s12- overview of distribution

7/31/2019 S12- Overview of Distribution

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Overview of distribution channels

Marketing Management II

(2005-06)


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Adidas to overhaul distribution

Adidas India is revamping its distribution

Exclusive distribution department being created Distributor performance being re-evaluated

Current distribution

74 exclusive stores ( run by franchisees)

1,000 multi-brand outlets ( catered to by around 40distributors).

"We need people who share the same vision andaggressiveness, and that hasn't been the case with allour partners in distribution."

Andreas Gellner- M.D., Adidas India


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The basics

What is a distribution ( or marketing)

channel?

Who belongs to a channel?

Concepts for understanding channels Indian distribution system

What is the work of a distribution channel?


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Concept of a distribution channel

Manufacturer Consumer

Activity 1

Activity 2

Activity 3

Activity N

Marketing Channel


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What is a distribution channel?

A channel of distribution is a pathway or route

to market extending from manufacturer orservice seller to its ultimate consumer or user

Direct sale from manufacturer to end user

is also a channel

A channel of distribution can also be

conceptualised as a sequence of valueadding activities


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Environment

Economy Technology Socio-Cultural Political

Legal Demographic

ProducersAgriculture

Manufacturers

ServiceWholesale Retail

Specialised participantsBuyers

Firms

Consumers

Government Policy

Public Distribution system

The Trade Channel

The distribution system


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Who is in the channel?

Primary participants

Manufacturers, Producers

Distributors and Wholesalers

Retailers

Specialized channel members

Transporters

C & F Agents

Warehouses

Brokers

DSAs

End users


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Generalised structure : Example Pharma

Manufacturer

Branch or Depot / CFA / Super Stockist

Stockist

Retailer

Patient

InstitutionHospital


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Factory Co-Packers

Nestle India- distribution structure

Imports

Clearing & Sales Agents

Distribution Centers

Cash Distributors

Re-Distributors

Retailers

Institutions

Out of Home

Channel


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Concept of directness

Manufacturer

Consumers

Channel

member 1 Channel

member 2

Channel member 3

Direct

2

Indirect

Indirect

Dual


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Concept of variety

Few types of channels

Traditional channel only

Many types of channels Traditional channel

Exclusive stores

Internet store front

Direct sales to corporate customers


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Concept of density

Exclusive

Automobiles

Selective Consumer durables

Intensive

FMCG


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Concept of novelty Traditional channel

Novel channels

Direct sales

Self help groups

Bancassurance

Vending machines

Internet

Shop in shop


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Indian Distribution channel: Foodstuffs

Farmer Consolidator

Trader

Commission

agent

Wholesaler

Retailer

Consumer


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Indian retail: Traditional formats

Door to door

Mobile vending ( Push cart) Roadside vendors

Temporary structures

Semi permanent Encroachments

Markets

Seasonal Permanent

Permanent shops


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Type of retail outlets in India

Urban %

Grocers 34.7

General Store 14.4

Paan 17.0

Other 17.0 Food 6.6

Chemist 6.3

Cosmetics 4.0

Rural %

Grocers

55.6

General Store 13.5

Others 27.6

Chemist 3.3


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328,000930,000Total

365025,000Entertainment

108008,200Books, Music, gifts

62,00035,000Catering services

0.52,950615,000Food & grocery

72,20033,000Furniture & furnishings

684013,000Mobile handsets & accessories

82,50032,000Consumer durables

255030,000Healthcare products

61502,500Health & Beauty care services

252,50010,000Footwear

4011102800Watches

285043,500Jewellery

1410,90080,000Clothing, Textiles, Fashion

Share %( Rs. Crores)(Rs. Crores)

OrganisedOrganised RetailTotal Retail Sales

Category

Retail sales in India


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McKinsey view of Indian retail( Source: McKinsey Quarterly 2000 Number 4 Asia)

Dry

Groceries

Electronics

Books,

Music

Mens apparel

Shopping Malls

Pharmacy

products

Liquor retail

Fresh

groceriesFast food

Womens apparel

Personal careproducts

READY TO GO

SHAPE / ADAPT

WAIT & WATCH

Supply Chain sophisticationLOW HIGH

Consumer

Readiness

LOW

HIGH


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10028,000Total

2650Entertainment

3800Books, Music, gifts72,000Catering services

112,950Food & grocery

82,200Furniture & furnishings

3840Mobile handsets & accessories

92,500Consumer durables

2550Healthcare products

1150Health & Beauty care services

92,500Footwear

41110Watches3850Jewellery

3910,900Clothing, Textiles, Fashion

Org retail %( Rs. Crores)

Category share inOrganised Retail

Category

Organised retail in India

Source: Images-KSA, 2005


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Why are channels important?

Route to market

Access potential buyer, convert the prospect, fulfillorders and service

Internationally, channel members collectivelyearn 30 to 50% of the final selling price

Channel not only serves the market but alsomakes the market

A good channel is strategic

Difficult to put into place, durable, difficult to imitate

Channel management offers the potential toobtain competitive advantage


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TRANSACTIONAL ACTIVITIES

Buy products from sellers

Promote Products to consumers

Absorb the risk of product ownership

PHYSICAL ACTIVITIES

Store the products

Transport the products

Break bulk the product into smaller quantities Service and repair the products

FACILITATING ACTIVITIES

Work done by the channel


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Flows

Producers Retailers

Physical possession

Ownership

Promotion

Negotiation

Financing

Risk assumption

Ordering

Payment

Source: Coughlan et al ,Marketing Channels


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Key decisions in channel

management

Structure

Strategic choices that can be representedgraphically

No. of participants in the channel etc.

Governance

Frameworks to ensure pursuit of objectives

Conflict resolution mechanisms

Relationship Management

Actions that frame the daily environment

s12- overview of distribution

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