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Nickels Nickels

McHughMcHugh

McHughMcHugh

Nickels Cover

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Chapter

15151515Distributing Distributing

Products Products Quickly and Quickly and EfficientlyEfficiently

15-2

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ChannelChannel ofof DistributionDistribution

• Marketing IntermediariesMarketing Intermediaries– WholesalerWholesaler– RetailerRetailer– Agents/BrokersAgents/Brokers

• Role of IntermediariesRole of Intermediaries– Create EfficiencyCreate Efficiency– Value vs. CostValue vs. Cost

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UtilityUtilityFormFormTimeTime

PlacePlace

PossessionPossession

InformationInformationServiceService

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Wholesale IntermediariesWholesale Intermediaries

• Merchant WholesalersMerchant Wholesalers– Full-ServiceFull-Service– Limited-FunctionLimited-Function– Rack JobbersRack Jobbers– Cash-and-CarryCash-and-Carry– Drop ShippersDrop Shippers

• Business to Business (B2B)Business to Business (B2B)

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Percent of B2BPercent of B2B Commerce from InternetCommerce from Internet

0.2% 0.4%1.0%

2.1%

4.0%

6.3%

9.4%

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0%

1997 1998 1999 2000 2001 2002 2003

*Excludes Service Industries*Excludes Service Industries

Source:Source: Forrester Research Inc.

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They All Started in 1962They All Started in 1962

CompanyCompany 11stst Store Store ObjectiveObjective

Wal-MartWal-Mart Rogers, Ark.Rogers, Ark.July 1962July 1962

Slash prices. Makeup Slash prices. Makeup

difference in volumedifference in volume

TargetTarget Roseville, MNRoseville, MNMay 1962May 1962

Discount retailer with Discount retailer with

strong sense of valuestrong sense of value

KmartKmart Garden City, MIGarden City, MIMarch 1962March 1962

Bring discount store Bring discount store concept to suburban concept to suburban

mallsmallsSource: Business 2.0, June 2003, p. 38.

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Wal-Mart’s Top Selling ProductsWal-Mart’s Top Selling Products

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600

Videotapes/DVDs

Diapers

Cigarettes

Toilet Paper

Milk

Dry Dog Food

Batteries

Breakfast Cereal

Film

Pet Supplies

Sales in MillionsSales in Millions

Source: Owen Thomas “Lord of the Things”, Business 2.0, March 2002, p. 32.

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Identify a Retailer in Your AreaIdentify a Retailer in Your Area

SupermarketSupermarket Convenience Convenience

StoreStore Discount StoreDiscount Store Department Department

StoreStore Category KillerCategory Killer

Specialty Specialty StoreStore

Factory OutletFactory Outlet SuperstoresSuperstores Catalog Catalog

ShowroomShowroom

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Is It Becoming aIs It Becoming aWal-Mart World?Wal-Mart World?

0

50

100

150

200

250300

350

400

450

500

Mexico Canada China U.K. Brazil Germany

Discount Stores Supercenter Sam's Neighborhood Mkts.

*There are 3,400 stores in the U.S.*There are 3,400 stores in the U.S.

Source: Source: Wal-Mart Annual Report 2003

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The Wheel of RetailingThe Wheel of Retailing

PassagePassage

ofof

TimeTime

2. Retail 2. Retail OutletOutlet

1. Retail 1. Retail Outlet StartsOutlet Starts

3. Retail 3. Retail OutletOutlet

4. New Outlet 4. New Outlet EntersEnters

Adds ServiceAdds Service

Raises PricesRaises Prices

Better Better LocationLocation

Adds ServiceAdds Service

Raises PricesRaises Prices

Better Better LocationLocation

Low PriceLow Price

Limited ServiceLimited Service

Out-of-way Out-of-way LocationLocation

Low PriceLow Price

Limited ServiceLimited Service

Out-of-way Out-of-way LocationLocation

Higher Higher PricesPrices

Higher Higher StatusStatus

Higher Higher PricesPrices

Higher Higher StatusStatus

Low PriceLow Price

Limited Limited ServiceService

Low PriceLow Price

Limited Limited ServiceService

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Retail Store DistributionRetail Store Distribution

• IntensiveIntensive

SelectivSelectivee

ExclusiveExclusive

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Non-Store DistributionNon-Store Distribution

• E-tailingE-tailing

• TelemarketingTelemarketing

• Vending Machines, Vending Machines, Kiosks, CartsKiosks, Carts

• Direct SellingDirect Selling

• Multilevel MarketingMultilevel Marketing

• Direct MarketingDirect Marketing

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Top Internet Shopping SitesTop Internet Shopping Sites

12.0

10.2

7.4

3.1 2.8

0

2

4

6

8

10

12

eBay Amazon Yahoo!Shopping

MSNShopping

Wal-MartStoresSource: USA Today, “Snapshots”

Site Hits in MillionsSite Hits in Millions

Week Ending 12/1/02Week Ending 12/1/02

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Why Buy Gifts Online?Why Buy Gifts Online?

0% 10% 20% 30% 40% 50% 60% 70% 80%

Save Time

Avoid Crowds

Afterhours Shopping

Better Prices

Easier to Find

Easy to Compare

Not In Local Store

Gift Shipment

Source: “Dreaming of a Green Christmas”, Newsweek, November 11, 2002, p. E24

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Why People Don’t Shop OnlineWhy People Don’t Shop Online

1.1. It isn’t secureIt isn’t secure

2.2. It will jeopardize It will jeopardize my privacymy privacy

3.3. Usually must pay Usually must pay shipping chargesshipping charges

4.4. Not enough Not enough selectionselection

5.5. Can’t touch/try Can’t touch/try things firstthings first

6.6. No satisfaction No satisfaction guaranteeguarantee

7.7. Returns are a Returns are a hasslehassle

8.8. Won’t arrive on Won’t arrive on timetime

9.9. Hard to find Hard to find things onlinethings online

10.10.Enjoy getting out Enjoy getting out of house to shopof house to shop

Source: blink, www.earthlink.net/blink

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Necessary Website FeaturesNecessary Website Features

0% 10% 20% 30% 40% 50% 60% 70% 80%

Low Price

Inexpensive Shopping

Easy to Use

No Sales Tax

Good Service

Fast Delivery

Broad Selection

Easy Returns

Helpful Information

Source: “Dreaming of a Green Christmas”, Newsweek, November 11, 2002, p. E24

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Channel CooperationChannel Cooperation

• Corporate Corporate DistributionDistribution

• Contractual Contractual DistributionDistribution

• Administered Administered DistributionDistribution

• Supply Chain Supply Chain ManagementManagement

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The Supply ChainThe Supply Chain

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LogisticsLogistics

Physical DistributionPhysical Distribution

InboundInbound

MaterialsMaterials

OutboundOutbound

ReverseReverse

InformationInformation

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Transportation & Storage Transportation & Storage ModesModes

• RailroadRailroad

• Motor Motor VehiclesVehicles

• WaterWater

• PipelinePipeline

• AirAir

• IntermodalIntermodal

• WarehousingWarehousing

–StorageStorage

–DistributionDistribution