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Understanding Business, 7/e
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Nickels Nickels
McHughMcHugh
McHughMcHugh
Nickels Cover
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Understanding Business, 7/e
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Chapter
15151515Distributing Distributing
Products Products Quickly and Quickly and EfficientlyEfficiently
15-2
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ChannelChannel ofof DistributionDistribution
• Marketing IntermediariesMarketing Intermediaries– WholesalerWholesaler– RetailerRetailer– Agents/BrokersAgents/Brokers
• Role of IntermediariesRole of Intermediaries– Create EfficiencyCreate Efficiency– Value vs. CostValue vs. Cost
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UtilityUtilityFormFormTimeTime
PlacePlace
PossessionPossession
InformationInformationServiceService
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Wholesale IntermediariesWholesale Intermediaries
• Merchant WholesalersMerchant Wholesalers– Full-ServiceFull-Service– Limited-FunctionLimited-Function– Rack JobbersRack Jobbers– Cash-and-CarryCash-and-Carry– Drop ShippersDrop Shippers
• Business to Business (B2B)Business to Business (B2B)
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Percent of B2BPercent of B2B Commerce from InternetCommerce from Internet
0.2% 0.4%1.0%
2.1%
4.0%
6.3%
9.4%
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%
10.0%
1997 1998 1999 2000 2001 2002 2003
*Excludes Service Industries*Excludes Service Industries
Source:Source: Forrester Research Inc.
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They All Started in 1962They All Started in 1962
CompanyCompany 11stst Store Store ObjectiveObjective
Wal-MartWal-Mart Rogers, Ark.Rogers, Ark.July 1962July 1962
Slash prices. Makeup Slash prices. Makeup
difference in volumedifference in volume
TargetTarget Roseville, MNRoseville, MNMay 1962May 1962
Discount retailer with Discount retailer with
strong sense of valuestrong sense of value
KmartKmart Garden City, MIGarden City, MIMarch 1962March 1962
Bring discount store Bring discount store concept to suburban concept to suburban
mallsmallsSource: Business 2.0, June 2003, p. 38.
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Wal-Mart’s Top Selling ProductsWal-Mart’s Top Selling Products
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
Videotapes/DVDs
Diapers
Cigarettes
Toilet Paper
Milk
Dry Dog Food
Batteries
Breakfast Cereal
Film
Pet Supplies
Sales in MillionsSales in Millions
Source: Owen Thomas “Lord of the Things”, Business 2.0, March 2002, p. 32.
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Identify a Retailer in Your AreaIdentify a Retailer in Your Area
SupermarketSupermarket Convenience Convenience
StoreStore Discount StoreDiscount Store Department Department
StoreStore Category KillerCategory Killer
Specialty Specialty StoreStore
Factory OutletFactory Outlet SuperstoresSuperstores Catalog Catalog
ShowroomShowroom
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Is It Becoming aIs It Becoming aWal-Mart World?Wal-Mart World?
0
50
100
150
200
250300
350
400
450
500
Mexico Canada China U.K. Brazil Germany
Discount Stores Supercenter Sam's Neighborhood Mkts.
*There are 3,400 stores in the U.S.*There are 3,400 stores in the U.S.
Source: Source: Wal-Mart Annual Report 2003
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The Wheel of RetailingThe Wheel of Retailing
PassagePassage
ofof
TimeTime
2. Retail 2. Retail OutletOutlet
1. Retail 1. Retail Outlet StartsOutlet Starts
3. Retail 3. Retail OutletOutlet
4. New Outlet 4. New Outlet EntersEnters
Adds ServiceAdds Service
Raises PricesRaises Prices
Better Better LocationLocation
Adds ServiceAdds Service
Raises PricesRaises Prices
Better Better LocationLocation
Low PriceLow Price
Limited ServiceLimited Service
Out-of-way Out-of-way LocationLocation
Low PriceLow Price
Limited ServiceLimited Service
Out-of-way Out-of-way LocationLocation
Higher Higher PricesPrices
Higher Higher StatusStatus
Higher Higher PricesPrices
Higher Higher StatusStatus
Low PriceLow Price
Limited Limited ServiceService
Low PriceLow Price
Limited Limited ServiceService
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Retail Store DistributionRetail Store Distribution
• IntensiveIntensive
SelectivSelectivee
ExclusiveExclusive
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Non-Store DistributionNon-Store Distribution
• E-tailingE-tailing
• TelemarketingTelemarketing
• Vending Machines, Vending Machines, Kiosks, CartsKiosks, Carts
• Direct SellingDirect Selling
• Multilevel MarketingMultilevel Marketing
• Direct MarketingDirect Marketing
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Top Internet Shopping SitesTop Internet Shopping Sites
12.0
10.2
7.4
3.1 2.8
0
2
4
6
8
10
12
eBay Amazon Yahoo!Shopping
MSNShopping
Wal-MartStoresSource: USA Today, “Snapshots”
Site Hits in MillionsSite Hits in Millions
Week Ending 12/1/02Week Ending 12/1/02
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Why Buy Gifts Online?Why Buy Gifts Online?
0% 10% 20% 30% 40% 50% 60% 70% 80%
Save Time
Avoid Crowds
Afterhours Shopping
Better Prices
Easier to Find
Easy to Compare
Not In Local Store
Gift Shipment
Source: “Dreaming of a Green Christmas”, Newsweek, November 11, 2002, p. E24
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Why People Don’t Shop OnlineWhy People Don’t Shop Online
1.1. It isn’t secureIt isn’t secure
2.2. It will jeopardize It will jeopardize my privacymy privacy
3.3. Usually must pay Usually must pay shipping chargesshipping charges
4.4. Not enough Not enough selectionselection
5.5. Can’t touch/try Can’t touch/try things firstthings first
6.6. No satisfaction No satisfaction guaranteeguarantee
7.7. Returns are a Returns are a hasslehassle
8.8. Won’t arrive on Won’t arrive on timetime
9.9. Hard to find Hard to find things onlinethings online
10.10.Enjoy getting out Enjoy getting out of house to shopof house to shop
Source: blink, www.earthlink.net/blink
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Necessary Website FeaturesNecessary Website Features
0% 10% 20% 30% 40% 50% 60% 70% 80%
Low Price
Inexpensive Shopping
Easy to Use
No Sales Tax
Good Service
Fast Delivery
Broad Selection
Easy Returns
Helpful Information
Source: “Dreaming of a Green Christmas”, Newsweek, November 11, 2002, p. E24
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Channel CooperationChannel Cooperation
• Corporate Corporate DistributionDistribution
• Contractual Contractual DistributionDistribution
• Administered Administered DistributionDistribution
• Supply Chain Supply Chain ManagementManagement
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The Supply ChainThe Supply Chain
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LogisticsLogistics
Physical DistributionPhysical Distribution
InboundInbound
MaterialsMaterials
OutboundOutbound
ReverseReverse
InformationInformation
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Transportation & Storage Transportation & Storage ModesModes
• RailroadRailroad
• Motor Motor VehiclesVehicles
• WaterWater
• PipelinePipeline
• AirAir
• IntermodalIntermodal
• WarehousingWarehousing
–StorageStorage
–DistributionDistribution