Marketing Channels – Importance
• A marketing channel system decisions affects the other marketing decisions also, and therefore are
among the most critical decisions. Channel choices themselves depend on the company’s marketing
strategy with respect to segmentation, targeting, and positioning. Marketing channels must not just see
markets but they must also make markets as one of the chief roles of marketing channels is to convert
potential buyers into profitable customers.
• In addition channel decisions include relatively long-term commitments with other firms as well as a set
of policies and procedures. Marketers in the present dynamic market should adopt the holistic
perspective and ensure that marketing decisions in all these different areas are made to collectively
maximize value.
• In managing the intermediaries, the firm must also decide on the emphasis given to the ‘push’ versus
‘pull’ marketing strategy. A ‘push’ strategy uses the manufacturer’s sales force, trade promotional money,
or other means to induce intermediaries to carry, promote, and sell the product to end-users.
• This strategy is appropriate where there is low brand loyalty in a category, brand choice is made in the
store, the product is an impulse item, and product benefits are well understood. While, in the ‘pull’
strategy the manufacturer uses advertising, promotion, and other forms of communication to persuade
consumers to demand the product from intermediaries, thereby, induce the intermediaries to order it.
• ‘Pull’ strategy is appropriate when there is high brand loyalty and high involvement in the category, when
consumers are able to perceive differences between brands, and when they choose the brand before they
go to the store.
• Marketing activities directed towards the channel as part of ‘push’ strategy are more effective when
accompanied by a well-designed and well-executed ‘pull’ strategy that activates consumer demand. On
the other hand, without at least some consumer interest, it can be very difficult to gain much channel
acceptance and support.

4. Hybrid Marketing
Hybrid marketing is a promotional approach that combines traditional marketing and
digital marketing.
Instead of focusing solely on online platforms or in-person touch points , hybrid
marketing merges both approaches to create a more effective and extensive
outreach plan.
It mixes and matches marketing approaches from both categories.
Traditional Marketing
– Mailers and flyers ,Trade show, Events, Print ads, Radio ads, Television ads
Static signage, Public relations.
Digital Marketing
Search engine marketing , Social media , Blogging ,Inbound marketing , Text
advertising , Email marketing , Display advertising ,Guest posting
In multichannel marketing, each channel targets a different segment of buyers, or
different need states for one buyer, and delivers the right products in the right places
in the right way at the least cost.

5. Channel-Design Decisions
It is very important that a distribution channel is properly aligned to satisfy
the needs of channel members and also for the success of any industrial
marketing strategy. A good industrial channel creates the communication
and physical supply linkages with existing and potential customers.
Channel designing in industrial markets is a dynamic process that
consists of either developing the new channels or modifying the existing
ones.
Designing an appropriate industrial distribution channel and managing it is a
tough and continuing task. A well designed channel structure helps to
achieve the desired marketing objectives. A channel structure consists of
types and number of middlemen, terms and conditions of channel members,
number of channels.

7. 1. Analyzing the Needs of the Customer
When a marketer designs a marketing channel, he must understand the
service output levels desired by the target customers. Different customers have
different levels of service requirements. A high potential customer needs to be
offered effective and professional service backup, ensured availability of
varied products compared to the low potential customer. The marketing
channel designer has to know at this stage itself that providing superior service
output means increased channel costs and higher prices for customers.
2. Establishing Channel Objectives
Channel objectives are a part of and result from the company’s
marketing objectives that need to be stated in terms of targeted service output
levels. Profit considerations and asset utilization must be reflected in channel
objectives and the resultant design. It should be the endeavour of the channel
members to minimize the total channel costs and still provide with the desired
level of service outputs. Channel objectives keep varying depending on
the characteristics of the products. For example, while a customized non-
standard product requires company sales force to sell directly, products like
HVAC (Heating, Ventilation and Air-conditioning) are either sold by the
company or its franchised dealers.

8. 3. Considering Channel Constraints
The industrial marketer develops his channel objectives keeping into consideration
various constraints like the company, competition, the environment, product
characteristics and the level of service output desired by the target customers.
Company: If a company has financial limitation as constraint, then it may restrict its
direct distribution approach through company sales force to few high potential
customers.
Competition: If a competitor has been very successful through direct service then it
may force all other firms also to adopt the same strategy of direct selling.
Environment: Economic conditions, legal regulations are the environmental factors
that affect channel design. During recession, producers use economical ways to sell the
products to avoid additional costs. Similarly, the law looks down upon those channel
arrangements that tries to build a monopoly market or minimize competition.
Product characteristics: As already mentioned, complex and non-standard products
require direct distribution without any intermediaries. E.g. If an industrial marketer is
providing customized machinery to his customer, then he deals directly with him rather
than involving any intermediary to understand the customer needs better.
Customer: The industrial marketers depends on intermediaries to offer services to
customers who are either giving less business or are located at far-off places and prefers
to serve the nearby or high potential customers by themselves.

