Distribution Channels

Various Distribution Alternatives

Distribution-Scope StrategiesIntensive distributionDistribute from as many outlets as possible to provide location convenienceSelective distributionAppoint several but not all retailersExclusive DistributionLimiting the distribution to only one intermediary in the territory

Approaches to Channel Based DistributionIntensive--essential to low involvement goodsSelective--desire to maintain imageExclusive--very high prestige needed or very high service requirementsAdmission ByINVITATIONONLY

Mass/ Intensive distribution

Distribute from as many outlets as possible to provide location convenience

Intensive Distribution

CharacteristicsLow value, repeat purchase itemsLow involvement products, least effort by customersBiggest imbalance between the production levels and consumption levelsLow shelf life in many casesMaximum no. of intermediate players

Example of Intensive DistributionCommodities, Food & grocery, stationery, medicines, mobile prepaid cards etc.Cigarettes, Matches, Tobacco productsPharmaceuticals

Advantages:Increased sales, wider customer recognition, and impulse buyingDisadvantages:Characteristically low price and low-margin products that require a fast turnover Difficult to control large number of retailersAverage retailer order size very small (shop size & money constraints)

Intensive Distribution

Which are the largest selling FMCG brands in India?Gold Flake 3000 croreWills 2000 crorePepsi 2000 croreThums UpBritanniaParleColgateCoca-ColaWheelNirmaSource: Brand Equity research 2006

Which are the largest selling FMCG categories in India?Personal care 9000 crore+Cigarettes 8000 crore+Soft drinks 7000 crore+Source: Brand Equity research 2006

One common factor for the largest brands is the greatest distribution width and scale

Typical FMCG distribution( Intensive distribution)Distributor 2

Host of IntermediariesBetween Distributor to Consumer, there can be wholesalers, sub-wholesalers, commission agents, store based retailers, patri-wallas, mobile retailers (push carts and pheri-wallas) etc.

Life is not so simplePotential conflict areas FactoryDepot / C&FDistributorWholesalersRetailersConsumersDistributor 3Distributor 2

Another ConflictDistributor 2

More ConfusionDistributor 2

New Developments: growth of organized retailingFactoryDepot / C&FDistributorNo intermediaryOrganized RetailersConsumersDistributor 3Direct co. to retailerDistributor 2

Collapsing outbound supply chainEarlier Carpet bombing technique

Manufacturer Mother godown CFA

Retailer Wholesaler Distributor

Consumer

Collapsing outbound supply chainNew trend Precision bombing technique

Manufacturer Retailers w/h or DCs

Consumer Retail stores

Intensive Distribution a specific caseQ. Which is the most perishable commodity today?

Answer NewspapersAverage shelf life: 3 hours

Typical newspaper distributionThe printed newspaper is dispatched to various distributors across the country through transportation. Transportation is normally through private contract carriers within local area, public transport in case of longer distances and through couriers in other cases.

Contd..The newspaper distributor has sole rights to distribute the newspaper in his area. His revenue is based on a commission on the sale of every newspaper. He achieves circulation through salesmen appointed and salaried by him, who in turn pass it on to hawkers.

ContdHawkers, vendors and book stall owners are the last link of the supply chain before newspaper reaches readers. The hawkers remuneration is based on a commission system and is the highest in the entire supply chain.

Optimization model

The entire distribution network can be segregated into various hawker points and an optimized route proposed for each of them, based on the vehicle capacity constraints. Starting at the first hawker, newspaper requirements are accumulated until the vehicle limit is reached. At this hawker, another vehicle route is begun. The procedure is continued until all the hawkers are included in some route.

Contd.After the routes that include all the hawkers and that satisfy the vehicle capacity constraints have been constructed, the time constraints must be checked. The routes describe the distance the vehicle must travel on each route and the sequence in which hawkers on that route are visited. For each route, the distance along the route, from the production facility to the last hawker point visited can be calculated. The time the vehicles stop at each hawker also needs to be considered.

