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Distribution ChannelsDistribution Channels
GROUP B6Claudie ChaumetteEirikur JenssonMajugo KamuntuHan-Tung LiLuís VianaMiguel Yanes
StructureStructure Definitions of distributionDefinitions of distribution Evaluation of alternative distribution Evaluation of alternative distribution
channelschannels Distribution channel strategyDistribution channel strategy Basic functions of distribution channel Basic functions of distribution channel
structurestructure Direct selling: Nuskin Direct selling: Nuskin Selective distribution: BootsSelective distribution: Boots Intensive distribution: L’OréalIntensive distribution: L’Oréal Surprise !Surprise !
Definitions of Distribution/ Definitions of Distribution/ PlacePlace
“…those activities which must occur in order for the product or service to move from producer to customer.”
(Leyland Pitt, 1997)
“…activities utilised to move a product and its title from productionto consumption.”
(Bucklin - Theory of Distribution Channel Structure 1966)
Distribution Channel Distribution Channel StrategyStrategy
Assess Assess ChannelChannelOpportunitiesOpportunities
Define Channel Define Channel RequirementsRequirements
Maximise Maximise Retail Market Retail Market place Reachplace Reach
Key Issues
What ‘go to market’ strategies have greatest potential?What opportunities to penetrate new or alternate channels of trade?What channels options do we have?
Key Activities
Define and measure size of end user markets.Assess current channels characteristics and fit to product/ market. Recommend channels to acquire required market coverage.
Source: www.retailforward.com
Value-added
Partners
Value-added
Partners
Direct sales
The Value-Adds vs. Costs of The Value-Adds vs. Costs of Different ChannelsDifferent Channels
Internet
Internet
Telemarketing
Telemarketing
Retail stores
Retail stores
DistributorsDistributors
Sales force
Sales force
Cost per transactionHigh
High
Low
Low
Val
ue-
add
ed p
er
sale
Direct marketing
Indirect channels
BBasicasic F Functionsunctions of of Distribution Channel Distribution Channel
StructureStructurePRODUCER ACTIVITIES
(at the Lowest Cost) CUSTOMER
REASSORTMENT = Grading + Bulk Breaking + Packaging
STORAGE = Keep in Stock + Duration
TRANSPORTATION = Moving the Product physically
FINANCING = Providing a Finance Scheme + Duration
CARRYING RISK = ‘Act of God’ + ‘Human Risk’ + ‘Market Risk’
SELLING FUNCTIONS = Search Function + Selling Activities +Lowest cost
How does the direct selling How does the direct selling work?work?
No traditional middlemenCompanies paid the savings to
distributorsDistributors work as networksDistributors can work any time,
in many ways
Selective Distribution Selective Distribution Drug Stores (Specialty Stores)Drug Stores (Specialty Stores)
Objective: Objective:
get an on-shelf availability at acceptable levels in its get an on-shelf availability at acceptable levels in its storesstores
Regional Common Stockroom Regional Common Stockroom
> Re-Distribution Centre > Re-Distribution Centre
> Company’s Local Stores> Company’s Local Stores
Suppliers’ transportation + Boots delivery vehiclesSuppliers’ transportation + Boots delivery vehicles
Self-selection: limited assistance in storesSelf-selection: limited assistance in stores
L’Oréal – Consumables L’Oréal – Consumables DistributionDistribution
Today consumers Today consumers can find L’Oréal can find L’Oréal brands in every brands in every distribution distribution channel, from channel, from perfumeries and perfumeries and department department stores to stores to supermarkets supermarkets and chemists. and chemists.
SupermarketsSupermarkets
Shops & storesShops & stores
Company storesCompany stores
PartnershipsPartnerships
Direct SellingDirect Selling
Internet Internet
Market SpecificsMarket Specifics
Product SpecificsProduct Specifics
Wide / Global reachWide / Global reach
Specialist groups Specialist groups
Target selective usersTarget selective users
Applying Distribution Channel Applying Distribution Channel StrategyStrategy
Assess Channel Opportunities
Define Channel Requirements
Maximise Retail Market place Reach
WholesalerWholesaler
RetailersRetailers
Direct SellingDirect Selling
Company storesCompany stores
InternetInternet
The Value-Adds vs. Costs of Different The Value-Adds vs. Costs of Different ChannelsChannels
Internet
Internet
Nuskin stores
Nuskin stores
Direct Selling
Direct Selling
Val
ue-
add
ed p
er s
ale
Cost per transaction
The Value-Adds vs. Costs of Different The Value-Adds vs. Costs of Different ChannelsChannels
Company chain of stores
Company chain of stores
Selected host
retailers
Selected host
retailersInternet
InternetV
alu
e-ad
ded
per
sal
e
Cost per transaction
The Value-Adds vs. Costs of Different The Value-Adds vs. Costs of Different ChannelsChannels
Val
ue-
add
ed p
er s
ale
Cost per transaction
InternetInternet
Distributors
Distributors
Retail stores
Retail stores
Selected Pharmacist
s
Selected Pharmacist
s
Marketing Functions of Marketing Functions of ChannelsChannels
L’OréalL’Oréal RetailerRetailer
Boots StoresBoots Stores Nuskin (Member Nuskin (Member distributor)distributor)
ReassortmentReassortment NoNo No No NoNo
TransportationTransportation NoNo NoNo YesYes
StorageStorage PartiallyPartially NoNo YesYes
FinancingFinancing NoNo NoNo PartiallyPartially
Carrying RiskCarrying Risk PartiallyPartially PartiallyPartially NoNo
SellingSelling PartiallyPartially YesYes YesYes
QQuizzesuizzes!!A push strategy involves L’Oréal using its sales forceand trade promotion money to induce intermediaries to carry, promote, and sell the product to end users. True / False
Companies that are successful in switching their customers to lower cost channels, assuming no loss of sales or deteriorationin service quality, will gain a channel advantage.
True / False
Which of the following companies uses the type of distributionwhere there is the use of more than a few but less than all of the intermediaries who are willing to carry a particular product?
L’Oréal / Boots / Nuskin
Questions?Questions?