9. 4. Listing Channel Tasks
The industrial marketers have to creatively structure the necessary tasks or functions to
meet customer requirements and company goals. They have to first make a list of
various tasks to be performed, identify the critical tasks, take objective and realistic
decisions on which tasks can be effectively performed by the company and which
cannot be performed due to certain constraints. The careful analysis of customer needs,
establishing objectives, considering constraints and listing the channel tasks form the
backbone of channel design process. Once these aspects are delineated individually, the
next step of identifying and evaluating channel alternatives starts.
5. Identifying Channel Alternatives
There are four issues that are involved in identifying the channel alternatives. They are:
the types of business intermediaries, the number of intermediaries, the number of
channels and the terms and responsibilities of each channel members.
- The Types of business intermediaries: There are different types of intermediaries
that the industrial marketers should identify. They have to consider various factors like
the tasks to be performed, product and market conditions before selecting either
manufacturer’s representatives or agents, industrial distributors, brokers, commission
merchants or value-added resellers. The marketers should search for innovative or
combination of marketing channels.
- Number of intermediaries: The manufacturers have to settle on the number
of intermediaries they wish to use in their channel structure. They may either go
for intensive, selective or exclusive distribution.

10. Intensive distribution: Intensive distribution is when a business ignores market
segmentation and decides to supply their product to every market available. The idea
of intensive distribution is that your product can be found anywhere where a person
shops, so that the product will be available for as many customers as possible.e.g.
convience goods
Selective distribution: The industrial marketer selects few intermediaries to distribute
the products to the target customer. This gives the marketer to develop a good
working relation with the selected intermediaries, have better control, incure less
costs and finally expect a better than average selling effort e.g. Shopping Goods
Exclusive distribution: This strategy helps to enhance the product image and is more
prevalent in consumer markets where some intermediaries exclusively deal and
distribute the products of one manufacturer. They are not allowed to handle the
competitor’s products. The manufacturer expects aggressive selling by
the intermediaries and tries to have control over their pricing policies,
promotion strategy, credit terms and other services. e.g. Speciality Goods
Number of channels: Industrial marketers need to serve various market segments.
This necessitates them to use more than one channel for distributing and marketing
their products. This multi-channel approach helps them not only to increase their
market share but also reduce their costs. However, the industrial marketers need to
take care of possible channel conflicts like proper demarcation of territory to channel
members to sell and serve the customers in their respective areas.

11. Terms and responsibilities of Channel Members: There are various terms
and conditions which the industrial marketer must make clear to the
participating channel members like the responsibilities and tasks, conditions
of sale and territorial rights that would enable both of them to enhance their
performance.
In order to avoid any future disagreements, there should be clarity in the
roles of both the industrial marketers and the channel partners. Each should
comply with the commitments about their individual responsibilities and
tasks to be performed.
Conditions of sale: It should be clearly mentioned well in advance about
the discounts offered by the manufacturers to the distributors, the
commission to be paid to the agents or brokers. Other terms relating to
warranty period , replacement of defective parts also should be appropriately
stated.
Territorial rights: The territory between the distributors should be
well demarcated so as to avoid any future confusion that may lead to legal
issues.

12. 6. Evaluating Alternate Channels
There are several channel alternatives available to the industrial markets.
They have to determine the best among the alternatives by evaluating them
based on the following criteria:
Economic Performance: Different channel alternatives generate different
levels of sales and incur different levels of costs. An industrial marketer has to
pose a question whether sales generation would be more by direct selling
through company sales force or through the channel members. Many of the
industrial marketers believe that sales will be more from company sales force
as they exclusively concentrate on company’s product, they are given proper
training to sell the product, they show more aggressiveness as their career
depends on company’s success and finally customers prefer to deal with the
company directly. But it may also happen that the intermediary can sell more
than the company sales force. The possible reasons for this could be the
agency having many sales people with it or its sales force are much motivated
with the commission offered by the company or the customers prefer to deal
with agents who have extensive contacts. The marketing manager has to
similarly estimate the total costs of selling through different channel
members.

