Distribution Management

7th Semester

B.B.A.

By

Mr. Navin Raj Saroj

M.B.A. (Marketing)

MERCHANT MIDDLEMEN

A trader who buys from producers and sells to retailers or consumers.

(Business / Commerce) an independent trader engaged in the distribution of goods from producer to consumer

A person who buys goods from the producer and resells them to the retailer or consumer.

A person who acts as an intermediary.

HOW INTERMEDIARIES ADD VALUE

Intermediaries offer the firm more than it can achieve on its own through their contacts, experience, specialization, and scale of operations From an economic view, intermediaries transform the assortment of products into assortments wanted by consumers • Intermediaries can carry out a range of tasks,

including payment • Processing, transport, transport planning and

management, storage and • Handling, and increasingly, light manufacturing and

assembly

INTERMEDIARIES ESTABLISHMENT - TYPES

Types of intermediaries refers to channel members available to carry out channel work. Examples include:

• Company sales force

• Manufacturer’s agency

• Industrial distributors

Number of intermediaries Companies have to decide on the number of intermediaries to use. Three

strategies available;

a) EXCLUSIVE DISTRIBUTION • limited number of intermediaries. It is used when the producer

wants to maintain control over the service level and service outputs offered by the reseller.

• It involves exclusive dealing arrangement, which the resellers agree not to carry competing brands. By granting exclusive distribution, the producer hopes to obtain more dedicated and knowledgeable selling. » It requires greater partnership between seller and reseller. » Appropriate for specialty products which are expensive,

infrequently bought and require service or info to fit them to buyers needs, such as Rolex watch, Mercedes and Roll Royce car.

INTERMEDIARIES ESTABLISHMENT - STAGES

b) SELECTIVE DISTRIBUTION

• Only some available outlets in area are chosen to distribute a product.

• The company does not have to dissipate its efforts over too many outlets, it enables the producer to gain adequate market coverage with more control and less cost than intensive distribution.

• It is appropriate for shopping products, which consumers are willing to spend more time visiting several retail outlets to compare prices, designs, styles, and other features of these product. Nike is a good example of selective distribution.

INTERMEDIARIES ESTABLISHMENT - STAGES

c) INTENSIVE DISTRIBUTION

• Intensive distribution is the use of all available outlets to distribute a product. It is suitable for convenience products, such as soft drinks, bread, candy, newspapers, etc. because they have high replacement rate and require almost no service.

• Multiple channels (i.e. convenience stores, service stations, supermarkets discount store) are used to sell these products. Availability of these products is more important than the nature of the outlet.

• For convenience of consumers, store must be located nearby and minimum time will be necessary to search for the product at the store.

INTERMEDIARIES ESTABLISHMENT - STAGES

INTERMEDIARIES

Retailer

Merchant Wholesaler

Stockist / Agents And Brokers

A channel intermediary that sells mainly to customers.

An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them.

Wholesaling intermediaries who facilitate the sale of a product by representing channel member.

Distributor / Dealer

Distributors are similar to wholesalers, but with one key difference.

INTERMEDIARIES - RETAILERS

RETAILERS - A retailer takes title to, or purchases, products from other market intermediaries.

Retailers can be independently owned and operated, like

small “mom and pop” stores, or they can be part of a

large chain, like BIG MART .

The retailer will sell the products it has purchased

directly to the end user for a profit.

RETAILERS ROLE

Retailers buys goods from wholesaler and sells them directly to consumers. Thus he acts as a direct link between the wholesaler and consumers.

1. Wide choice to Consumers

2. Availability of goods in small quantities and at convenient locations

3. Home Delivery

4. Assurance of regular supply

5. Credit Facility

6. Close Interactions with Customers

RETAILERS TYPES

1)Store retailers

2)Non-store retailers

3)Other retailers

4)Retail organisations

STORE RETAILERS - TYPES

a) Speciality stores – Few lines but deep assortment

– E.g. Mobile shops, Camera shops

b) Department stores – Many product lines

– E.g. Westside, Shoppers Stop

c) Super Markets – Many product lines – large stores and chains

– E.g. Big Bazaar, Walmart, Bhatbhateni

d) Convenience Stores – Well located – convenient

– Few FMCG type lines

– E.g. Kirana shops, Petrol pump stores

e) Super stores – Large stores for particular product lines

– E.g. City Center, Kathmandu Mall

f) Discount Stores – Limited / broad product lines

– Low prices, limited service

– E.g. Dollar Stores

STORE RETAILERS – TYPES Cont….

