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8/13/2019 4-channels of distribution
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The Retail
Environment
Distribution
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Channels of Distribution
The path a product takes from producer or
manufacturer to the final user
Remember the FORM UTILITY? PLACEUTILITY?
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Channels of Distribution
Think about the pair of jeans/shorts you
are wearing right now.
Starting with you purchasing the jeans andworking backwards listthe steps of how
the jeans to your hands
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Might look something like this:
http://images.google.com/imgres?imgurl=http://images.jupiterimages.com/common/detail/28/46/22774628.jpg&imgrefurl=http://www.jupiterimages.com/itemDetail.aspx%3FitemID%3D22774628&h=250&w=250&sz=24&hl=en&start=1&tbnid=vmwhBJeNzjjHzM:&tbnh=111&tbnw=111&prev=/images%3Fq%3Dpeople%2Bdrinking%2Borange%2Bjuice%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.fairportweb.com/images/salesman.jpg&imgrefurl=http://www.fairportweb.com/photo.htm&h=400&w=400&sz=109&hl=en&start=1&tbnid=orZQbc3kCDI2DM:&tbnh=124&tbnw=124&prev=/images%3Fq%3DSalesman%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.tropicana.com/TRP_ProductInformation/images/pa_OrangeJuice.jpg&imgrefurl=http://www.tropicana.com/trp_productinformation/Category.cfm%3FCategoryID%3D11&h=280&w=243&sz=22&hl=en&start=16&tbnid=MGPpQByQIR7lrM:&tbnh=114&tbnw=99&prev=/images%3Fq%3Dorange%2Bjuice%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.hickerphoto.com/data/media/185/orange-trees_12924.jpg&imgrefurl=http://www.hickerphoto.com/orange-trees-12924-pictures.htm&h=311&w=468&sz=36&hl=en&start=5&tbnid=qPBY5YIKEWxicM:&tbnh=85&tbnw=128&prev=/images%3Fq%3Dorange%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.rampantscotland.com/graphics/safeway4771a.jpg&imgrefurl=http://www.rampantscotland.com/let030118.htm&h=250&w=310&sz=19&hl=en&start=7&tbnid=kdh-POmOOjk9UM:&tbnh=94&tbnw=117&prev=/images%3Fq%3Dsafeway%26gbv%3D2%26hl%3Den8/13/2019 4-channels of distribution
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That process
Is called the Channels o f Dist r ibu t ion
Each step along the way is called a
intermediary(sometimes calledmiddlemen)
Orange grower, manufacturer, salesperson,grocery store, and YOU, the consumer
The more middlemen, the more expensivethe product
Everyone has to be paid along the way
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Trader Joes
We buydirect f rom supp l iers
wheneverpossible, we bargain hard to get the best
price, and then pass the savings on to
you.
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Channels of Distribution
Classified as either Director Indirect
Direct Distribution occurs when the goods
or services are sold from the producerdirectly to the final user, no intermediariesinvolved
Indirect Distribution involves one or moreintermediaries
Most services have a direct channel ofdistribution.
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People Involved
Manufacturers: those that make/grow the
product
Wholesalers: Buy from the manufacturerand sell to the retailers. The middlemen
Retailer: Buy from Wholesales and sell to
the end consumer
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Group Activity
1. Count off by 1, 2 & 3s 1s represent wholesalers
2s represent manufacturers 3s represent retailers
2. Develop a list of conflicts from your point
of view that might arise between yourgroup and the other two groups.
Example: Retailers might say thatwholesalers are too slow to deliver products.
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Channels of Distribution
Direct Channels of Distribution Producer to consumer: no retailer involved
Farm stands, farmers markets, flower stands on side of road
The internet is making this option much easier for people Indirect Channels of Distribution:
Distribution channel with a retailer Retailers actually buy the merchandise from the producer
and then resell it to consumers
When retailers buy direct they can get the latest products atthe best prices, quantity discounts, and some advertisingmaterials and/or dollars to aide in marketing the product
Producers get their product out to a large number of people
Consumers get access to a number of products
More expensive the consumer buying direct
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Channels of Distribution
Interview with NIKE
Through what channels does Nike currently sell
its shoes? Primarily through a combination of retail accounts,
NIKE-owned retail stores, independent distributors
and licensees, in the United States and over 160
countries worldwide. The biggest retail account is
FootLocker, Inc., which accounts for 10% of Nikes
sales worldwide. Nike also has its own Internet store,
www.niketown.com.
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Channels of Distribution
Distribution channel with wholesaler Retailer buys merchandise from a wholesaler
Wholesaler buys directly from the producer
This is done if a retailer does not have the space, or the desire,to store large quantities of merchandise
Many large retailers have their own wholesale environments Winco distribution center in Woodburn
Fred Meyer distribution center in Troutdale
When retailers purchase from wholesaler they are able to buysmaller quantities, get merchandise faster, and pay on credit.
Distribution channel with an agent Common with imported products which pass through an agent
before moving into the hands of a retailer.
Agents never own products, they are just salespeople.
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Nontraditional and Multiple
channels of Distribution Businesses do not always follow the traditional
channels of distribution Example: Leggs Products, a division of Hanes,
revolutionized the panty hose industry by puttingLeggs in grocery stores, where women were mostoften.
3M did the same thing by putting its office supplies ingrocery outlets.
Multiple channels are used when a product fitsthe needs of multiple consumers.Greenfield Healthy Foods produces Fat free cookies.
Right now they sell primarily to supermarkets. Theyare looking to expand into schools and hospitals.
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Multiple ChannelsLevis Jeans
Costco
Macys
Fred Meyer
One ChannelKirkland brand
Costco
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Distribution Intensity
Distribution Intensity has to do with how
widely a product will be distributed.
Intensive Distribution: the object iscomplete market coverage-get your
product out everywhere
Flowers to plant in the yard are sold at:Home Depot, Rite Aid, Safeway, Winco,
Nurseries, all over
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Distribution Intensity
Selective distribution: a limited number of outlets
in a given area are used to sell the product
When distributing this way, a company (thedistributor) can focus on the retail outlets that sell the
most and/or are the most willing to sell the product
Retailers face less competition if they carry a product
that is selectively distributed.Often times this is how products begin
Tims Cascade Chips
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Distribution Intensity
Exclusive Distribution: involves protectedterritories for distribution in a given
geographic location Dealers/retailers are assured that they are
the ONLY one selling the product in adesignated area
In this situation, the retailer is usually tiedthrough a contract.
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