Production scheduleThe production schedule can be deduced by arranging the routes in a sequence that will ensure delivery of all the newspapers by the prescribed time. This sequence is developed by arranging the routes in descending order of the total route length distance from the production facility to the last hawker. Usually, newspapers for the farthest locations are produced and shipped first since the total delivery time is greater. Dark zone -> City edition -> Metro edition -> local supplements

Mass distribution some issues Differential taxation across states.Leads to cross-state movement of goods, territory infiltration, rate issues & market conflict.Case : Nimulid TabletsDelhi VAT 4%, UP VAT 9%Suggest solutions to Panacea Biotech

HULA distribution giant

Selective distribution

Appoint several but not all retailers

Selective DistributionCharacteristicsSomewhat expensive, infrequent purchase items (life usually more than 6 months)Relatively high involvement products, more effort by customers (can go 3-5 kms)Less of impulse purchaseMore impact of store image & atmosphericsLower level of distribution

Products Distributed through Selective DistributionConsumer Durables, Mobiles, Apparels, Watches, Footwear, Sport goods, Toys, Kitchenware, Jewelry, etc.

Selective DistributionAdvantages:More control and less cost than intensive distributionConcentrate effort on few productive outletsSelected firms capable of carrying full product line and provide the required service

Selective Distribution (contd)Disadvantages:May not cover the market adequatelyDifficult to select dealers (retailers) that can match your requirement and goals

Typical Consumer Durables distributionSub dealer

DealersSpaced out within a marketUsually carry Multi-brandsProduct presentation is criticalCustomer handling by sales person is keyClearing of doubts at the purchase point (dissonance reducing buying behavior)After sales service is a must

The biggest selective distribution model in IndiaLGT/O 10000 crore+43 branches, 150 area offices, 10000+ channel partnersNo. 1 or 2 in most of its product categories:AC 30%, CTV 27%, Washing m/c 35%, Refrigerators 30%, Microwaves 40%

New distribution networkFactoryDistribution CenterDealer1CustomerDealer 2Distributor 1Dealers in small townsCustomerSub dealerExclusive outlet

New developments: growth of organized retailingTo have better control on their brand and customer interaction, manufacturers started retailing activitiesRaymonds shop, Bata StoresExclusive Brand outlets; either owned or franchisedEBOs are in addition to the regular MBOs

A special case of selective distribution Film distributionThe production house (like Yash Raj Banner) sells the territorial rights to film distributors (like Shringar Films).The price is decided by the cost of the project and the trade potential of the movie.Retailers are the exhibitors (theatres)The spectrum has organized chains like PVR & Imax at one end to single screen theatres at the other.

Why selective distribution?Not feasible to release a movie on all the screens of a marketNeither it is desirableMultiplexes have clearly sliced the market into classes & masses.Films are now produced with this segmentation in mind right at the onset.Only universally potential movies find acceptance by all kind of exhibitors.

Further selectivity down southSouth India more selective distributionThriving vernacular movie industries in 4 languagesHuge demand and high number of screensDepending on the catchment area, the exhibitor prefers the language of the movie out of broad 6 choices.

Exclusive Distribution

Limiting the distribution to only one intermediary in the territory.

Depending on the market strength, the territory can be one entire state, town or a major region of a city.

Exclusive DistributionCharacteristics

Generally expensive, capital expenditure, once in a lifetime purchase items Can be meant for a particular class or communityHigh involvement products, more effort by customers (can go fair distance to purchase the products)More impact of store image & atmosphericsGenerally 1-level distribution

Examples of Exclusive DistributionTwo-wheelers, cars, Luxury goods, home furnishings & carpets, etc.

Exclusive DistributionAdvantages Maximize control over service level/outputEnhance products image & allow higher markupsPromotes dealers loyalty, better forecasting, better inventory and merchandising controlRestricts resellers from carrying competing brands

Exclusive DistributionDisadvantages Betting on one dealer in each marketOnly suitable for high price, high margin, and low volume products

Typical Auto Industry distributionCustomerManufacturing LocationDealer1Dealer 3Dealer 2

DealersPop & potential: the basic criteria for selectionSpaced out within a big city Only 1 in a small cityExclusive Brand Outlets OnlyHave to give lot of customer educationProduct presentation, demonstration is criticalCustomer handling by sales person is keyAfter sales service is a must

After Sales Service network in auto industryService network has to be more distributed than sales networkMostly through Authorized Service StationsRecently, Companies started realizing service as a key differentiatorMaruti itself opened service stations - MSM

Why should service be more distributed than sales for auto industry ?Sales one time purchase activity by the customerHigh involvement product; more effort by the customerService more frequent and routineEmergency repairs, accidentsBigger earning potential for the companyCustomer would like service station to be as close to him as possible.

Does Auto Industry require Mass Distribution?Yes For its spare parts.Spare Parts are relatively low value, repeat purchase products.They are sold through car spare parts dealers in specific markets apart from the authorized service stations.Small repair garages, workshops and mechanics purchase them from these outlets.

