The document discusses several key concepts related to distribution and retailing, including: 1) Product classes have different placement needs - convenience products are best in convenient small stores while shopping products work well in malls and superstores. 2) Placement must consider the product life cycle as locations that work in growth stages may not in later stages. 3) Distribution intermediaries help overcome discrepancies in quantity and assortment between what producers make and what consumers want through accumulation, breaking bulk, sorting, and assorting. 4) Channels create time, place and ownership utility by delivering products at the right time, place and with appropriate legal ownership.

1. Distribution & Retailing Unit 4 Subhajit Sanyal

2. P = Location Convenience Distribution Availability Accessibility Usability Where and when necessary Size and portability

3. Product Classes - Place Convenience Products - have to be in convenient places - small stores, vending machines Shopping Products - have to be where shoppers go, malls, superstores etc. Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and where you can park easily

4. Place and PLC PLACE must be considered in terms of the Product Life Cycle In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying

5. What is it? Distribution - the where when how and why products and services are made available to potential customers Physical distribution - the activities concerned with the physical flows through producer to intermediaries to consumers and customers

6. Objectives of Distribution Appropriate and adequate distribution Access to markets and target customers Relative cost effectiveness in access, transaction value and distribution Reseller motivation Revenue returns from channel members Competitive representation Customer service

7. Marketing / Distribution Channels create - Time - Place - Possession/ownership utility Delivered at the right time - time utility Delivered to the right place - place utility With appropriate legal requirements - possession / ownership utility

8. Product Classes - Place The different Product Classes have different PLACE situations Place decisions can be aided by knowing about the product classes

9. Product Classes - Place Convenience Products - have to be in convenient places - small stores, vending machines Shopping Products - have to be where shoppers go, malls, superstores etc. Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and where you can park easily

10. Place and PLC PLACE must be considered in terms of the Product Life Cycle In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying

11. Discrepancies Discrepancy of Quantity Discrepancy of Assortment

12. Discrepancies Discrepancy of Quantity the mfg. Makes much more than individual consumers want to buy each time middlemen, wholesalers and retailers break this amount down into smaller amounts for individual consumers to buy

13. Discrepancies Discrepancy of Quantity … the difference between the quantity of products it is economical for an individual producer to make and the quantity normally wanted by individual consumers or users...

14. Discrepancies Discrepancy of Assortment the difference between ALL the product lines a mfg. Makes, and what the wholesaler wants to sell, and what the consumer will buy middlemen, break this amount down into different selections which the wholesalers want

15. Discrepancies middlemen, break this amount down into different selections which the wholesalers want EG. KRAFT makes many many different types of salad dressing A no-frills store just wants to sell 7 types cause its customers don’t buy the fancy kinds

16. Accumulation - combining products from several different producers. “… make it more convenient for companies to buy and handle…” When farmers collect food, and sell them to buyers who gather large amounts for shipping to processors

17. The Accumulating Process

18. Breaking Bulk - take all the product and physically move it into small containers so it can be shipped to wholesalers. “… divide larger quantities into smaller quantities…”

19. Separating products into grades and qualities desired by different target markets. Eg. Food products, small onions, large onions, or white eggs, brown eggs or … Sorting

20. Taking heterogeneus commodities and sorting them into homogenous categories Eg. All apples into red apples and green apples Sorting

21. The process that helps producers, who produce different amounts, and different types, organize their products into categories/assortments to make it easier for the consumer to buy. Sorting

22. “… putting together a variety of products to give a target market what it wants…” ie. In this video store, mostly Asian films ie. In this record store, mostly hip hop ie. In this jewelry store, mostly chains Assorting

23. Some stores cannot take the full range of a company’s product line - they do not have the shelf space or floor space - so they carefully select the brands of several mfgs to sell. Assorting

24. Marketing / Distribution Channels create - Time - Place - Possession/ownership utility Delivered at the right time - time utility Delivered to the right place - place utility With appropriate legal requirements - possession / ownership utility

25. Channels and key players Channel of distribution Intermediary Merchant Functional middleman

26. Channel design decisions Analyse customer service needs - marketing channels deliver appropriate value to the customer Defining channel objectives and constraints - which segments to serve and which channel to use for each Identifying key channel alternatives - direct marketing, broker, agent, intermediary, wholesaler, retailer, e-commerce Evaluating alternatives - economic, control, level of flexibility criteria

