Distribution Management

1. Distribution Management Marketing 2B Distribution Management

2. Quiz What are the 5 Primary and 4 Support Activities that “Porter” names in his model to describe Value creation in the Supply chain? 9+1 point Marketing 2B Distribution Management

3. Quiz 9 Value creating stages - Porter • Primary activities • Inbound logistics • Operations goods • Outbound logistics • Marketing / Sales • Service • Support activities • Procurement function • Tech Development • Human resources • Infrastructure Marketing 2B Distribution Management

4. SAF Channel participants – Chapter 2 Evolution of SAF distribution channels SAF Distribution - Overview Trends Informal sector Franchising Marketing 2B Distribution Management

5. SAF Distribution - Overview Typical SAF Distribution channels participants Wholesalers Manufacturing Retailers Informal retailers Consumers Marketing 2B Distribution Management

6. The Typical distribution channel Importer Producer Wholesaler Retailer Consumer Manufacturer Supplier Importer Producer Retailer Consumer Manufacturer Supplier Global company Local Manufacturer Local Wholesaler Local Retailer Local Consumer Marketing 2B Distribution Management

7. Evolution of SAF distribution channels • History lesson!! Marketing 2B Distribution Management

8. SAF Retailers ( Grocery) 2004 Marketing 2B Distribution Management

9. Trends. • Evolution of Distribution channels is linked to economic development. • SAF – Large informal retail sector ( Spaza shops and street vendors) • But 2% of Retailers are responsible for 70% of sales (P&P et al) • Wholesalers have evolved into Self service wholesalers (Metcash Africa) Marketing 2B Distribution Management

10. Trends - Wholesalers • Phase of evolution is dependant on the economic development of the country. • Phase 1 • Divorced its operation from those of importers. • Phase 2 • Certain activities handed over to retailers • Phase 3 • Specialization according to manufacturing lines. • Phase 4 • Attraction of End consumers Marketing 2B Distribution Management

11. Importance of Wholesalers in developing countries • Wholesalers are key in Marketing activities • Control the Distribution channel. • Activities: • Collects products and Raw material • Network with Markets • Keep stocks • Break down bulk • Finance function • Cash / Carry Wholesalers are prominent in developing economies Marketing 2B Distribution Management

12. Evolution of C/C Wholesalers • C/C Wholesalers market a limited range with fast turnover. • Gains a competitive advantage by buying in bulk. • Focus on small independent retailers and individual consumers Marketing 2B Distribution Management

13. Development of C/C Wholesalers • 1960 – 1970 • No C/C wholesalers, Full service wholesale responsible for distribution to retailers • 1970-1985 • Makro and Metro established • 1986 – 1990 • Growth in Makro and Metro • Opening of Price club (P&P) • 1991- 2005 • Consolidation into Premier group and Massmart • Economic and tech innovation causing further changes in C/C profile Marketing 2B Distribution Management

14. Metcash Organogram Marketing 2B Distribution Management

15. Massmart organogram Marketing 2B Distribution Management

16. SAF retailers • 3 main groups responsible for 63% of all food purchased in Retail market • Purchase directly from manufacturer • In competition with C/C wholesalers • Some C/C wholesalers targeting Consumers so lines are blurring Marketing 2B Distribution Management

17. Comparison of Clicks vs. Dischem + Marketing 2B Distribution Management

18. Franchising “Being in business for yourself but not by yourself” • Arrangement between the franchisor and the franchisee • Franchisor – Seller and owner of the trademark or name of the business • Franchisee – purchases the right to use the name / trademark and the processes of the business • Highest are of growth in retail business globally Marketing 2B Distribution Management

19. Advantages Acquire funds No direct ownership of Brand Reduction in Distribution cost Motivation is high Co-operative advertising opportunities Disadvantages Regulations limiting power Loss of control: Over brand Over Distribution Expansion programs Financial situation Corporate intellectual property Franchisor Marketing 2B Distribution Management

20. Advantages Risk of failure minimized: Business model proven Products proven Continuous service Economies of scale High return on investment Disadvantages No guarantees of success Little say in expansion programs Loss of some level of independence Pricing model might may be a disadvantage to the Franchisee Franchisee Marketing 2B Distribution Management

21. Franchising in SAF Marketing 2B Distribution Management

22. Informal sector and Distribution channels • Developing countries have an “informal business” sector • ASGISA – 2nd economy • Unemployed people that operate a small “informal” business • In general outside the normal regulations and legal framework • Critical and essential part of economy. • Needs some from of distribution network to service demands Marketing 2B Distribution Management