4-channels of distribution

8/13/2019 4-channels of distribution

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The Retail

Environment

Distribution


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Channels of Distribution

The path a product takes from producer or

manufacturer to the final user

Remember the FORM UTILITY? PLACEUTILITY?


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Think about the pair of jeans/shorts you

are wearing right now.

Starting with you purchasing the jeans andworking backwards listthe steps of how

the jeans to your hands


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Might look something like this:
http://images.google.com/imgres?imgurl=http://images.jupiterimages.com/common/detail/28/46/22774628.jpg&imgrefurl=http://www.jupiterimages.com/itemDetail.aspx%3FitemID%3D22774628&h=250&w=250&sz=24&hl=en&start=1&tbnid=vmwhBJeNzjjHzM:&tbnh=111&tbnw=111&prev=/images%3Fq%3Dpeople%2Bdrinking%2Borange%2Bjuice%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.fairportweb.com/images/salesman.jpg&imgrefurl=http://www.fairportweb.com/photo.htm&h=400&w=400&sz=109&hl=en&start=1&tbnid=orZQbc3kCDI2DM:&tbnh=124&tbnw=124&prev=/images%3Fq%3DSalesman%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.tropicana.com/TRP_ProductInformation/images/pa_OrangeJuice.jpg&imgrefurl=http://www.tropicana.com/trp_productinformation/Category.cfm%3FCategoryID%3D11&h=280&w=243&sz=22&hl=en&start=16&tbnid=MGPpQByQIR7lrM:&tbnh=114&tbnw=99&prev=/images%3Fq%3Dorange%2Bjuice%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.hickerphoto.com/data/media/185/orange-trees_12924.jpg&imgrefurl=http://www.hickerphoto.com/orange-trees-12924-pictures.htm&h=311&w=468&sz=36&hl=en&start=5&tbnid=qPBY5YIKEWxicM:&tbnh=85&tbnw=128&prev=/images%3Fq%3Dorange%26gbv%3D2%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.rampantscotland.com/graphics/safeway4771a.jpg&imgrefurl=http://www.rampantscotland.com/let030118.htm&h=250&w=310&sz=19&hl=en&start=7&tbnid=kdh-POmOOjk9UM:&tbnh=94&tbnw=117&prev=/images%3Fq%3Dsafeway%26gbv%3D2%26hl%3Den


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That process

Is called the Channels o f Dist r ibu t ion

Each step along the way is called a

intermediary(sometimes calledmiddlemen)

Orange grower, manufacturer, salesperson,grocery store, and YOU, the consumer

The more middlemen, the more expensivethe product

Everyone has to be paid along the way


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Trader Joes

We buydirect f rom supp l iers

wheneverpossible, we bargain hard to get the best

price, and then pass the savings on to

you.


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Classified as either Director Indirect

Direct Distribution occurs when the goods

or services are sold from the producerdirectly to the final user, no intermediariesinvolved

Indirect Distribution involves one or moreintermediaries

Most services have a direct channel ofdistribution.


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People Involved

Manufacturers: those that make/grow the

product

Wholesalers: Buy from the manufacturerand sell to the retailers. The middlemen

Retailer: Buy from Wholesales and sell to

the end consumer


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Group Activity

1. Count off by 1, 2 & 3s 1s represent wholesalers

2s represent manufacturers 3s represent retailers

2. Develop a list of conflicts from your point

of view that might arise between yourgroup and the other two groups.

Example: Retailers might say thatwholesalers are too slow to deliver products.


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Direct Channels of Distribution Producer to consumer: no retailer involved

Farm stands, farmers markets, flower stands on side of road

The internet is making this option much easier for people Indirect Channels of Distribution:

Distribution channel with a retailer Retailers actually buy the merchandise from the producer

and then resell it to consumers

When retailers buy direct they can get the latest products atthe best prices, quantity discounts, and some advertisingmaterials and/or dollars to aide in marketing the product

Producers get their product out to a large number of people

Consumers get access to a number of products

More expensive the consumer buying direct


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Interview with NIKE

Through what channels does Nike currently sell

its shoes? Primarily through a combination of retail accounts,

NIKE-owned retail stores, independent distributors

and licensees, in the United States and over 160

countries worldwide. The biggest retail account is

FootLocker, Inc., which accounts for 10% of Nikes

sales worldwide. Nike also has its own Internet store,

www.niketown.com.


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Distribution channel with wholesaler Retailer buys merchandise from a wholesaler

Wholesaler buys directly from the producer

This is done if a retailer does not have the space, or the desire,to store large quantities of merchandise

Many large retailers have their own wholesale environments Winco distribution center in Woodburn

Fred Meyer distribution center in Troutdale

When retailers purchase from wholesaler they are able to buysmaller quantities, get merchandise faster, and pay on credit.

Distribution channel with an agent Common with imported products which pass through an agent

before moving into the hands of a retailer.

Agents never own products, they are just salespeople.


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Nontraditional and Multiple

channels of Distribution Businesses do not always follow the traditional

channels of distribution Example: Leggs Products, a division of Hanes,

revolutionized the panty hose industry by puttingLeggs in grocery stores, where women were mostoften.

3M did the same thing by putting its office supplies ingrocery outlets.

Multiple channels are used when a product fitsthe needs of multiple consumers.Greenfield Healthy Foods produces Fat free cookies.

Right now they sell primarily to supermarkets. Theyare looking to expand into schools and hospitals.


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Multiple ChannelsLevis Jeans

Costco

Macys

Fred Meyer

One ChannelKirkland brand

Costco


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Distribution Intensity

Distribution Intensity has to do with how

widely a product will be distributed.

Intensive Distribution: the object iscomplete market coverage-get your

product out everywhere

Flowers to plant in the yard are sold at:Home Depot, Rite Aid, Safeway, Winco,

Nurseries, all over


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Selective distribution: a limited number of outlets

in a given area are used to sell the product

When distributing this way, a company (thedistributor) can focus on the retail outlets that sell the

most and/or are the most willing to sell the product

Retailers face less competition if they carry a product

that is selectively distributed.Often times this is how products begin

Tims Cascade Chips


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Exclusive Distribution: involves protectedterritories for distribution in a given

geographic location Dealers/retailers are assured that they are

the ONLY one selling the product in adesignated area

In this situation, the retailer is usually tiedthrough a contract.

ThermaFocus 5 in 1

4-channels of distribution

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