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Distribution and Retailing

Distribution and Retailing. Dr. Amit Joshi MAR 6816. Manufacturer. Retailer. Distributor. Consumers. Distribution Channel (PLACE). Business Structure. Logistics or Physical Distribution. Physical Distribution Gets It to Customers.

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Distribution and Retailing

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  1. Distribution and Retailing Dr. Amit Joshi MAR 6816

  2. Manufacturer Retailer Distributor Consumers Distribution Channel (PLACE) Business Structure

  3. LogisticsorPhysicalDistribution Physical Distribution Gets It to Customers Coordinating the flow of information among channel members

  4. The Nature of Marketing Channels • Marketing Channel – Network of marketing institutions. • Channel Members / Marketing Intermediaries: Reseller or middlemen. • Functions • Transactional (promote & negotiate) • Logistical • Facilitating (researching and financing)

  5. Supply Chain Management • Customer-driven philosophy • Goal is enhanced value • Two roles • Communicator of customer demand • Manager of the physical flow process

  6. Accumulating Bulk-Breaking Assorting Channel Specialists Adjust Discrepancies with Regrouping Activities Accumulating (EGGS) Allocating or Bulk-Breaking QUANTITY Heterogeneity Sorting (Grading Oranges) Assorting (Winn Dixie) ASSORTMENT

  7. Channel Specialists Increase Contact Efficiencies Multiplicative Rock Fan Pioneer Pop Fan Classical Fan JVC "Dr. E" Country Fan Magnavox Reggae Fan New Age Fan Sony Rap Fan

  8. Channel Specialists Increase Contact Efficiencies Rock Fan Pioneer Pop Fan Classical JVC Dapper Dan’s Stereos "Dr. E" Country Fan Magnavox Reggae Fan New Age Fan Sony Rap Fan Additive

  9. Retailers Take Title to Goods Merchant Wholesalers Take Title to Goods Agents and Brokers Do NOT Take Title to Goods Channel Intermediaries

  10. Factors Suggesting Type of Wholesaling Intermediary to Use

  11. Types of Marketing ChannelsChannels for Consumer Products Direct Channel TRADITIONAL

  12. Types of Marketing ChannelsChannels for Industrial Products

  13. CHANNEL STRATEGY DECISIONS Market exposure – optimal Selection of a Marketing Channel Intensity of Distribution Management of Relationships

  14. Intensity of Market Coverage Intensive Distribution Sell it where they buy it!

  15. Intensity of Market Coverage Limited #; Enables price control Selective Distribution Sell it where it sells best!

  16. Intensity of Market Coverage Exclusive Distribution Extreme case of Selective Distribution. UNIQUE Positioning.

  17. Pepsi-Cola Coca-Cola Pepsi-Cola bottler Coca-Cola bottler Kroger supermarket Publix supermarket Channel Conflicts (Inequitable Relationships)

  18. Manufacturer Retailer Distributor Consumers Vertical

  19. Retailer Retailer Retailer Retailer Distributor Horizontal

  20. Retailing

  21. Introduction Retailer • An intermediary involved in selling goods and services to ultimate consumers Wholesaler • An intermediary that takes title to the goods it handles and redistributes them to retailers, other distributors, and sometimes end consumers

  22. STRATEGIC IMPLICATIONS: RETAIL MARKETING STRATEGY • A retailer develops a marketing strategy based on the firm’s goals and strategic plans • Two fundamental steps: • Picking a target market: size and profit potential. POSITION. • Developing a retailing mix to satisfy the chosen target market • 4Ps + Personnel & Presentation used to create a retail image

  23. Product Personnel Place TargetMarket Presentation Promotion Price The Retailing Mix

  24. Choosing the Merchandising Mix The mix of products offered to the consumer by the retailer; also called the product assortmentor merchandise mix.

  25. Merchandising (Product) Strategy • Category management: Retailing strategy which views each product category as an individual profit center. • Slotting Allowances: lump-sum payments by manufacturers for stocking new products. (Also includes pay-to-stay allowances.) • Scrambled Merchandising: Combining dissimilar product lines to boost sales volume. (Diversity in merchandising). • Growth of Store brands – Battle for shelf space

  26. Business 2.0 (2005) • 'Today every major U.S. consumer-packaged-goods retailer, from Albertson's to Petsmart practices category management. Even at Kmart, Target and Wal-Mart, what you see on the shelves is largely the result of recommendations by category captains like Gillette, Nestle Purina and SC Johnson.' "

  27. Conwood V. USTC • A $1.05 billion antitrust award against the United States Tobacco Co. in favor of Conwood Co. • Conwood filed the suit alleging that United States Tobacco unfairly dominated the smokeless tobacco industry through its category captain arrangements. • It also marked the first time an appeals court condemned as an antitrust violation a system that gives a company some control over merchandise displays of its own and competitors' products.

  28. Presentation of the Retail Store - Atmosphere The overall impression conveyed by a store’s physical layout, décor, and surroundings. Five Senses.

  29. Atmospherics • Five Senses • Sight - darker colors are more intense! • Sound - potato chips; packaged in crinkling bags. • Feel – texture, temperatures. • Taste • Smell – • developing a new car smell for used car dealers • a fresh-baked cookie air treatment product for Realtors to use when showing homes • fresh bread aerosols for markets • malls putting pizza aroma through air ducts to draw people to food courts

  30. Sexy Smells • Smell and Taste Treatment and Research Foundation, Chicago • Dr. Alan Hirsch • What odors make people happy? • Subjected volunteers to various odors while measuring blood flow.

  31. Two Common SellingTechniques Trading Up Suggestion Selling Personnel and Customer Service

  32. Retail Prices Low Price High Price Quality Image Good ValueSingle Price PointEDLP

  33. Pricing Strategy • EDLP – Everyday Low Pricing • Markup – amount added to a retailer’s cost • Gross margin

  34. Gross Margin The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.

  35. High Margins Low Margins HIGH INVENTORY TURNOVER LOW Profitability of a Retailer

  36. Classification of Retail Operations Level of Service Product Assortment Price

  37. Major Types of Retail Operations Department Stores Wide variety. J.C Penney, Macy’s Given type of merchandise. The Children’s Place Specialty Stores Compete on low prices, high turnover. Discount Stores Convenience Stores Miniature supermarkets Supermarkets Large, self service, specialize in food. Publix.

  38. Full-LineDiscounters Low prices, broad assortment, self service, branded goods; Wal-Mart Specialty Discount Stores Niche, often single line. Best Buy, Staples WarehouseClubs Limited selection, bulk, members only. Costco, Sam’s Club Off-PriceDiscount Retailers At least 25% discount, irregular merchandise. T.J. Maxx, Ross Categories of Discount Stores (Mass merchandising strategies)

  39. Wheel of Retailing • Newer, low-price types of retailing arise to challenge older established “bigger” retailers.

  40. Wheel of Retailing 3 Motel + Free Breakfast+ HBO Motel + Free Breakfast+ HBO + Happy Hour 4 2 New Entrant Motel + Free Breakfast 1 No Frills Motel a theory to explain the institutional changes

  41. Wheel of Retailing • Newer, low-price types of retailing arise to challenge older established “bigger” retailers.

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