Taking exclusivity to a new levelWorld leader in luxury, LVMH (Louis Vuitton Mot Hennessy) Louis Vuitton possesses a unique portfolio of over 60 prestigious brands. The Group is active in five different sectors: Wines & Spirits Fashion & Leather Goods Perfumes & Cosmetics Watches & Jewelry Selective retailing

LVMH The BrandsLouis VuittonKenzoGivenchyFendiThomas PinkDonna KaranMont Blanc etc.

LVMH in IndiaOnly 3 outlets till 2008:The Oberoi, New Delhi, 2003The Taj Lands End, Mumbai, 2004Taj Mansingh, New Delhi, 2005

Lack of the right retail environment, where their target segment can meet them.

The emerging scenarioA few of the existing malls in India fulfill their requirements Select Citywalk.Some super-luxury malls are being developed DLF Emporio Recently, LVMH has signed-up for their stores in these.Has also a store at UB World, Bangalore

Channel ManagementSelecting Channel MembersTraining Channel MembersMotivating Channel MembersConflict Management

Channel Management DecisionsSelecting Channel MembersIdentify characteristics that distinguish the best channel membersManaging and Motivating Channel MembersPartner relationship management (PRM) is key

Evaluating Channel MembersPerformance should be checked against standardsChannel members should be rewarded or replaced as dictated by performance

Channel Management DecisionsSelecting channel membersManaging and motivating channel membersEvaluating channel members

Which characteristics are important? Years in businessLines carriedGrowth and profit recordCooperativeness and reputationType of customerlocationDecisions

Selecting Channel PartnersGetting good channel partners is a difficult part of doing business Some of the methods employed to select channel partners are:Sales people identify prospects and talk to themPress advertising (industrial goods)Existing channel partners can give good referencesCompetitors channel members for reference, or poaching

Setting up the Distribution ChannelQ. Which players do you select and appoint (have a contract)?A. 1. Primary Distributors / Exclusive Dealers who will become your authorized channel partners. 2. Franchisees 3. CFAs incase you do not want to have your own distribution centerRest of the players ie wholesalers, retailers, multibrand dealers are only convinced and motivated to sell your products.

Selection CriteriaQualitative: willingness, confidence in company products, willingness to abide by company rules, building company image, innovativeness etcQuantitative: financial status, infrastructure, location, present businesses, customer relationships, market standing etc

Selection ..contd.Determine the number at each level required in any territoryEstimate the potential business from each memberIdentify capable parties (FEED principle at Gillette)SelectionROI & cost of servicing the accountConvince, negotiate, finalize, sign a formal agreement (in case of primary partners)

The core channel offeringsThe financial returns which the channel partner will getThe quality of the productThe reputation of the brandThe advertising supportThe price at which it is being offered to the marketDelivery reliabilityMarket goodwill

Training Channel MembersStarts from the time of recruitmentChannel member owner and his staffMarket views channel member as part of the company he has to behave in a like manner hence training assumes significanceTraining could be on the job field training or classroom trainingTraining is an ongoing process.


Partner relationship management (PRM) for long-term partnershipsSoftware available to coordinate membersDecisions

Motivating Channel MembersAmbitious volume and growth targets continuous motivation required to achieveMotivation includes:Capacity building programsTrainingPromotions supportMarketing research support Working with company personnelIncentives

Motivating the distributorsThrough ensuring high secondary salesHealthy profit and ROIImage buildingJoint publicity newspaper ads, trade-fairs, hoardings & banners, road-showsSales promotion schemes QPS, target incentives, volume discounts, trips, contests etc.Training to their teamsTransparency and fairness in dealingRegular communication from the seniors

Motivating the retailersPeriodic retailer promotionsProviding display material free or at subsidized prices Cooperative advertising and promotionDisplay contestsWindow hiringMystery shopperAlso training retailers in how to use & where to use the display is necessary to get his interest and cooperation.


Check channel performance of:SalesInventoryCustomer deliveryPromotion and trainingCustomer serviceDecisions

Channel Members EvaluationEffectiveness of the distribution channel determines the success of the companyCompany would like its channel partners to perform at the highest standards possibleNeed to constantly evaluate performance on sales targets, coverage, productivity, inventory holdings, attending to servicing requests etc Role of ROI..

