15-1

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1-1McGraw-Hill/IrwinUnderstanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights

Reserved.

Nickels McHugh McHughNickels McHugh McHugh

**Distributing

ProductsQuickly andEfficiently 15

CH

AP

TE

R*

* *

15-2

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Channel of DistributionChannel of Distribution

• Marketing IntermediariesMarketing Intermediaries• WholesalerWholesaler

• RetailerRetailer

• Agents/BrokersAgents/Brokers

• Role of IntermediariesRole of Intermediaries• Create EfficiencyCreate Efficiency

• Value vs. CostValue vs. Cost

15-3

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Distribution Effect onDistribution Effect on Your Food Dollar (In cents)Your Food Dollar (In cents)

25

7.5

4.5

4

3.5 7.5

14

34Labor

Farmer

Building costs

Packaging

Transportation

Advertising

Profits

Misc.

15-4

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They All Started in 1962They All Started in 1962

CompanyCompany 11stst Store Store GoalGoal

Wal-MartWal-Mart Rogers, Ark.Rogers, Ark.July 1962July 1962

Slash prices. Makeup Slash prices. Makeup

difference in volumedifference in volume

TargetTarget Roseville, MNRoseville, MNMay 1962May 1962

Discount retailer with Discount retailer with

strong sense of valuestrong sense of value

KmartKmart Garden City, MIGarden City, MIMarch 1962March 1962

Bring discount store Bring discount store concept to suburban concept to suburban

mallsmalls

Source: walmart.com, target.com, kmart.com; Business 2.0, June 2003

15-5

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U.S. and International U.S. and International Wal-Mart Stores 2006Wal-Mart Stores 2006

0

500

1000

1500

2000

2500

Wal-MartStores

Supercenter Sam's NeighborhoodMkts.

Source: Source: Wal-MartFacts.com, 2006

0

100

200

300

400

500

600

700

800

900

Mexico Japan UnitedKingdom

Brazil Canada

US Retail Units

Wal-Mart International

15-6

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Utilities Created byUtilities Created by IntermediariesIntermediaries

FormForm TimeTime

PlacePlace

PossessionPossession

InformationInformation ServiceService

15-7

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Wholesale IntermediariesWholesale Intermediaries

• Merchant WholesalersMerchant Wholesalers• Full-ServiceFull-Service

• Limited-FunctionLimited-Function

• Rack JobbersRack Jobbers

• Cash-and-CarryCash-and-Carry

• Drop ShippersDrop Shippers

• Agents and BrokersAgents and Brokers

15-8

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Retail Distribution StrategyRetail Distribution Strategy

• IntensiveIntensive

• SelectiveSelective

• ExclusiveExclusive

15-9

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Identify a Retailer Identify a Retailer In Your AreaIn Your Area

• SupermarketSupermarket

• Convenience Convenience StoreStore

• Discount StoreDiscount Store

• Department Department StoreStore

• Category KillerCategory Killer

• Specialty StoreSpecialty Store

• Factory OutletFactory Outlet

• SuperstoresSuperstores

• Catalog Catalog ShowroomShowroom

• Warehouse clubWarehouse club

15-10

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Largest Mall in USALargest Mall in USA

• THE MALL OF AMERICA in Bloomington, THE MALL OF AMERICA in Bloomington, MinnesotaMinnesota• Large enough to hold Thirty-two 747’sLarge enough to hold Thirty-two 747’s

• Four Gap storesFour Gap stores

• AquariumAquarium

• Full-size amusement parkFull-size amusement park

• More than 40 million visitors a year More than 40 million visitors a year (more than Disney World, Graceland and the Grand Canyon (more than Disney World, Graceland and the Grand Canyon

combined)combined)

Source: Source: The Week magazine, April 2004

15-11

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The Wheel of RetailingThe Wheel of Retailing