13. Degree of control: This is another important factor while evaluating the channel
alternatives. An industrial marketer exercises different levels of control over different
channel members. The degree of control is more on company sales force and least on
distributors. The distributor may concentrate more on those products that earn him high
products rather than following the instructions of the manufacturer to push less
preferred products. Similarly an agent entertains his potential customers most rather
than concentrating on manufacturer’s product.
Degree of adaptability of channel members: With the market changing dynamically,
the channel members should have the capacity to adapt themselves to the changing
environment. The industrial marketer must be able to control as well as modify the
channel structure. Each channel member should be committed to the agreement they
have with other members.
For example, a Tyre Company who is trying to enter into US market is a manufacturer
of safety systems for vehicle tyres whose products allow the vehicle to continue to be
driven even if the tires burst or are shot out. The main customers for the systems are
police forces, security companies, emergency services like ambulance and fire service,
armies, trucking companies, and even the general public. The organization cannot serve
all types of customers through a single distribution channel, so depending on the size of
the market, value and the level of usage, the market for safety systems can be divided
into three segments.
Government Organizations (Ambulance, fire services, armies),
Private sector (Original equipment manufacturers like Trucking companies & vehicle
manufactures),
General public.

14. Channel Management Decision
After a company has chosen a channel system, it must select, train,
motivate, and evaluate individual intermediaries for each channel. It
must also modify channel design and arrangements over time. As
the company grows, it can also consider channel expansion into
international markets.
Selecting Channel Members
To customers, the channels are the company. Consider the negative
impression customers would get of McDonald’s Mercedes-Benz etc
if one or more of their outlets or dealers consistently appeared dirty,
inefficient, or unpleasant.
To facilitate channel member selection, producers should determine
what characteristics distinguish the better intermediaries—number
of years in business, other lines carried, growth and profit record,
financial strength, cooperativeness, and service reputation.

15. Training and Motivating Channel Members
A company needs to view its intermediaries the same way it views its end users. It
should determine their needs and wants and tailor its channel offering to provide them
with superior value. Carefully implemented training, market research, and other
capability-building programs can motivate and improve intermediaries’ performance.
The company must constantly communicate that intermediaries are crucial partners in a
joint effort to satisfy end users of the product.
POWER Producers vary greatly in their skill in managing distributors.
Channel power is the ability to alter channel members’ behaviour so they take
actions they would not have taken otherwise. Manufacturers can draw on the
following types of power to elicit cooperation:
• Coercive power. A manufacturer threatens to withdraw a resource or terminate a
relationship if intermediaries fail to cooperate. This power can be effective, but its
exercise produces resentment
and can lead the intermediaries to organize countervailing power.
• Reward power. The manufacturer offers intermediaries an extra benefit for
performing specific acts or functions. Reward power typically produces better results
than coercive power, but intermediaries may come to expect a reward every time the
manufacturer wants a certain behaviour to occur.

16. Legitimate power. The manufacturer requests a behavior that is warranted under the
contract. As long as the intermediaries view the manufacturer as a legitimate leader,
legitimate power works.
• Expert power. The manufacturer has special knowledge the intermediaries value. Once
the intermediaries acquire this expertise, however, expert power weakens. The manufacturer
must continue to develop new expertise so intermediaries will want to continue cooperating.
• Referent power. The manufacturer is so highly respected that intermediaries are proud
to be associated with it. Companies such as IBM, Caterpillar, and Hewlett-Packard have high
referent power.
Coercive and reward power are objectively observable; legitimate, expert, and referent
power are more subjective and depend on the ability and willingness of parties to recognize
them.
CHANNEL PARTNERSHIPS More sophisticated companies try to forge a long-term
partnership with distributors. The manufacturer clearly communicates what it wants from its
distributors in the way of market coverage, inventory levels, marketing development,
account solicitation, technical advice and services, and marketing information and may
introduce a compensation plan for adhering to the policies.
To streamline the supply chain and cut costs, many manufacturers and retailers have adopted
efficient consumer response (ECR) practices to organize their relationships in three areas:
(1) demand side management or collaborative practices to stimulate consumer demand by
promoting joint marketing and sales activities, (2) supply side management or collaborative
practices to optimize supply (with a focus on joint logistics and supply chain activities), and
(3) enablers and integrators, or collaborative information technology and process
improvement tools to support joint activities that reduce operational problems, allow greater
standardization, and so on.

