BUSI 141 Place

DISTRIBUTIONDelivering the

GoodsPrinciples of Marketing BUSI 141

Professor Conrad

Our Discussion for Today•What is Distribution?•Channel Functions•Wholesaling Intermediaries•Types of Distribution Channels

•4 Steps of Developing a Distribution Strategy

•The Lowdown on Logistics

What is Distribution?The process of getting the right product to the right place at the right time for the right customer.

•Physical Distribution•Channel of Distribution•Channel Intermediaries

PHYSICAL DISTRIBUTION

The activities that move finished goods from the manufacturer to final customers, including

order processing, warehousing, materials handling, transportation and inventory control.

What Distribution Channels Do•Create efficiencies by breaking bulk•Transportation and storage•Facilitating •Assumes risk•Communication and transaction functions

What are Wholesaling IntermediariesHandles the flow of products from manufacturer to retailer

WHOLESALE INTERMEDIARY

Types of Wholesaling IntermediariesMerchant

Wholesaler

Independent

Takes title of goods

Assumes risks

Sets price

Merchant Agents and

BrokersIndependent

Never takes title

Agents are repsBrokers are employed

Earns commission

Manufacturer-Owned

WholesalerOwned by

manufacturer

Separate business unit

Serves geographical

area

Types of Distribution Channels

Types of Distribution Channels - Levels• The number of distinct categories of intermediaries that make up a channel of distribution•What channel members are available?•How large is the market?•How frequently do consumers purchase the product?

•What services do consumers require?

Customer ChannelsDirect to Customer•Better service•Lower price•More control

•Price•Service•Delivery

Indirect Channel•Consumer preference•Manufacturer convenience

•Enhance reach to customer

Customer ChannelsDual or Multiple Systems•Sells the same product in different ways to different customers (Pharmaceutical Industry example)• Directly to hospitals and

clinics• Drug wholesalers for

pharmacies• Directly to third-party

payers (i.e. insurance companies)

Hybrid System•Hybrid System

• Direct sales• Distributors• Retail sales• Direct mail

Channel

Strategy

Develop Objectives

Evaluate Environme

nt

Choose Strategy

Develop Tactics

Make product available when, where and in quantities needed at

minimum cost.

Internal

External

Conventional

VerticalHorizontal

IntensiveExclusiveSelective

Select Channel Partners

Manage the Channel

Lowdown on LogisticsThe process of designing, managing, and improving the movement of products through the supply chain. Includes purchasing, manufacturing, storage and transport.

Order processing

The time between when an order comes in and the product goes out. < Time = < Money

Warehousing

Storing goods to match supply with demandAnticipating amount and time for transfer to next channel

Materials Handling

Moving products into, within and out o the warehouse

Transportation

DependabilityCostSpeedAccessibilityCapabilityTraceability

Inventory ControlProcess to ensure sufficient quantities to meet demands but not too much.

DISTRIBUTION The Customer

ExperiencePrinciples of Marketing BUSI 141

Professor Conrad

Our Discussion for Today•Retailing

•Definition•Evolution•Ethics

•Types of Bricks-and-Mortar•Types of Clicks-and-Order and More•Providing Top-Notch Service

What is Retailing?Final stop in the distribution chain…. The process by which organizations sell goods and services to the consumers for their personal use.

•$4.53 trillion in sales in 2013 •E-commerce = 17%•M-commerce = 9%•>1 Million Retail businesses•15.3 million employees (10% of US workers)

•Most retail businesses are small, mom-and-pop businesses

•Some retailers are also wholesales who sell to businesses as well as consumers (Home Depot, Sam’s Club)

Find Statistics on US Retailing Exercise1. What is the current and projected number of retail firms?2. What is the current and projected sales of retail?3. What is the current and projected number of retail

employees?4. What are the top 5 retailers?5. What is the current and projected sales of e-commerce

retailing?6. What are the worldwide sales of leading US retailers?7. What retail chains opened the most stores?8. What retail chains closed the most stores?

Evolution of Retailing

Wheel-of-Retailing Hypothesis

Entry Phase• Low Margins• Low Prices

• Limited/no services• Low-end facility

Trading-Up Phase• Moderate prices• Better facilities• Some services

• Increased quality goods

Vulnerability Phase• High prices

• Luxurious facilities• Excellent services/amenities

Experiential Retailing•Experiential Shoppers want and need to have ‘fun’ while they shop

•Retailtainment is marketing strategies that enhance the shopping experience

•Examples include Toys-R-Us, Disney, Bass Pro Shop and Cabela’s

Cabela’s devotes 45% o their floor space to retailtainment features such as taxidermy

displays, fish tanks, restaurant and a shooting gallery.

Retailing Ethics (pgs 366-368)

•Loss of $112 billion or 1.4% of all retail sales annually

•Loss of $300 per family •Consumers pays for these losses•Shoplifting•Employee theft•Retail borrowing•Customer profiling

Bricks-and-Mortar Store Types

Convenience StoreSupermarket

Box StoreSpecialty StoresCategory Killers

Leased DepartmentsVariety Stores

Discount StoreWarehouse Clubs

Department StoresPop-up Stores

K-MartKay JewelersFamily DollarJC PenneyPhantom FireworksSam’s ClubKrogerSheetzALDISephoraHome Depot

Non-Store Retailing• Direct Selling• Door-to-Door• Parties and

Networks• Multilevel (Pyramid

Schemes)• Automatic Vending

E-Commerce and M-CommercePurchasing products online by computer or mobile device

Benefits for Consumer• Easy and convenient• Shop 24/7• More product choices• Information on

product/price easily and quickly available

• Lower prices

Benefits for the Business•Opens more markets•Decreases overhead costs

•Specialized businesses can succeed

•Real-time pricing

E-Commerce and M-CommercePurchasing products online by computer or mobile device

Drawbacks for Consumer• Security concerns• Fraud• Can’t touch or try on items• Color misrepresented on

monitor• Return cost can be high• Loss of human touch

Drawbacks for the Business•Security concerns•Site maintenance paramount

•Fierce price competition•Conflicts with traditional retailers

•Legal issues not resolved

What is service?•Intangible offerings•Acts, efforts or performances exchanged from producer to user without ownership rights.

Categories of Consumer ServiceDirectly on Consumer Directly on something

consumer owns

Intangibility• Cannot be

physically possessed

Perishability• Cannot store for

later use or consumption

Variability• Will not be exactly

the same 100% of the time

Inseparability• Produced and

consumed at the same time

Service

Serv

ice

Char

acte

risti

cs

Providing Quality Service • Be Positive• The goal is to satisfy the

customer• Identify customer

expectation• Work hard to exceed

expectations• Plan for mistakes• Be apologetic and

transparent• Act fast with resolution• Train and empower

employees