PassagePassage

Of TimeOf Time

2. Retail 2. Retail OutletOutlet

1. Retail Outlet 1. Retail Outlet StartsStarts

3. Retail 3. Retail OutletOutlet

4. New Outlet 4. New Outlet EntersEnters

Adds ServiceAdds Service

Raises PricesRaises Prices

Better Better LocationLocation

Adds ServiceAdds Service

Raises PricesRaises Prices

Better Better LocationLocation

Low PriceLow Price

Limited ServiceLimited Service

Out-of-way Out-of-way LocationLocation

Low PriceLow Price

Limited ServiceLimited Service

Out-of-way Out-of-way LocationLocation

Higher Higher PricesPrices

Higher Higher StatusStatus

Higher Higher PricesPrices

Higher Higher StatusStatus

Low PriceLow Price

Limited Limited ServiceService

Low PriceLow Price

Limited Limited ServiceService

15-12

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Nonstore DistributionNonstore Distribution

• Electronic retailingElectronic retailing

• TelemarketingTelemarketing

• Vending Machines, Vending Machines, Kiosks, CartsKiosks, Carts

• Direct SellingDirect Selling

• Multilevel MarketingMultilevel Marketing

• Direct MarketingDirect Marketing

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Top Internet Top Internet Shopping SitesShopping Sites

0

10

20

30

40

50

60

70

eBay Amazon Wal-Mart Target AppleComputer

Source: Investors Business Daily, November 23, 2005

By Millions of Visitors By Millions of Visitors in October 2005in October 2005

15-14

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Top Internet Top Internet Comparison-Shopping SitesComparison-Shopping Sites

0

2

4

6

8

10

12

14

16

18

20

Shopping.com Yahoo Shop Local

Source: Investors Business Daily, November 2005

By Millions of Visitors By Millions of Visitors in October, 2005in October, 2005

15-15

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10 Ways to Increase 10 Ways to Increase Sales on eBaySales on eBay

1.1. Accept multiple payment options.Accept multiple payment options.2.2. Take good pictures.Take good pictures.3.3. Write detailed, compelling descriptions.Write detailed, compelling descriptions.4.4. Work to maintain your eBay feedback rating.Work to maintain your eBay feedback rating.5.5. Provide good customer service.Provide good customer service.6.6. Open an eBay Store. Open an eBay Store. 7.7. Let them Buy It Now.Let them Buy It Now.8.8. Choose Multiple listing categories and upgrade Choose Multiple listing categories and upgrade

features.features.9.9. Try shorter auction times.Try shorter auction times.10.10.Offer satisfaction guarantees, warranties, or returns.Offer satisfaction guarantees, warranties, or returns.

Source: allbusiness.com, accessed August 9, 2006.Source: allbusiness.com, accessed August 9, 2006.

15-16

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Source: Forrester

Why People Don’t Why People Don’t Shop OnlineShop Online

0% 10% 20% 30% 40% 50% 60% 70%

Don't want to give out personal financial information

Want to be able to see things before I buy them

Delivery costs are too high

Prefer to buy in store

Other reasons

Don't have a credit/debit card

Heard about others bad experiences

Don't trust delivery conditions

Don't want to wait

Too complicated

15-17

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Channel CooperationChannel Cooperation

• Corporate Corporate DistributionDistribution

• Contractual Contractual DistributionDistribution

• Administered Administered DistributionDistribution

• Supply Chain Supply Chain ManagementManagement

15-18

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The Supply ChainThe Supply Chain

15-19

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LogisticsLogistics

• Physical DistributionPhysical Distribution

• InboundInbound

• Materials handlingMaterials handling

• OutboundOutbound

• ReverseReverse

• InformationInformation

15-20

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Transportation & Transportation & Storage ModesStorage Modes

• RailroadRailroad

• Motor Motor VehiclesVehicles

• WaterWater

• PipelinePipeline

• AirAir

• IntermodalIntermodal

• WarehousingWarehousing

• StorageStorage

• DistributionDistribution