17. Evaluating Channel Members
Producers must periodically evaluate intermediaries’ performance against such standards as
sales quota attainment, average inventory levels, customer delivery time, treatment of
damaged and lost goods, and cooperation in promotional and training programs.
A producer will occasionally discover it is overpaying particular intermediaries for what they
are actually doing. One manufacturer compensating a distributor for holding inventories
found the inventories were actually held in a public warehouse at its own expense. Producers
should set up functional discounts in which they pay specified amounts for the trade
channel’s performance of each agreed upon service.
Underperformers need to be counselled, retrained, motivated, or terminated.
Modifying Channel Design and Arrangements
No channel strategy remains effective over the whole product life cycle. In competitive
markets with low entry barriers, the optimal channel structure will inevitably change over
time. The change could mean adding or dropping individual market channels or channel
members or developing a totally new way to sell goods.
CHANNEL EVOLUTION A new firm typically starts as a local operation selling in a fairly
circumscribed market, using a few existing intermediaries. Identifying the best channels
might not be a problem; the problem is often to convince the available intermediaries to
handle the firm’s line.
If the firm is successful, it might branch into new markets with different channels. In smaller
markets, the firm might sell directly to retailers; in larger markets, through distributors. In
rural areas, it might work with general-goods merchants; in urban areas, with limited-line
merchants. It might grant exclusive franchises or sell through all willing outlets. In one
country, it might use international sales agents; in another, it might partner with a local firm.

18. Channel Modification Decisions
A producer must periodically review and modify its channel design and arrangements. The
distribution channel may not work as planned, consumer buying patterns change, the market
expands, new competition arises, innovative distribution channels emerge, and the product
moves into later stages in the product life cycle.
Perhaps the most difficult decision is whether to revise the overall channel strategy.
Despite the convenience of automated teller machines, online banking, and telephone call
centers , many bank customers still want “high touch” over “high tech,” or at least they want
the choice. Banks are thus opening more branches and developing cross-selling and up-selling
practices to capitalize on the face-to-face contact that results.
Global Channel Considerations
International markets pose distinct challenges, including variations in customers’ shopping
habits, but opportunities at the same time .Many top global retailers such as Germany’s Aldi,
the United Kingdom’s Tesco, and Spain’s Zara have tailored their image to local needs and wants
when entering a new market.
Franchised companies such as Curves women’s fitness centers and Subway sandwich shops have
experienced double-digit growth overseas, especially in developing markets such as Brazil and
Central and Eastern Europe.
A good retail strategy that offers customers a positive shopping experience and unique
value, if properly adapted, is likely to find success in more than one market. Take Topshop for
instance.
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19. CHANNEL INTEGRATION AND
SYSTEMS

20. Distribution channels don’t stand still. We’ll look at the recent growth of
vertical, horizontal, and multichannel marketing systems; the next section
examines how these systems cooperate, conflict, and compete.
Vertical marketing system (VMS) is one in which the main members of a
distribution channel--producer, wholesaler, and retailer--work together as a
unified group in order to meet consumer needs. In conventional marketing
systems, producers, wholesalers, and retailers are separate businesses that
are all trying to maximize their profits. When the effort of one channel
member to maximize profits comes at the expense of other members,
conflicts can arise that reduce profits for the entire channel. To address this
problem, more and more companies are forming vertical marketing systems.
Vertical integration is the expansion of a company by moving forward or
backward within your vertical market or industry.
Corporate VMS - A group of companies performing different tasks under one
ownership.
E.g. Amway is an American Cosmetic company which manufacture its own
product range and sell these products only through its authorized Amway
stores.
There Production and distribution is with in company itself.

21. Contractual VMS - Independent companies that join together for mutual
benefit. Producer, wholesaler and retailer have sub-groups. E.g Franchising.
(1) Producer/Wholesaler - Franchise operations fall in this category. The
manufacturer licenses the wholesaler to distribute the product.
(2) Producer/Retailer - Another franchise operation where the retailer must
meet certain quotas to operate under the company name. Must be a strong
company name.
(3) Retailer/Wholesaler - If the wholesalers are the owners they encourage
retailers to band together to buy as a group to receive more desirable pricing.
If the retailers are the owners, they are called co-operatives. They buy from
the jointly-owned wholesaler and share the profits those purchases generate.
Administered VMS – There is no contract between the members of
production and channel distribution, but their activities to get influenced size
and power of any one of them.
Any power and influential members of the channel dominate the activities of
other channel members.
E.g. Wal-Mart
When is the huge kind of retailer available in the market they usually decide
their terms and condition to the companies that are small (producer)

23. Horizontal Marketing systems
It is a new trend in distribution in which two or more companies join hands to exploit a
marketing opportunity or opportunities, either by themselves or by creating an
independent unit.
Ex:- Maruti suzuki etc., PNB Met life
For example, companies that sell nutrition supplements, exercise equipment, or
workout apparel offer very different products and yet are in the same vertical market
because they target customers within the health and fitness industry. These businesses
may focus on the same customers, but their products or services are unique to them and
offered independently.
However, what if two or more of these fitness-based companies joined together to offer
their products and share manufacturing, marketing, and sales operations? Chances are
they might be able to reach a much broader audience and maximize their rewards by
marketing and distributing their products together.

