Philip Hunter – Student ID 800624597
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How to get distribution right.
The ultimate goal of any business is to get its product to the right place at the right price for the right person to commit to a sale from creating value in the purchase. Kozlenkova 2015 wrote ‘the real value is assessed when customers decide whether to buy a product’
How is this done?
A Supply chain must be established to connect the manufacturer to the consumer. Supply chains can consist of other business partners (batteries/screens for laptops) that supply components that make up a product.
Distribution channels are created to bring the product or service from the manufacturer to the consumer. Some manufacturers (Dell, Apple, Nespresso) choose an option to (either exclusively or in parallel to other channels), supply direct to the consumer. This can be a successful strategy providing that the manufacturer is set up to receive and dispatch those orders from consumers without delay or disruption. Consumers receive discounts by buying direct, and manufacturers save costs of engaging a third party to ‘peddle their wares’.
But what other options are available to manufacturers? Surely when you are not set up to sell direct to the public, there are others ways. Channels are created by manufacturers utilising a third party to link the source to the sale. Retail outlets are one example where store owners either purchase SKU’s on account or on loan until they are sold.
Since the 1900’s corner stores were the start of the retail trend. They sold a selection of products in one place. Consisting of a small store, they were established(and still are) in a convenient central location within in a community; designed to make the shopping experience more convenient by bringing multiple products into one place. The corner store concept has developed with iterations over the years into the large shopping centres of today containing hundreds of speciality and department stores, designed to encourage us to spend.
Iacobucci 2015 wrote ‘franchising is a unique format of multisite expansion, a means to quasi-integrate’. The concept behind franchising is forming a network of business units that provide a product or service under license from a proven business model. Standards and branding are set by the franchisor by establishing and following systems. Franchisees buy in with a fee and are supporting by an proven business model and branding, whilst the consumer is provided standard levels of service and product.
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The internet has definitely changed the way we shop. According to Iacobucci 2015’Retail sales online are about $145 billion, growing about 10% a year, but that’s still only 4% of the total retail sales. The internet has become the most convenient way (for those with computer access) to browse a supplier’s range prior to purchase. The potential consumer can review attributes of the product from a distance, engage in online comparisons and review potential cost, all before entering a store. This gives the consumer more buy in once they have become familiar with a certain brand or product and are more likely to commit to a purchase.
The internet has a long way to go before it becomes a real contender in retail when considering its low market share.
Another interesting debate about retail is the Sales Force versus product success. A retailer will often cite sales as a product of the sales personnel and sales techniques/customer engagement, whilst the manufacturer will argue that the consumer came to the retail outlet because of their product not the the service.
How marketers Push and Pull sales
Manufacturers can pull sales figure up by engaging in marketing communications to encourage sales. Promotions including discounts, samples and loyalty points pull consumers toward a sale. Pushing products to the marketplace involves strategies including employing sales staff, quantity discounts and sales incentives to channel partners.
What happens when larger entities disagree with the little guy?
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It should be noted that not all parties agree in approaches to marketing, advertising may be requested to be changed, images not favoured or packaging requested to be updated. Depending on who the larger party is can sway the outcome. If a multi national manufacturer requests the boutique reseller to change its layouts, who is going to argue? The opposite can be considered when reviewing a large retail chain who has been ask to provide more shelf space by the small time manufacturer. Power must be a valid consideration when making or receiving requests, and communication is key to ensuring all parties feel valued in the transaction.
So much to consider, but master this delicate framework with effective decisions and regular feedback from all stakeholders, and your business will never look back.