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Overview of distribution channels
Marketing Management II
(2005-06)
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Adidas to overhaul distribution
Adidas India is revamping its distribution
Exclusive distribution department being created Distributor performance being re-evaluated
Current distribution
74 exclusive stores ( run by franchisees)
1,000 multi-brand outlets ( catered to by around 40distributors).
"We need people who share the same vision andaggressiveness, and that hasn't been the case with allour partners in distribution."
Andreas Gellner- M.D., Adidas India
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The basics
What is a distribution ( or marketing)
channel?
Who belongs to a channel?
Concepts for understanding channels Indian distribution system
What is the work of a distribution channel?
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Concept of a distribution channel
Manufacturer Consumer
Activity 1
Activity 2
Activity 3
Activity N
Marketing Channel
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What is a distribution channel?
A channel of distribution is a pathway or route
to market extending from manufacturer orservice seller to its ultimate consumer or user
Direct sale from manufacturer to end user
is also a channel
A channel of distribution can also be
conceptualised as a sequence of valueadding activities
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Environment
Economy Technology Socio-Cultural Political
Legal Demographic
ProducersAgriculture
Manufacturers
ServiceWholesale Retail
Specialised participantsBuyers
Firms
Consumers
Government Policy
Public Distribution system
The Trade Channel
The distribution system
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Who is in the channel?
Primary participants
Manufacturers, Producers
Distributors and Wholesalers
Retailers
Specialized channel members
Transporters
C & F Agents
Warehouses
Brokers
DSAs
End users
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Generalised structure : Example Pharma
Manufacturer
Branch or Depot / CFA / Super Stockist
Stockist
Retailer
Patient
InstitutionHospital
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Factory Co-Packers
Nestle India- distribution structure
Imports
Clearing & Sales Agents
Distribution Centers
Cash Distributors
Re-Distributors
Retailers
Institutions
Out of Home
Channel
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Concept of directness
Manufacturer
Consumers
Channel
member 1 Channel
member 2
Channel member 3
Direct
2
Indirect
Indirect
Dual
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Concept of variety
Few types of channels
Traditional channel only
Many types of channels Traditional channel
Exclusive stores
Internet store front
Direct sales to corporate customers
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Concept of density
Exclusive
Automobiles
Selective Consumer durables
Intensive
FMCG
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Concept of novelty Traditional channel
Novel channels
Direct sales
Self help groups
Bancassurance
Vending machines
Internet
Shop in shop
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Indian Distribution channel: Foodstuffs
Farmer Consolidator
Trader
Commission
agent
Wholesaler
Retailer
Consumer
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Indian retail: Traditional formats
Door to door
Mobile vending ( Push cart) Roadside vendors
Temporary structures
Semi permanent Encroachments
Markets
Seasonal Permanent
Permanent shops
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Type of retail outlets in India
Urban %
Grocers 34.7
General Store 14.4
Paan 17.0
Other 17.0 Food 6.6
Chemist 6.3
Cosmetics 4.0
Rural %
Grocers
55.6
General Store 13.5
Others 27.6
Chemist 3.3
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328,000930,000Total
365025,000Entertainment
108008,200Books, Music, gifts
62,00035,000Catering services
0.52,950615,000Food & grocery
72,20033,000Furniture & furnishings
684013,000Mobile handsets & accessories
82,50032,000Consumer durables
255030,000Healthcare products
61502,500Health & Beauty care services
252,50010,000Footwear
4011102800Watches
285043,500Jewellery
1410,90080,000Clothing, Textiles, Fashion
Share %( Rs. Crores)(Rs. Crores)
OrganisedOrganised RetailTotal Retail Sales
Category
Retail sales in India
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McKinsey view of Indian retail( Source: McKinsey Quarterly 2000 Number 4 Asia)
Dry
Groceries
Electronics
Books,
Music
Mens apparel
Shopping Malls
Pharmacy
products
Liquor retail
Fresh
groceriesFast food
Womens apparel
Personal careproducts
READY TO GO
SHAPE / ADAPT
WAIT & WATCH
Supply Chain sophisticationLOW HIGH
Consumer
Readiness
LOW
HIGH
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10028,000Total
2650Entertainment
3800Books, Music, gifts72,000Catering services
112,950Food & grocery
82,200Furniture & furnishings
3840Mobile handsets & accessories
92,500Consumer durables
2550Healthcare products
1150Health & Beauty care services
92,500Footwear
41110Watches3850Jewellery
3910,900Clothing, Textiles, Fashion
Org retail %( Rs. Crores)
Category share inOrganised Retail
Category
Organised retail in India
Source: Images-KSA, 2005
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Why are channels important?
Route to market
Access potential buyer, convert the prospect, fulfillorders and service
Internationally, channel members collectivelyearn 30 to 50% of the final selling price
Channel not only serves the market but alsomakes the market
A good channel is strategic
Difficult to put into place, durable, difficult to imitate
Channel management offers the potential toobtain competitive advantage
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TRANSACTIONAL ACTIVITIES
Buy products from sellers
Promote Products to consumers
Absorb the risk of product ownership
PHYSICAL ACTIVITIES
Store the products
Transport the products
Break bulk the product into smaller quantities Service and repair the products
FACILITATING ACTIVITIES
Work done by the channel
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Flows
Producers Retailers
Physical possession
Ownership
Promotion
Negotiation
Financing
Risk assumption
Ordering
Payment
Source: Coughlan et al ,Marketing Channels
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Key decisions in channel
management
Structure
Strategic choices that can be representedgraphically
No. of participants in the channel etc.
Governance
Frameworks to ensure pursuit of objectives
Conflict resolution mechanisms
Relationship Management
Actions that frame the daily environment