24. Integrating Multichannel Marketing Systems
Most companies today have adopted multichannel marketing. Disney sells its DVDs
through five main channels: movie rental stores such as Blockbuster, Disney Stores
(now owned and run by The Children’s Place), retail stores such as Best Buy, online
retailers such as Disney’s own online stores and Amazon.com, and the Disney catalog
and other catalog sellers.
This variety affords Disney maximum market coverage and enables it to offer its videos
at a number of price points.
An integrated marketing channel system is one in which the strategies and tactics of
selling through one channel reflect the strategies and tactics of selling through one or
more other channels.
Adding more channels gives companies three important benefits. The first is increased
market coverage. Not only are more customers able to shop for the company’s
products in more places, but those who buy in more than one channel are often more
profitable than single-channel customers. The second benefit is
lower channel cost—selling by phone is cheaper than personal selling to small
customers. The third is more customized selling—such as by adding a technical sales
force to sell complex equipment.

25. Supply Chain Management & Logistics
The term “Supply Chain Management” was coined in 1982 by Keith Oliver of Booz, Allen and
Hamilton Inc. But the discipline and practice has been in existence for centuries.
The terms Logistics and Supply Chain Management are used interchangeably these days, but
there is a subtle difference that exists between the two.
‘Logistics’ has a military origin, and used to be associated with the movement of troops and their
supplies in the battlefield. But like so many other technologies and terminologies, it entered into
the business lexicon gradually and has now become synonymous with the set of activities ranging
from procurement of raw materials, to the delivery of the final polished good to the end
consumer.
In a typical business scenario, many organizations work in tandem (knowingly or unknowingly) to
get the final product in hand of the end consumer. The supply chain is a network of these
organizations that coalesce with each other (downstream or upstream) to make the final
shipment successful.
Logistics is generally seen as a differentiator in terms of the final bottom line of a typical “hard
and tangible goods” organization; enabling either a lower cost or providing higher value.
While a lower cost is mostly a one-time feel good factor and has been the traditional focus area in
logistics, high value comes into the picture much later and may be tangible or intangible in a
good’s initial stages.
So while an organization like Zappos may look costly at a first glance, the extraordinary customer
service due to robust policies is a value which more than offsets the slightly higher cost.
Logistics is concerned with both materials flow and information flow. While the materials flow
from the supplier to consumer, the information flows the other way round. It is not only concerned
with inventory and resource utilization, customer response also falls under the ambit of logistics.

26. Retailing
Retailing includes all the activities in selling goods or services directly to final consumers for
personal, non-business use. A retailer or retail store is any business enterprise whose sales
volume comes primarily from retailing.
Any organization selling to final consumers—whether it is a manufacturer, wholesaler, or
retailer—is doing retailing. It doesn’t matter how the goods or services are sold (in person, by
mail, telephone, vending machine, or on the Internet) or where (in a store, on the street, or in the
consumer’s home).
After reviewing the different types of retailers and the new retail marketing environment, we
examine the marketing decisions retailers make. The following are four examples of innovative
retail organizations that have experienced market success in recent years.
Innovative Retail Organizations :- Panera Bread, GameStop, Lumber Liquidators, Net-a-Porter.
Types of Retailers
Consumers today can shop for goods and services at store retailers, non store retailers, and retail
organizations.
STORE RETAILERS:- Perhaps the best-known type of store retailer is the department store.
Japanese department stores such as Takashimaya and Mitsukoshi attract millions of shoppers
each year and feature art galleries, restaurants, cooking classes, fitness clubs, and children’s
playgrounds.
Different formats of store retailers will have different competitive and price dynamics. Discount
stores, for example, compete much more intensely with each other than other formats. Retailers
also meet widely different consumer preferences for service levels and specific services.
Specifically, they position themselves as offering one of four levels of service:

27. Self-service— Self-service is the cornerstone of all discount operations. Many
customers are willing to carry out their own “locate-compare-select” process to save
money.
2. Self-selection—Customers find their own goods, although they can ask for
assistance.
3. Limited service—These retailers carry more shopping goods and services such as
credit and merchandise-return privileges. Customers need more information and
assistance.
4. Full service—Salespeople are ready to assist in every phase of the “locate-compare-
select” process. Customers who like to be waited on prefer this type of store. The high
staffing cost, along with the higher proportion of specialty goods and slower-moving
items and the many services, result in high-cost retailing.

