15-1 Chapter Fifteen Distributing Products

15-15-11

ChapterChapterFifteenFifteen

Distributing ProductsDistributing ProductsEfficiently and Competitively:Efficiently and Competitively:

Supply Chain ManagementSupply Chain Management

15-15-22

Channel of Channel of DistributionDistribution

Marketing IntermediariesMarketing Intermediaries WholesalerWholesaler RetailerRetailer BrokersBrokers

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

15-15-33

DistributionDistribution Marketing IntermediariesMarketing Intermediaries

Organizations that assist in moving Organizations that assist in moving goods and services from producer to goods and services from producer to industrial and consumer usersindustrial and consumer users

Channel of distributionChannel of distribution The whole series of marketing The whole series of marketing

intermediaries who join together to intermediaries who join together to transport and store goods in their transport and store goods in their path from producers to consumerspath from producers to consumers

15-15-44

DistributionDistribution WholesalerWholesaler

Wholesaler - a merchant establishment Wholesaler - a merchant establishment operated by a concern that is primarily operated by a concern that is primarily engaged in buying, taking title to, usually engaged in buying, taking title to, usually storing and physically handling goods in large storing and physically handling goods in large quantities, and reselling the goods (usually in quantities, and reselling the goods (usually in smaller quantitiessmaller quantities) ) retailers or to industrial or retailers or to industrial or business users. business users.

BrokersBrokers Are marketing intermediaries who bring buyers Are marketing intermediaries who bring buyers

and sellers together and assist in negotiating and sellers together and assist in negotiating an exchange, but do not take title to the goodsan exchange, but do not take title to the goods

RetailersRetailers Organization that sells to ultimate consumersOrganization that sells to ultimate consumers

15-15-55

IntermediariesIntermediaries

Create Exchange EfficienciesCreate Exchange Efficiencies Decrease the number of contacts Decrease the number of contacts

needed to establish product needed to establish product exchangesexchanges

More effective than manufacturersMore effective than manufacturers Provide economies of scalesProvide economies of scales Can reach many consumersCan reach many consumers Can promote productsCan promote products Can inventory productsCan inventory products

15-15-66

Conventional Channels of Conventional Channels of Distribution of Consumer GoodsDistribution of Consumer Goods

ConsumersConsumers

ConsumersConsumers

ConsumersConsumers

ConsumersConsumers

ConsumersConsumers

ManufacturerManufacturer




ManufacturerManufacturer AgentAgent WholesalerWholesaler

WholesalerWholesaler

AgentAgent

RetailersRetailers

RetailersRetailers

RetailersRetailers

RetailersRetailers

15-15-77

Conventional Channels of Conventional Channels of Distribution for Organizational Distribution for Organizational

GoodsGoods




OrganizationalDistributors


Figure 10-4



AgentsAgents



AgentAgent








Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

15-15-88

Intermediaries UtilitiesIntermediaries Utilities

Is the Value or want-satisfying Is the Value or want-satisfying ability that’s added to goods ability that’s added to goods or services when the products or services when the products are made more useful or are made more useful or accessible to consumers.accessible to consumers.

15-15-99

UtilityUtilityFormForm

TimeTime

PlacePlace

PossessionPossession

InformationInformation

ServiceService

OPEN 24 HRSOPEN 24 HRS

15-15-1010

Wholesale Wholesale IntermediariesIntermediaries

Difference between Wholesalers and Difference between Wholesalers and RetailersRetailers Some producers wont sell to retailers but Some producers wont sell to retailers but

only to wholesalersonly to wholesalers Some organizations sell most t wholesalers Some organizations sell most t wholesalers

but also sell to consumersbut also sell to consumers Retail Sales is the sales of goods and Retail Sales is the sales of goods and

services directly to consumers for their own services directly to consumers for their own useuse

Wholesale sale is the sales of goods and Wholesale sale is the sales of goods and services to businesses and institutions for services to businesses and institutions for use in the business of others for resaleuse in the business of others for resale

15-15-1111

Wholesale Wholesale IntermediariesIntermediaries

Merchant Merchant WholesalersWholesalers Rack JobbersRack Jobbers Cash-and-CarryCash-and-Carry Drop ShippersDrop Shippers

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

XYZ XYZ WarehouseWarehouse

15-15-1212

Percent of B2B Percent of B2B Commerce from Commerce from

InternetInternet

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.

15-15-1313

Retail IntermediariesRetail Intermediaries A established organization that sells A established organization that sells

directly to consumers,directly to consumers, 2.3 Million retail stores in the U.S.2.3 Million retail stores in the U.S. About 11 Million people for retail About 11 Million people for retail

organizationsorganizations How retailers compete?How retailers compete?

