15-1 distribution and marketing logistics chapter 15

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Distribution and Marketing Logistics

Chapter 15

Chapter 15 Objectives

After studying this chapter, you will be able to:• Explain the role of marketing intermediaries

business and list the nine primary functions that intermediaries can perform.

• Identify the major types of wholesalers and summarize four trends shaping the future of wholesaling.

• Identify the major retailing formats and summarize six trends shaping the future of retailing.

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Chapter 15 Objectives Cont.

• Explain the strategic decisions that manufacturers must make when choosing distribution channels.

• Identify five key attributes of distribution channel design and management.

• Highlight the major components of physical distribution and logistics.

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The Role of Marketing Intermediaries

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• Distribution Strategy:

A firm’s overall plan for moving products through intermediaries and on to final customers

• Marketing Intermediaries:Businesspeople and organizations that assist

in moving and marketing goods and services between producers and consumers

Wholesaling versus Retailing

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Wholesalers Retailers

Contributions of Intermediaries

• Match buyers and sellers.

• Provide market information.

• Provide promotional and sales support.

• Gathering assortments of goods.

• Transport and store products.

• Assume risks.• Provide financing.• Complete product

solutions.• Facilitate

transactions and support customers.

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How Intermediaries Simplify Commerce

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Major Types of Wholesalers

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Merchant Wholesalers:Independent wholesalers that take legal title to goods they distribute.

Distributors: Merchant wholesalers that sell products to organizational customers for internal operations or the production of other goods, rather than to retailers for resale.

Agents and Brokers: Independent wholesalers that do not take title to the goods they distribute but may or may not take possession of those goods.

The Outlook for Wholesalers

• Integrated logistics management

• Threat of disintermediation

• Unbundling of services

• Industry consolidation

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©2007 Prentice Hall15-10

Integrated logistics management. The outsourcing trend is definitely having an impact in the wholesaling sector as third-party logistics firms continue to take over a wide range of tasks in supply chain management.

Threat of disintermediation. Intermediaries role would be taken over by manufacturers on the upstream end or by customers (retailers and other organizational buyers) on the downstream end.

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Unbundling of services. A growing number of wholesaling customers would like to see these services “unbundled” so they can pay for specific distribution services individually.

Industry consolidation. With all the forces at play in the marketplace, consolidation seems likely as large firms with economies of scale buy up or drive out smaller, less-competitive firms.

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Retailing Formats

• Wheel of Retailing: An evolutionary process by which stores that feature low prices gradually upgrade until they no longer appeal to price-sensitive shoppers and are replaced by a new generation of leaner, low-price competitors.

Retailing Formats

• Department Stores

• Specialty Stores

• Discount Stores

• Off-price Stores

• Online retailers• E-commerce

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Retailing Formats


Department stores: Large stores that carry a variety of products in multiple categories, such as clothing, house wares, gifts, bedding, and furniture.

Specialty stores: Stores that carry only a particular type of goods, often with deep selection in those specific categories.

Discount stores: Retailers that sell a variety of everyday goods below the market price by keeping their overhead low.

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Retailing Formats


Off-price stores: Stores that sell designer labels and other fashionable products at steep discounts.

Online retailers: Companies that use e-commerce technologies to sell over the Internet; includes Internet-only retailers and the online arm of store-based retailers.

E-commerce: The application of Internet technologies to wholesaling and retailing.

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The Outlook for Retailers

• Overcapacity

• Continued growth in online retailing

• Growth of multichannel retailing

• Format innovations

• Retail theatre

• Threat of disintermediation

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Overcapacity. In too many categories, there are simply too many stores to support current levels of business activity.

Continued growth in online retailing. The growth rate of online retailing has outpaced store-based retailing in recent years, and that trend is likely to continue.

Growth of multichannel retailing. The growth in online retailing also reflects the fact that today’s consumers increasingly combine online and offline shopping.

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Format innovations. As companies endlessly search for that magic formula to attract customers and generate profitable sales.

Retail theater. Increasingly, retail stores aren’t just places to buy things; they’re becoming places to research new technologies, learn about cooking, socialize, or simply be entertained for a few minutes.

Threat of disintermediation. Like wholesalers, retailers face the threat of disintermediation if suppliers or customers don’t think they add sufficient value or if other types of retailers can do the job better.

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Distribution Strategies

Distribution Mix: A combination of intermediaries and channels a producer uses to reach target customers.

•Customer needs and expectations•Product support requirements•Segmentation, targeting, and positioning•Competitors’ distribution channels•Established industry patterns and requirements

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Consideration in Channel Design

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Common Distribution Channel Models

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Common Distribution Channel Models

Market Coverage

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Distribution

Convenience Goodsand Organizational Supplies

Expensive Technicalor Specialty Products

Intensive Selective Exclusive

Cost Factors

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SellingSelling

StorageStorage

DistributionDistribution

Channel Conflict

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Inadequate Product SupportInadequate Product SupportInadequate Product SupportInadequate Product Support

Too Many IntermediariesToo Many IntermediariesToo Many IntermediariesToo Many Intermediaries

Multiple Sales ChannelsMultiple Sales ChannelsMultiple Sales ChannelsMultiple Sales Channels

Control Issues

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How Goods AreHow Goods AreSold in the MarketplaceSold in the Marketplace

How Goods AreHow Goods AreSold in the MarketplaceSold in the Marketplace

ChannelChannelLengthLength

OverallOverallControlControl

LongerLongerShorterShorter

LessLessMoreMore

Factors That Influence Distribution Channel Choices

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Physical Distribution and Logistics

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Physical Distribution

All the activities required to move finished products from the producer to the consumer

Logistics

The planning, movement, and flow of goods and related information throughout the supply chain


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Steps in the Physical Distribution Process

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Forecasting. To control the flow of products

through the distribution system, a firm must have

an accurate estimate of demand. To some degree,

historical data can be used to project future sales,

but despite heavy investments in information

technology, forecasting remains a major logistical

challenge for many companies.

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Order processing involves preparing orders for shipment and receiving orders when shipments arrive.

It includes; Checking the customer’s credit Recording the sale Making the appropriate accounting entries Arranging for the item to be shipped Adjusting the inventory records Billing the customer

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Inventory control decides how much product to keep

on hand and when to replenish the supply of goods in

inventory.

Products held in inventory are physically stored in a

warehouse. Some are almost purely holding facilities

in which goods are stored for relatively long periods.

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An important part of warehousing activities is

materials handling, the movement of goods within and

between physical distribution facilities.

For any business, outbound transportation is normally

the largest single item in the overall cost of physical

distribution. Five common types of outbound

transportation are rail, truck, water (ships and barges),

air (planes), pipeline, and digital networks.

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©2007 Prentice Hall11-361-15

Intermodal Transportation:

The coordinated use of multiple modes of transportation, particularly with containers that can be shipped by truck, rail, and sea.

15-1 distribution and marketing logistics chapter 15

Documents

wholesalersretailers

independent wholesalers

merchant wholesalers

intermediaries role

marketing goods

major types of wholesalers

marketing logistics

specific distribution