28. Major Types of Store Retailers
(1) Specialty store: Narrow product line. The Limited, The Body Shop.
(2) Department store: Several product lines. JCPenney, Bloomingdale’s.
(3) Supermarket: Large, low-cost, low-margin, high-volume, self-service store
designed to meet total needs for food and household products. Kroger, Safeway.
(4) Convenience store: Small store in residential area, often open 24/7, limited line of
high-turnover convenience products plus takeout. 7-Eleven, Circle K.
(5) Drug store: Prescription and pharmacies, health and beauty aids, other personal
care, small durable, miscellaneous items. CVS, Walgreens.
(6) Discount store: Standard or specialty merchandise; low-price, low-margin, high-
volume stores. Wal-mart, Kmart.
(7) Extreme value or hard-discount store: A more restricted merchandise mix than
discount stores but at even lower prices. Aldi, Lidl, Dollar General, Family Dollar.
(8) Off-price retailer: Leftover goods, overruns, irregular merchandise sold at less than
retail. Factory outlets; independent off-price retailers such as TJ Maxx; warehouse
clubs such as Costco.
(9) Superstore: Huge selling space, routinely purchased food and household items,
plus services (laundry, shoe repair, dry cleaning, check cashing). Category killer (deep
assortment in one category) such as Staples; combination store such as Jewel-Osco;
hypermarket (huge stores that combine supermarket, discount, and warehouse
retailing) such as Carrefour in France and Meijer in the Netherlands.
(10) Catalog showroom: Broad selection of high-mark-up, fast-moving, brand-name
goods sold by catalog at a discount. Customers pick up merchandise at the store.
Inside Edge Ski and Bike.

29. NONSTORE RETAILING Although the overwhelming bulk of goods and
services— 97 percent—is sold through, non-store retailing has been growing much
faster than store retailing. Any sale happening to the end customer which is not
happening through a traditional retail channel or through a physical retail space is
known as Non-store retailing.
Amazon is a perfect example of Non-store retailing. Amazon does not have its own
retail space from where it sells the goods to customers. It directly sells from its
website and does not sell via a retail space. Hence, it is known as a Non-Store Retailer.
Non-store retailing falls into four major categories: direct selling, direct marketing
(which includes telemarketing and Internet selling), automatic vending, and buying
services:
1) Direct Sales:- One of the oldest forms of non-store retailing is the Direct sales type.
The best way to describe this would be Door to Door salesmen who do cold calls to
homes and offices to sell their products. They might also
do other activities like Standees, promotions, and
others to directly sell to the end customer.
This type of non-store retailing involves manual
involvement and might involve usage of good
selling techniques and personal selling skills.
A door to door selling is used for selling technical
equipment like Air Conditioners, Vacuum cleaners,
Water purifiers and others. Even religious books
are nowadays sold door to door.

30. 2) Direct Marketing :- Unlike Direct selling, Direct marketing is on the rise especially
since the adoption of the internet. It was initially used in the form of direct mail
services where letters and coupons were sent to the end customer. Later on, once
internet started, Email marketing was very successfully used where companies spent a
huge amount of designing and sending emails to a large number of customers.
After emails, it went to websites and we could see Amazon, eBay, Alibaba and other
websites grow and sell products by the truckloads. None of these sellers had a single
store. All of it was online. Finally today, we can see that even small businessmen have
their online store and a website and they sell their products not only through a
physical presence but regularly take part in non-store retailing via social media or via
their own websites.
3) Automatic Vending:- Automatic vending
machines are being used very smartly in the
FMCG segment.
Brands like Nespresso which are pushing their
coffee vending machines into the market
because once these vending machines are
placed, the sale of coffee to the end
customer becomes easier and it is higher
in margins because there is no middleman
involved.