ROI as a MeasureLeading FMCG companies feel that an ROI of 30% for a distributor is healthy and is a fair indication that he is performing well.If the ROI is more, additional tasks are givenIf the ROI is less, the company may provide additional supportPost evaluation tasks include counseling, retraining and motivating. In extreme cases it may result in termination.

Calculating ROIThe investment by the channel members is in capital and infrastructureFor a particular period, R = {S X P (Tc + Sc)} / Wc + IcR=Return, S=Sales volume, P=Profit per unit, Tc=Transaction cost, Sc=Shipping cost, Wc=Working capital cost, Ic=Infrastructure cost

Performance EvaluationOn pre-agreed tasks only. No surprises.Specific targets on periodical basis are set.Targets on volume and outlet productivity could be for a week or a monthTargets relating to increasing market shares or total outlet coverage could be for 6 monthsDifferent weightages could be given for each of the parameters for evaluationThe performance appraisal is open and transparent

Modifying Channel Arrangements Modification becomes necessary when the distribution channel is not working as planned.When consumer-buying patterns change.When the market expands.When new competition arises.When innovative distribution channels emerge.And when the product moves into the later stages in the product life cycle.

Multi-channel Marketing SystemsMulti-channel marketing occurs when a single firm uses two or more marketing channels to reach one or more customer segments. By adding more channels, companies can gain three important benefits:Increased market coverage.Lower channel cost.More customized selling.

Multi-channel CostsThe gains from adding new channels come at a price:New channels typically introduce conflict and control problems.Two or more channels may end up competing for the same customers.The new channel may be more independent and make cooperation more difficult.

Distribution & Logistics Mgmt issues involvedMore dependent on outsiders (not employeesAll the flows in the channel have to be performed and even one missing link will make the channel ineffectiveGenerally products compete with many others in the same channelProper ROI to be generated through volumes or higher margins

Channel conflictEach member is an independent business entity having own goals and orientation

When one member perceives the behavior of other member to be impeding its effective functioning.

Channel BehaviorChannel ConflictOccurs when channel members disagree on roles, activities, or rewards.Types of Conflict: Horizontal conflict: occurs among firms at the same channel level Vertical conflict: occurs among firms at different channel levels

Typical reasons for Channel conflictsUnfulfilled commitment from either sideUnrealistic expectationsAmbiguous terms of businessPersonality clash between the party and the company sales personInfringement in assigned sales territory by other distributorDifferent treatment to different channel partnersLower prices in wholesale (in the case of mass-products)

Multi-channel Conflict Multi-channel conflict exists when the manufacturer has established two or more channels that sell to the same market. Multi-channel conflict is likely to be especially intense when the members of one channel get a lower price (based on larger volume purchases) or work with a lower margin.

Four StagesLATENTMANIFESTFELTPERCEIVEDEach stage is progressively more severe than the earlier one

Conflict Resolution StylesAvoidance AggressionAccommodationCompromiseCollaborationLeast effort and resultsMaximum effort and Best resultsKenneth W ThomasStyles are a combinationof assertiveness andco-operation.

Utilizing Power in the ChannelIn the era of Retailers and the influence of the Internet on retailing, it is interesting to consider which channel member(s) is/are powerful and how the power is being utilized.1. Reward power: The ability of one member to provide financial or other type rewards to others for compliance.2. Coercive power: The ability of one member to punish others through various means for non-compliance.3. Legitimate power: This is based on the notion that one member has the right to influence others and that others should accept it.4. Referent power: The power derived by one member by identifying with another.5. Expert power: The power based on the perception that one member has expertise or special knowledge.

Managing Channel ConflictDiplomacyMediationArbitrationDiplomacyMediationArbitration

Methods to Manage Channel ConflictMotivating MethodsPunitive MethodsCooptationDiplomacy

MediationArbitrationThe above two are third party mechanismsAt any point, skillful negotiations are very important in resolving conflicts

Relationship Marketing via the Marketing Channel

Typology of Relationship Marketing

Relationship Nature

Relationship PurposeAd HocOn GoingStrategicAlliance RelationshipPartnering RelationshipOperationalTransactional RelationshipCooperative Relationship

Strategies for conflict resolution

Significance of Individual GoalsLowHigh

Nature of Relationship MaintenancePartneringCompromising by sacrificeIntegrating by negotiationTransactionalWithdrawing by avoidanceForcing by domination

Definition:Continuing and mutually supportive relationship between the manufacturer and its channel members in an effort to provide a more highly motivated team, network, and alliance of channel partnersStrategic Alliances and Partnerships in Marketing Channels

