Japanese Distribution PPT

PlaceJapan’s Distribution System

Japan’s Distribution

•Multiple layers of wholesalers who have developed close, personal relationships with other wholesalers, manufacturers, importers, and retailers.

4 Features1.Structure dominated by many

small middleman dealing with many small retailers

2.Channel control by manufacturers 3.A business philosophy shaped by

a unique culture4.Laws that protect the foundation

of the system – the small retailer.

•Manufacturers try to create their own distribution

•Leading market share holder’s depend on distribution coverage

•Independent channel members --> part of the family

•“First come our customers, then our dealers, then our employees.”

Problems of Distribution

•Many-layered system of smaller wholesalers and a large number of mom-pop stores•Have gradually eased

•Emergence of larger chains•Discount stores

•Hallmarks:•Middlemen positioning

themselves to minimize costs•Central clearing point for the

collection, rearrangement and dispersion of merchandise

Western Distribution

Western Distribution

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Japanese Distribution

•Hallmarks:•No central clearing point•More control by manufacturers•Better service quality•Better price stability

Japanese Distribution

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Key Points•Marketer: stays close to the ultimate

consumer and dealers•Manufacturer: helps with trade &

financing•Dealer: sells only manufacturer’s

brand•A form of mutual dependence

Advantages•Close business relationships

•Easier for retailers/distributors to suggest product modifications and improvements

•Prevent waste in design stage•Quicker innovations

Advantages•Encourages the sharing of

information •product trends, •innovations, •competition, •and overall market opportunities

Advantages

•Business loyalty demonstrated •Reduces uncertainty and

tension •More cooperative business

relationship

•Shiseido supports retailers through:

•Inventory control

•Shelf stocking

•Sales training

•Store demonstrations

•Kao established Hansha:

•a network of distributors

•stabilized product flow to smaller wholesalers and larger retailers

•entry barrier against foreign brands

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Close to Customers

•Rebate arrangements --> not unusal

•Gifts for the spouse

•Free trips & golf tournaments

•Personal visits are key

•“Whiskey management tools”

•Narrow focus•Limit expansion•In a foreign market:

•new Japanese channels are established by hands-on research, trial & error

Disadvantages of having close links

Supermarkets vs Wholesalers

•1960’s, supermarkets became a threat•Wholesalers reduced prices

•1990’s, supermarkets established direct buying offices•More pressure for wholesalers

Changes

•Now underway•Used to be a tight, integrated

distribution channel within the Keiretsu

•Under pressure from structural changes in Japanese retailing

• Significant alterations in Japan's Large Scale Retail Store Law

•Eased restrictions on opening of new large retail stores.

•Original law protected the smaller "mom and pop" operations.

•Substantial increase in the number of applications to open new retail stores

•Western-type shopping malls and superstores dotting Japan

•Main cause: Recession in Japan•Direct marketing, catalog sales•Almost anything can now be ordered

at discounted prices through catalogs•Online retailers•Breakdown of vertical distribution

keiretsu

Trend

•Trend towards greater efficiency within the Japanese distribution system

•fewer smaller retailers and wholesalers.

•Deregulation & changing patterns of consumption

•new marketing and sales strategies to take advantage of these developments.

•Kao’s response:

•consolidating warehouses & wholesalers

•offer more co-op advertising support to independent channel members

•increased salespeople

•pruned their product lines

•fewer variants, stronger brands

•Imports are already benefiting from these trends

• Increased sales by Japanese department stores and other mass merchandisers

•A variety of new retailing ventures that match changing Japanese lifestyles.

•Modernized & consolidated operations

• Reduces inefficient elements in the system.

•However, the process is slow.

•The characteristics of the distribution system are deeply rooted in the cultural history of Japan.