g) Warehouse stores

– Large stores with large size packs

– E.g Vegetable Market, China Market

h) Showrooms

– Franchise outlets

– Company brand promotion

– E.g. Titan, Tanishq, Samsung, Sony

Service / Facilities / Assistance

a) Self service

b) Limited Assistance / facilities

c) Full assistance / facilities / service

STORE RETAILERS – TYPES Cont…

NON STORE RETAILERS - TYPES

a) Mail order catalogues

b) Direct mail

c) Telemarketing

d) TV marketing

e) Internet retailing

f) E-shopping

OTHER RETAILERS - TYPES a) Direct selling – Door to door

– Multi-level marketing

b) Through Machines

– Automated Vending Machines

– ATMs

MARKETING DECISIONS FOR RETAILERS

1) Target market – Which consumers? Who are the buyers?

2) Product Assortment – Which product lines / products to take on?

3) Pricing – Margins, ROI

4) Services / facilities – What level of services / facilities to provide?

5) Store formats / layouts – Convenience, premium, discount

6) Promotion – How to reach consumers?

– Print media, in-store promotions, POPs

– Campaigns, schemes, discount coupons / sales

WHOLESELLING INTERMEDIARIES

WHOLESALERS - Wholesalers are independently owned firms that take title to the merchandise they handle. The wholesalers own the products they sell. Wholesalers purchase product in bulk and store it until they can resell it. Wholesalers generally sell the products they have purchased to other intermediaries, usually retailers, for a profit. Wholesaling is concerned with the activities of those persons or establishments that sell to retailers and other merchants and / or industrial, institutional and commercial users but do not sell in large amounts to consumers.

WHOLESALERS ROLE

Wholesaler acts as a middlemen in the channel of distribution as he buys goods in large quantity from the manufacturer and sells these to retailers in small quantities.

1. Buying and Assembling

2. Selling and dispersing

3. Transportation

4. Storage

5. Packing and grading

6. Advertising and Sales Promotion

7. Financing

8. Risk taking

WHOLESALERS ADVANTAGES

• Bring efficiencies to selling process

• Assist small organisations in selling

• Specialist role on selling so that manufacturers can focus on production

• Bring economies of scale

• Give / make assortment of products

• Important link between manufacturers and retailers

WHOLESALERS - FUNCTIONS

a) Selling – Push products / services b) Promotion – Pass on schemes c) Bulk breaking – eg. steel, wires d) Assortment building – wide range – FMCG e) Warehousing – Intermediate storage f) Transportation – Quicker delivery g) Financing – Credit to retailers h) Risk bearing – Damage, loss, theft, spoilage,

obsolescence i) Market Information – Competition activities, price

trends j) Management Services – Technical services, layouts

1)Merchants

2)Brokers / Agents

3)Manufacturers offices / branches

4)Miscellaneous wholesalers

WHOLESALERS - TYPES

DISTRIBUTORS / DEALER

DISTRIBUTORS - Distributors are similar to wholesalers, but with one key difference.

Wholesalers will carry a variety of competing products, for instance Pepsi and Coke products, whereas distributors only carry complementary product lines, either Pepsi or Coke products.

Distributors usually maintain close relationships with their suppliers and customers.

Distributors will take title to products and store them until they are sold.

DEALER

Role similar to a distributor but

May not have a clearly defined territory and may sell both in the market and from his shop

May deal with competitive products also

Extends credit selectively

Dealers in industrial products may have better defined roles i.e. dealer for an edible oil company, garment brands

DISTRIBUTORS / DEALER

AGENT - MIDDLEMEN

AGENT - is an independent individual or company whose main function is to act as the primary selling arm of the producer and represent the producer to users.

Agents take possession of products but do not actually

own them.

Agents usually make profits from commissions or fees

paid for the services they provide to the producer and

users.