Traditional us-against-them mentality is replaced with a new cooperative perception of us in an effective channel partnership or strategic alliance

Thus, partnerships or strategic alliances go well beyond the ad-hoc, on-again / off-again interactions typical of traditional relationships among channel members

Requirements for Partnerships or Strategic Alliances in Marketing Channels(1) Recognition of interdependence of channel members(2) Close cooperation between channel members(3) Careful specification of roles, rights, and responsibilities in the relationship(4) Coordinated effort focused on common goals(5) Good communications and trust between channel members

Building Relationships with Channel MembersFind Out the Needs and Problems of Channel Members-informal information system (grapevine)-research studies of channel members-research studies by outside parties-marketing channel audit-distributor advisory councils

Offer Support to Channel Members that is Consistent with Their Needs and Helps Solve their Problems-cooperative arrangements-partnerships and strategic alliances-distribution programmingProvide Leadership to Motivate Channel Members -use power effectively-recognize causes of conflict-resolve conflictsBuilding Relationships with Channel Members Contd

Key relationship factors and IT-based distribution system Reasonable ROICompany & Transparency in dealing its WarehousesPrompt info sharingQR techniquesFixed / smaller replenishment cycles IT-enabledZero-defect deliverydist. channelEarly recovery systemTracking infoServqual consistency Channel members

IT enabled Distribution systemsDisintermediation vs. ReintermediationCybermediary, Infomediary, Intermediary empowermentStrategic framework

Impact of e-commerce on DistributionMany researchers predicted the demise of traditional distribution channels with the advent of e-commerce.Most of them wrote about the DTC model for products / services.Has complete disintermediation happened?

E-commerce leads to:Disintermediation: Elimination of intermediary organizations by substitution or consolidation using IT & communication linkages.Does not completely eliminate intermediary functions in most categories.Either automates or shifts intermediary functions upstream or downstream of a supply chain.

The E-Distribution

Comparison between various channels of distribution reveal that e-channels have the lowest cost-per-transaction and low value added service.

On the other hand, traditional physical channels that include salespersons have the highest cost-per- transaction and the highest value added service.

The E-Distribution

Choice of utilizing the traditional physical channels (brick only), e-channels (pure-play, click only) or dual channels (brick & click).

While some marketers use brick only channels (ex. SMEs) or click only channels (Amazon.com), many have settled for a dual channel system (ex. Wal-Mart).

The E-Distribution

While some use dual channels for promotion, sales and distribution of their products/services, others are confined to promotion and service via the e-channel of their products sold through physical channels.

For instance, automotive companies use their websites to drive traffic to their brick sites (dealerships).

HondaHonda.comDealershipAdvertisingDual Channel Complementary 1In this case, Hondas Website provides vehicle and dealer information and directs customers to the nearest dealer.

SonySony.comBest BuyAdvertisingDual Channel Complementary 2In this case, Sony sells certain products/services through Best Buy and others through its own Website.

Prentice HallPrenHall.comUSA BookstoreDual Channel Competing 1In this case, book publisher Prentice Hall sells books via university book stores and also via their own Website.

Wal-Mart Stores, Inc.Walmart.comSupercentersDual Channel (Retailer) Competing 2In this case, retailer Wal-Mart sells certain products thru competing channels while others thru a single channel.

Emergence of newer forms of intermediarySome functions like information search, demand aggregation, title exchange and communication are more efficiently performed by electronic intermediaries than traditional distribution channels.Other functions like product promotion, integration, negotiation, logistics are still the forte of traditional channels.

Major transformations due to IT environmentDisintermediationMeaning To remove the middlemanBiggest benefit getting closer to the customer and managing less number of intermediariesWhat about cost?Cost advantage accrues only if service / control over market is not compromised

2 types of disintermediationPartial disintermediationReduction or bypass of a few 3rd party intermediaries.Example Airlines adopting direct booking / e-ticketing for their privileged corporate clients. They have disintermediated at least one out of agencies and CRS vendors, and pass on the savings on commissions to the clients in terms of value-added offers, loyalty program.