31. CORPORATE RETAILING AND FRANCHISING Although many retail stores are
independently owned, an increasing number are part of a corporate retailing
organization. These organizations achieve economies of scale, greater purchasing
power, wider brand recognition, and better-trained employees than independent
stores can usually gain alone. The major types of corporate retailing—corporate chain
stores, voluntary chains, retailer and consumer cooperatives,
franchises, and merchandising conglomerates.
Major Types of Corporate Retail Organizations
Corporate chain store: Two or more outlets owned and controlled, employing central
buying and merchandising, and selling similar lines of merchandise. Gap, Pottery Barn.
Voluntary chain: A wholesaler-sponsored group of independent retailers engaged in
bulk buying and common merchandising. Independent Grocers Alliance (IGA).
Retailer cooperative: Independent retailers using a central buying organization and
joint promotion efforts. Associated Grocers, ACE Hardware.
Consumer cooperative: A retail firm owned by its customers. Members contribute
money to open their own store, vote on its policies, elect a group to manage it, and
receive dividends. Local cooperative grocery stores can be found in many markets.
Franchise organization: Contractual association between a franchisor and franchisees,
popular in a number of product and service areas. McDonald’s, Subway, Pizza Hut, Jiffy
Lube, 7-Eleven.
Merchandising conglomerate: A corporation that combines several diversified
retailing lines and forms under central ownership, with some integration of
distribution and management. Federated Department Stores renamed itself after one
of its best-known retailers, Macy’s, but also owns other retailers such as
Bloomingdale’s.

32. Retailer Marketing Decisions
Target-market decision: A retailer’s most important decision. Until the target is not
defined, the retailer cannot make consistent decisions. Retailers should conduct
periodic marketing research to ensure that they are reaching & satisfying their target
customers.
Product Assortment-&-procurement decision: Must match the target market’s
shopping expectations. The retailer has to decide on product-assortment breadth &
depth. Another product assortment dimension is the quality of the goods. The real
challenge is to develop a product differentiation strategy:
Feature some exclusive brands not available at competing retailers.
Feature mostly private branded merchandise.
Feature blockbuster distinctive merchandise events.
Feature surprise or ever-changing merchandise
Feature the latest or newest merchandise first.
Offer merchandise customizing services.
Offer a highly targeted assortment
Once the retailer decides on the product-assortment strategy, the retailer must decide
on procurement sources, policies, & practices. Retailers are rapidly improving their
procurement skills. Stores are learning to measure direct product profitability, which
enables them to measure a product’s handling costs from the time it reaches their
warehouse until a customer buys it & takes it out.

33. Services-&- store- atmosphere decision: The services mix is one of the key tools for
differentiating one store from another. The store’s atmosphere is another element. Ex:
Banana Republic stores work on the concept of retail theater.
Price Decision: Key positioning factor & must be decided in relation to the target
market, the product-&-service-assortment & competition. Retailers must pay attention
to pricing tactics. They will plan markdowns on slower-moving merchandise. A
growing number of retailers have abandoned “sales pricing” in favour of everyday low
pricing (EDLP). This could lead to lower advertising costs, greater pricing stability, a
stronger store image of fairness & liability, & higher retail profits.
Promotion Decision: Use promotion tools that reinforce image position.
Place Decision: Retailers have a choice of locating their stores in:
Central business districts (downtown). Rents are high.
Regional shopping centers. Large suburban malls containing 40-200 stores.
Malls are attractive because of generous parking, one-stop shopping,
restaurants, & recreational facilities.
Community shopping centers. Smaller malls. Between 20-40 smaller stores.
Strip malls. Contain a cluster of stores, usually housed in one long building.
A location within a larger store. Certain well known retailers-McDonald’s,
Dunkin Donuts- are locating units in airports, schools, Wal-Marts.

34. The New Retail Environment
(1) New Retail Forms and Combinations:- To better satisfy customers’ need for
convenience, a variety of new retail forms have emerged. Bookstores feature coffee
shops. Gas stations include food stores. Loblaw’s Supermarkets have fitness clubs.
Shopping malls and bus and train stations have peddlers’ carts in their aisles.
(2) Growth of Intertype Competition:- Department stores can’t worry just about
other department stores—discount chains such as Wal-Mart and Tesco are expanding
into product areas such as clothing, health, beauty, and electrical appliances. Different
types of stores—discount stores, catalog showrooms, department stores—all compete
for the same consumers by carrying the same type of merchandise
(3)Competition between Store-Based and Nonstore-Based Retailing:- Consumers
now receive sales offers through direct-mail letters and catalogs, television, cell
phones, and the Internet.
The nonstore-based retailers making these offers are taking business away from store-
based retailers. Store-based retailers have responded by increasing their Web
presence and finding different ways to sell online, including through their own Web
sites, as well as creating more involving and engaging experiences in their stores.