27. A vertical marketing channel Members Consumer Functions Design Make Brand Price Promote Buy Stock Display Sell Deliver Finance Manufacturer Wholesaler Retailer Consumer A conventional marketing channel Members Functions Design Make Brand Price Promote Sell Buy Stock Promote Display Sell Deliver Finance Buy Stock Promote Display Sell Deliver Finance Figure 12.5 Comparison of a conventional marketing channel and a vertical marketing system SOURCE: Adapted from Strategic Marketing, by David J. Kollat et al., copyright  1972. Reprinted by permission. Manufacturer Wholesaler Retailer

28. Control of resources Size of company Reward power Expert power Referent power Legitimate power Coercive power Economic sources of power Non-economic sources of power Level of power Dependency of other channel members Willingness to lead Channel leadership Figure 12.8 Determinants of channel leadership SOURCE: R.D. Michman and S. D. Sibley, Marketing Channels and Strategies, 2nd edn (Worthington, Ohio: Publishing Horizons, Inc., 1980), p.413. Reproduced by permission.

29. ACTIVITY DESCRIPTION Table 13.1 Major wholesaling activities Wholesale Management Negotiating with suppliers Promotion Transport Inventory control and data- processing Planning, organising, staffing and controlling wholesaling operations Serving as the purchasing agent for customers by negotiating supplies Providing a sales force, advertising, sales promotion and publicity Arranging and making local and long distance shipments Controlling physical inventory, book keeping, recording transactions, keeping records for financial analysis Warehousing and product handling Receiving, storing and stock keeping, order processing, packaging, shipping outgoing orders and materials handling Security Safeguarding merchandise Pricing Developing prices and providing price quotations Financing and budgeting Extending credit, borrowing, making capital investments and forecasting cash flow Management and marketing assistance to clients Supplying information about markets and products and providing advisory services to assist customers to sell

30. Figure 12.1 Efficiency in exchanges provided by an intermediary Producer Buyers Producer Buyers Middleman or intermediary

31. Marketing channel activities that intermediaries perform TABLE 12.1 CATEGORY OF MARKETING ACTIVITIES POSSIBLE ACTIVITIES REQUIRED Table 12.1 Marketing channel activities that intermediaries perform Marketing information Marketing management Facilitating exchange Price Physical distribution Analyse information such as sales data; perform or commission marketing research studies Establish objectives; plan activities; manage and co-ordinate financing, personnel and risk taking; evaluate and control channel activities Choose and stock product assortments that match the needs of buyers Establish pricing policies and terms of sales Manage transport, warehousing, materials handling, inventory control and communication Promotion Set promotional objectives, co-ordinate advertising, personal selling, sales promotion, publicity, direct mail and packaging

32. Classifying heterogeneous supplies into homogeneous groups Developing a bank or stock of homogeneous products to provide aggregate inventory Breaking down homogeneous stocks (inventories) into smaller units Combining products into collections or assortments that buyers want Sorting out Accumulation Allocation Assorting Figure 12.2 Sorting activities conducted by channel members.

33. Figure 12.4 Typical marketing channels for industrial products E F G H Producer Producer Producer Producer Agents Agents Business-to-business distributors Business-to-business distributors Business-to-business buyers Business-to-business buyers Business-to-business buyers Business-to-business buyers

34. CHANNEL CAPTAIN “ A person, or company, that helps direct the activities of a whole channel, and tries to avoid, or solve conflicts…” However, some older products don’t have such a position.

35. CHANNEL CAPTAIN Can be,,, A strong wholesaler a market oriented producer a large retailer

36. CHANNEL CAPTAIN Sometimes Middlemen have a clear picture of what the customer wants, and who the producers are, so they arrange for producers to be in contact with the retailers, so more product can flow in the channel. The Middlemen makes more money by making nore commission on stuff sold.

37. The whole channel focusses on the same target market at the end of the channel sometimes a large firm will buy up the smaller companies in the channel to have more control over the distribution Vertical Marketing Systems

38. The paths goods follow from consumer to manufacturer or to marketing intermediaries. Common in the recycling industries. Eg. - Empty glass bottles - used batteries - used tires - used printer cartridges - Canon Reverse Channels

39. Also used for product recalls or for broken products that need to be fixed under Warranty - especially cars, tires and some expensive electronic consumer items. Reverse Channels Important to maintain consumer satisfaction and confidence.

40. STRATEGIC ISSUES IN RETAILING Location Property Ownership Product Assortment Retail Positioning Atmospherics Store Image Scrambled Merchandising The Wheel of Retailing

41. Recent Trends in Retailing Customisation Larger outlets Own label brands Customer expectations Category stores Relocation of businesses e.shopping Home delivery

42. e-commerce Basics of doing business Market opportunities & the future Media Branding Business to business Regulations Internet and Society