PricePrice ServiceService LocationLocation SelectionSelection EntertainmentEntertainment

15-15-1414

Retail Retail CompetitionCompetition

PricePrice ServiceService LocationLocation SelectionSelection EntertainmeEntertainme

ntnt

15-15-1515

Retail Store Distribution Retail Store Distribution StrategyStrategy

IntensiveIntensive

SelectivSelectiveeExclusiveExclusive

15-15-1616

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

050

100150200250300350400450500

Number of Wal-Mart

Stores

Mex

ico

Can

ada

Pue

rto

Ric

o

Uni

ted

Kin

gdom

Arg

enti

na

Chi

na

Ger

man

y

*There are 2,985 *There are 2,985 stores in the stores in the

U.S.U.S.

Source: Source: Wal-Mart Annual Report 2000

15-15-1717

Non-Store Non-Store DistributionDistribution

E-tailingE-tailing TelemarketingTelemarketing Vending Machines, Vending Machines,

Kiosks, CartsKiosks, Carts InternetInternet Direct SellingDirect Selling Multilevel MarketingMultilevel Marketing Direct MarketingDirect Marketing

15-15-1818

Channel Channel CooperationCooperation

Corporate Corporate DistributionDistribution

Contractual Contractual DistributionDistribution

Administered Administered DistributionDistribution

Supply Chain Supply Chain ManagementManagement

15-15-1919

Contractual Contractual DistributionDistribution

Franchise SystemsFranchise Systems

Wholesaler-Wholesaler-Sponsored ChainsSponsored Chains

Retail CooperativesRetail Cooperatives

15-15-2020

The Supply ChainThe Supply Chain(Figure 15.6)(Figure 15.6)

15-15-2121

Distribution/Distribution/Storage*** ModeStorage*** Mode

RailroadRailroad Motor Motor

VehiclesVehicles WaterWater PipelinePipeline

AirAir IntermodalIntermodal StorageStorage Materials Materials

HandlingHandling

15-15-2222

Identify a Retailer Identify a Retailer in Your Areain Your Area

SupermarketSupermarket Convenience Convenience

StoreStore Discount StoreDiscount Store Department Department

StoreStore Category KillerCategory Killer

Specialty Specialty StoreStore

Factory Factory OutletOutlet

SuperstoresSuperstores Catalog Catalog

ShowroomShowroom

15-15-2323

E-Business E-Business ExpectationsExpectations

05

10152025303540

% Companies Responding

None 1-5% 6-10% 11-20% 20%+ Don’tKnow

Now In 5 Years

Share of company revenues CEOs say Share of company revenues CEOs say come from e-business Now vs. In 5 come from e-business Now vs. In 5

yearsyears

Source:Source: USA Today

15-15-2424

The Wheel of The Wheel of RetailingRetailing

PassagPassagee

ofof

TimeTime

2. Retail 2. Retail OutletOutlet2. Retail 2. Retail OutletOutlet

1. Retail 1. Retail Outlet StartsOutlet Starts

1. Retail 1. Retail Outlet StartsOutlet Starts

3. Retail 3. Retail OutletOutlet3. Retail 3. Retail OutletOutlet

4. New Outlet 4. New Outlet EntersEnters

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

15-15-2525

Has The Internet Has The Internet Changed Your Shopping Changed Your Shopping

Habits?Habits?

41% 37%

24% 38%

35%25%

0%10%20%30%40%50%60%70%80%90%

100%

High Use Low Use

Undecided

No

Yes

Survey of Americans who Survey of Americans who have high* Internet use have high* Internet use vs. those with low usevs. those with low use

* high use = 15+ hours * high use = 15+ hours per weekper week

Source: Source: USA Today

15-15-2626

What Online Shoppers What Online Shoppers Bought* Per Month in Bought* Per Month in

20002000

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000

Airline Tickets

Computer Hardware

Apparel

Hotel Reserv.

Books

Software

Health & Beauty

Toys/Video Games

*In thousands of dollars*In thousands of dollars

Source: Source: Forrester Research

15-15-2727

What does it take to What does it take to persuade persuade consumers to buy consumers to buy

online?online?

0

10

20

30

40

50

60

70

Percent

Assurance ofPrivacy

PriceDiscounts

Ability toReturn toBrick-and-

Mortar Store

**Survey of 1,944 Web Survey of 1,944 Web users that had users that had notnot made made

an online purchasean online purchase

Source: Source: CIO Web Business, 10/1/1999

Documents

15-1 Chapter Fifteen Distributing Products