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MLDSO & DSO channels-Defining MLDSO & DSO
-Advantages/disadvantagesof MLDSO
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Outline
Nonstore retailing
Catalog
Direct-Selling Orgs (DSOs) Electronic Channels
Market Opps
Service Output Provision and Demand-Side Gaps
Channel Flow Performance and Supply-Side Gaps
Coordination Challenges
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Non-Store Retailing: Catalogs
E.g.: Sears Catalog, Lands End
Service Outputs Offered:
Break bulk Assortment and variety can vary widely (trend towards
specialty in-depth focused narrower range products)
Smaller Catalogs more targeted mailings
Ultimate in Spatial Convenience (shop from home, yetperhaps a delay without expense of overnight delivery)
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Non-Store Retailing: Catalogs
Segments served: Time starved working mother Busy Single parents People whose time and travel costs to get to a store are expensive The Housebound
Others?
Related Costs and Risks: Reliance on manufacturers if do not produce yourself Creation of the catalog (size, product coverage, segment
distribution) Mailing List look at lifetime value of mailing list and delete or add
customers Order Fulfillment Logistics of picking and packing Stock-Outs inventory management vs. delivery delays Merchandise returns 6-15% in stores, 35% in catalog sales. Returns
are more expensive to manage (bulk broken) and ship
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Direct-Selling Orgs (DSOs)
Direct Selling is the sale of a consumerproduct or service in a face to face manneraway from a fixed retail location.
Typically high reliance on personal selling E.G.s: Amway, Mary Kay, Herbal Life, Avon,
and Tupperware. Top 5 DSO countries - sales (Canada is 10th):
1. Japan2. USA3. Brazil4. Germany5. Korea
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Direct-Selling Orgs (DSOs)
MLM- Multi-level Marketing (MLDSO) MLDSO distributors are compensated in three different ways:
1. Mark-up on wholesale cost earnings2. MLDSO commission paid per sale3. MLDSO commission on sales made by subordinates (recruits)
Balance growth of Network vs. Sale of products (often based onpersonal consumption)
Ilegal Pyramid Schemes: Fraudulent mechanisms by which new recruits are required to pay a
nonrefundable fee for becoming a distributor and the distributors onlyreward is this fee (there is no sale and/or consumption of a product orservice). Ultimately the last layer of the pyramid will make no moneyfrom anyone (population maximized), yet the highest in the pyramidearns money from everyone.
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Electronic Channels
any channel that involves using the
Internet as a means of reaching the end-
user or any channel for which theconsumer literally buys on-line. B2C orB2B.
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Market Potential for E-Channels
Restrictive Marketmust be able to shop online.
Strong Growth in some countries1998 33% of US online, whereas in 2003 56% of
US online
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Service Outputs and Demand-
Side Gaps in E-Channels Positives:
Any time of day or night spatial convenience
More pleasant shopping experience, takesless time
Price-value promotions for online shopping
Lower prices Broader access
Consumer Control
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Service Outputs and Demand-
Side Gaps in E-Channels Negatives:
Product return challenges
Stock availability Timely delivery (like catalog sales)
Trust and Privacy
Prefer face-to-face shopping
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E-Channel Flow Performance
and Supply-Side Gaps New Fixed Costs Created Technical Infrastructure Warehousing or inventory arrangements Need for new intermediaries (E-bay, yahoo)
May reduce costs (EDI integration, VMI, and CRP systems) Physical Possession inventory, pick, pack, ship costs increase. 3rdParty expert business is on the rise as a result (FedEx).
Promotion impacts on alternative channels such as retail stores Negotiation may decrease or increase in intensity Risking increased fear about disclosure of financial information online,
reduce risk of holding inventory (ship direct from manufacturer) Ordering Technology has improved effectiveness of ordering
dramatically (reducing operating cost and increasing entry cost) Payment existence of electronic payment from backing has facilitated
e-commerce growth. Trust issues have induced new 3rd party memberslike PayPal.
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E-Channel Coordination
Challenges Creates Dual Channel Conflicts related to Goals,
Domain and perception-of-reality.
Bricks and Mortar in combination with onlineresellers may exert greater strength in thechannel, increasing power conflicts.
Confusion about online threat results in
restrictive channel behaviour precluding channelsuccess (e.g.: mall merchants restricted fromonline expansion by mall leasor)
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Thank You!
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