Distree Russia - 2013 St. Petersburg

25 June, 2013

NAVIGATING IN THE WORLD OF CHANNEL STRATEGIES

IGOR SNYTKO

CONTENTS

Impact of Channel Strategies

Varieties of Channel Strategies

Key Channel Trends

CHANNEL STRATEGY ROLE

Retail markup

Distribution margin

Manufacturer's profit

Variable cost

Fixed cost

COGS

DETERMINED BY THE MARKET

IMPACTED BY CHANNEL

STRATEGY

retail price Determined by the market , brand values

DEPENDS ON THE STRATEGY

DEPENDS ON THE STRATEGY

DEPENDS ON THE VOLUME

DEPENDS ON THE VOLUME

FACTORS DENERMINING STRATEGY

EXTERNAL FACTORS

•  Level of market development

•  Product structure of the market / demand structure

•  Competitors actions INTERNAL FACTORS

•  Product portfolio structure

•  Business volume, market share

•  Internal market expertise, availability of resources

KEY PRODUCT TRENDS

1.  Focus on mobility 2.  Areas of growth: tablets, smartphones

and accessories 3.  Sales decrease: laptop computers,

netbook withdraw from the market 4.  Further segmentation and internal

cannibalization in portable computer market: the development of "hybrid" devices undermines prospects for ultrabooks

5.  “Virtualization”: Apps vs Devices

MAXIMUM ENGAGEMENT OF MANUFACTURER

CHANNEL STRATEGY SCALE

MAXIMUM DELEGATION TO

DISTRIBUTOR 1.  Mono distribution 2.  Distributor is realizing channel & marketing strategy on behalf of manufacturer 3. High margins of distributor 4. Small markets 5. Low level of competition

1.  Multi distribution 2.  Many direct contracts

with partners 3.  Demand generation and

channel programs by manufacturer

4.  Service model of cooperation

KEY DIRECTION

1.  The time of push- strategies has passed 2.  End customers and channel are defining distributor

Channel partners

End customers

Distributor

Manufacturer

Channel partners

End customers

Distributor

Manufacturer

DISTRIBUTION TRENDS

1. Reducing space for growth

2. Product convergence

3. Consolidation of distribution companies

4. Increasing the level of attention to smaller customers

5. Displacement of the sub-distributors and "wholesalers"

6. Increasing competition on the cost of business (access to financial resources, optimization of logistic procedures, implementation of higher level ERP-systems)

OPPORTUNITIES?

FUTURE OF SUBDISTRIBUTION

Distributors replacing subdistributors

•  Area for growth •  Increasing business transparency •  Development of logistics

infrastructure

SERVICES BUSINESS MODEL

FOR MANUFACTURER + -

Increase the predictability of business

Significant cost increase (sales infrastructure)

Direct contact with the channel

FOR DISTRIBUTOR + -

Decreasing requirements to working capital

Decreasing profitability

Decreasing risks Increasing competition for the business cost Loss control over the channel

•  Switch from “margin” concept •  Manufacturer generates demand and channel deals and coordinates all

channel matters (marketing, sales support, etc.) •  Logistics by distributor

FEASIBLE IN CASE OF SIGNIFICANT VOLUME OF BUSINESS

DISTRIBUTION TRENDS

Survival and Growth Options:

Value add distribution

Niche high-margin distribution

Focus on logistics

Product diversification

Downstream/Upstream

vertical integration

REQUIRES SIGNIFICANT INVESTMENTS

RETAIL TRENDS

1. A lot of plans for store number growth, but questionable

2. Further consolidation of the channel, major federal retailers winning share

3. Regional retail players stay only in smaller formats and in smaller cities, unfeasible for majors

4. Growth opportunities for Telco retailers, as consumer preferences shifts support their business

5. Further development of on-line retail: early to talk about consolidation, but major investments and focus on multi-channeling

6. Further development of franchise projects is questionable

OPPORTUNITIES?

EMERGE OF MONO-BRAND RETAIL Brand value oriented vendors focus on mono-brand retail: •  development of Apple Monobrand Stores (big chains

like IRG + many smaller Co) •  emerge of Samsung Monobrand Stores in Russia

(IRG acquired Nosimo)

Stagnation or close down of mono-brand chains for some respected vendors: •  Sony •  Toshiba •  Nokia

?

CONFLICTING

TRENDS

MONO-BRAND RETAIL

Vendor •  Wide line-up •  Focus on brand development –

Marketing investments •  Efficient marketing policy enforcement

Environment •  Market size/retail traffic in specific

location justifies investment •  Professional partner with strong retail

expertise

STRONG COMBINATION +

WHEN DOES IT WORKS?

1.  CHANNEL STRATEGY DEFINES THE PROFITABILITY

2.  POSITION ON "STRATEGIES SCALE" DEFINES BY OBJECTIVES & OPPORTUNITIES

3.  TRACKING TRENDS & STRATEGIES MODIFICATION

CONCLUSIONS

THANKS FOR YOUR ATTENTION

FEEL FREE TO CONTACT WITH INQUIRIES: IGOR.SNYTKO@OCEANSOLUTIONS.RU TEL: +7-495-221-71-81 WWW.OCEANSOLUTIONS.RU