ContdComplete disintermediationRemove all channel partners and sell through the Internet.New term coined for this distribution model CybermediaryExample Dell uses either its direct sales force (for B2B dealings) or through Internet (for B2C business)Benefits fast and wide reach to customers, automatic paperless record keeping, no brick-n-mortar outlets and no pipeline inventories

Growth of ReintermediationThe process of using the Internet to reassemble sellers, buyers & business partners in new waysDisintermediated players can regroup and fight back.Emergence of new IT-based intermediaries between customers and suppliers to provide info based services like source search and evaluation, price comparisons etc. Example E-bay

2 forms of reintermediation emergingInfomediaryMarketing intermediary in the business of providing informationServes as an electronic information broker, providing shopping services or buying assistance to help buyers and sellers find each otherExample - NTE in USA, Job-search sites, Mutualfundsindia.com, Property-search sites

2nd type of reintermediationIntermediary EmpowermentTo take out costs from the most potent area i.e. distribution; organizations are using IT for developing linkage with their strategic channel partnersMajor advantages of this are sharing of working methodology, transparency and real-time availability of information regarding order-status, shipment schedules, replies of inquiries, credit-status, inventory management etc . This leads to empowerment of the channel partners and creates committed team-players.

Disintermediation vs. ReintermediationConcept of disintermediation even the smallest producers gain exposure to vast number of customers. All they need is a good enough website.Reality has proved otherwise.In many cases, addition of intermediaries has happened in the channel (reintermediation)Example Amazon.com, Indiatimes.com, Auto-by-Tel, Peapod

The verdictThe jury is still out on the issue.Good examples of reintermediation do not mean it has prevailed over disintermediationA powerful example of successful disintermediation is Dell ( which sells over $40 million worth of goods everyday directly)No matter how technologically superior Internet is, the law of economics will always hold true.Efficiency in the performance of distribution tasks is what will determine the form of the channel structures to emerge.

Information flow vs. Product flow5 flows in channels product, money, title, information and promotion.Internet can superbly handle flow 2,3,4 & 5 as all of them have information which can be digitized.However in maximum cases, flow of products i.e. actual fulfillment of transaction has to be in the old-fashioned way i.e. through people, warehouses, packaging, transportation means etc.It is the product flow which is at the core as in the absence of it, no other flow is required.Thus internet is not a complete marketing channel.Depending on the product category and behaviour of customer segments, electronic channels will have different role and impact for companies.

Strategic framework for adopting various IT-enabled distribution systems1. Product characteristics All products are not fit for e-comm. A larger %age of e-based sales come from products which can be digitized.Product characteristics GRID:

Nature of productNon-physical Physical productConfiguration of the product featuresSimple featuresCybermediaryPartial disintermediationComplex featuresInfomediaryIntermediary empowerment

2. Consumer Involvement in Purchase decisionInvolvement can manifest itself in 2 forms information search and inspection of product attributes.Consumer sensitivity GRID:

Need for info search lowNeed for info search - highNeed for physical inspection - lowCybermediaryInfomediaryNeed for physical inspection - highPartial disintermediationIntermediary empowerment

3. Distribution Profile of the organizationMost firms have limited direct distribution resource capability.Conflicts between established and new channel is one of the biggest issues, specially in consumer goods companies.Harmonious relationships with entrenched intermediaries are very important to them for growth & long-term peformance.Distribution profile GRID:

DD Resource capability of the firm - LowHighNeed for harmonious channel relationship lowInfomediaryCybermediaryHighIntermediary empowermentPartial disintermediation

4. Role of intermediariesIt is expected that intermediaries who primarily facilitate information exchange will be eliminated by e-comm.Depending on the quantum of logistical and marketing value addition, a GRID based on role of intermediaries is formed:

Logistical value addition - lowHighMarketing value addition- lowCybermediaryPartial disintermediationHighInfomediaryIntermediary empowerment

Strategic framework for adoption of Internet-based Distribution system

Factors

IT-enabled systemsProduct characteristicsConsumer involvementRole of intermediariesDistribution profile of firmNature of productProduct featuresNeed for info searchNeed for physical inspectionLogistical value addMarketing value addDDS resource capabilityNeed for harmonious channel relationCybermediaryNon-physicalSimpleLowLowLowHighHighLowPartial disint.PhysicalSimpleLowHighLowHighHighHighInfomediaryNon-physicalComplexHighLowLowHighLowLowIntmdy. empowermentPhysicalComplexHighHighHighHighLowHigh

Summary of the changes in distribution due IT Metamorphic transformation is possible in traditional distribution structures.Disintermediation (partial or total) as well as reintermediation in the form of infomediary and intermediary empowerment is happening.Disintermediation in the short-run with the bypassed players regrouping and getting reintermediated through use of IT is a big possibility.

********e.g. My Fashion, 7-Eleven, McDonalds*************************************************************************************************************************

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Distribution Channels