35. (4) Growth of Giant Retailers:- Through their superior information systems, logistical
systems, and buying power, giant retailers such as Wal-Mart are able to deliver good
service and immense volumes of product to masses of consumers at appealing prices.
They are crowding out smaller manufacturers that cannot deliver enough quantity and
often dictate to the most powerful manufacturers what to make, how to price and
promote, when and how to ship, and even how to improve production and management.
(5) Growing Investment in Technology. Almost all retailers now use technology to
produce better forecasts, control inventory costs, and order electronically from
suppliers.
Technology is also affecting what happens inside the store. In-store programming on
plasma TVs can run continual demonstrations or promotional messages.
( 6) Growth of Shopper Marketing:- Buyed by research suggesting that as
much as 70 percent to 80 percent of purchase decisions are made inside the retail
store, firms are increasingly recognizing the importance of influencing
consumers at the point of purchase

36. Wholesalingincludes all the activities in selling goods or services to those who buy
for resale or business use. It excludes manufacturers and farmers because they are engaged
primarily in production, and it excludes retailers. Wholesalers (also called distributors) differ
from retailers in a number of ways.
First, wholesalers pay less attention to promotion, atmosphere, and location because they are
dealing with business customers rather than final consumers.
Second, wholesale transactions are usually larger than retail transactions, and wholesalers
usually cover a larger trade area than retailers.
Third, the government deals with wholesalers and retailers differently in terms of legal
regulations and taxes.
Wholesalers are more efficient in performing one or more of the following
functions:
• Selling and promoting. Wholesalers’ sales forces help manufacturers reach many small
business customers at a relatively low cost. They have more contacts, and buyers often trust
them more than they trust a distant manufacturer.
• Buying and assortment building. Wholesalers are able to select items and build the
assortments their customers need, saving them considerable work.
• Bulk breaking. Wholesalers achieve savings for their customers by buying large carload lots
and breaking the bulk into smaller units.
• Warehousing. Wholesalers hold inventories, thereby reducing inventory costs and risks to
suppliers and customers.

37. • Transportation. Wholesalers can often provide quicker delivery to buyers because they are
closer to the buyers.
• Financing. Wholesalers finance customers by granting credit, and finance suppliers by
ordering early and paying bills on time.
• Risk bearing. Wholesalers absorb some risk by taking title and bearing the cost of theft,
damage, spoilage, and obsolescence.
• Market information. Wholesalers supply information to suppliers and customers regarding
competitors’ activities, new products, price developments, and so on.
Major Wholesaler Types
Merchant wholesalers: Independently owned businesses that take title to the merchandise they
handle. They are full-service and limited-service jobbers, distributors, and mill supply houses.
Full-service wholesalers: Carry stock, maintain a sales force, offer credit, make deliveries,
provide management assistance. Wholesale merchants sell primarily to retailers: Some carry
several merchandise lines, some carry one or two lines, others carry only part of a line.
Industrial distributors sell to manufacturers and also provide services such as credit and delivery.
Manufacturers’ and retailers’ branches and offices: Wholesaling operations conducted by
sellers or buyers themselves rather than through independent wholesalers. Separate branches
and offices are dedicated to sales or purchasing. Many retailers set up purchasing offices in
major market centres.
Specialized wholesalers: Agricultural assemblers (buy the agricultural output of many farms),
petroleum bulk plants and terminals (consolidate the output of many wells), and auction
companies (auction cars, equipment, etc., to dealers and other businesses).

38. Limited-service wholesalers: Cash and carry wholesalers sell a limited line of fast-
moving goods to small retailers for cash. Truck wholesalers sell and deliver a limited
line of semi perishable goods to supermarkets, grocery stores, hospitals, restaurants,
hotels. Drop shippers serve bulk industries such as coal, lumber, and heavy
equipment. They assume title and risk from the time an order is accepted to
its delivery.
Rack jobbers serve grocery retailers in non food items. Delivery people set up displays,
price goods, and keep inventory records; they retain title to goods and bill retailers
only for goods sold to the end of the year. Producers’ cooperatives assemble farm
produce to sell in local markets.
Mail-order wholesalers send catalogs to retail, industrial, and institutional customers;
orders are filled and sent by mail, rail, plane, or truck.
Brokers and agents: Facilitate buying and selling, on commission of 2 percent to 6
percent of the selling price; limited functions; generally specialize by product line or
customer type.
Brokers bring buyers and sellers together and assist in negotiation; they are paid by
the party hiring them—food brokers, real estate brokers, insurance brokers. Agents
represent buyers or sellers on a more permanent basis. Most manufacturers’ agents
are small businesses with a few skilled salespeople: Selling agents have contractual
authority to sell a manufacturer’s entire output; purchasing agents make purchases
for buyers and often receive, inspect, warehouse, and ship merchandise; commission
merchants take physical possession of products and negotiate sales.