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Channels of Distribution

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Beth Foster

on 4 January 2013

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Transcript of Channels of Distribution

Exclusive Distribution When a manufacturer makes a deal with one or two retailers to sell the manufacturer's product exclusively, they are using the method of exclusive distribution. Inventory management controls the goods that are within the business. These management systems are very important for the supply chain, and they help businesses determine what products they need, how much they need, and when they need it.
Two examples of this are overstocks, and out of stocks. Inventory Management Companies that do not want their product sold everywhere use selective distribution. These manufacturers control the distribution of their product by making sure that other retailers who are not certified to sell the product are not able to. Selective Distribution Apple uses selective distribution with their products, including the iPhone 5. The company does not want to lose it's high quality status and therefore does not sell its products to other retailers unless they are authorized resellers of Apple products. Becoming an authorized reseller is difficult for companies unless they are well known, reliable sellers of electronics. This helps protect the branding position Apple has created for itself. -Maintains company positioning as an upscale product
-Limiting vendors makes the product seem more luxurious
-Prevents retailers from discounting their product (Walmart is not an authorized reseller = prevents iPhone from being marked down)
-By law, manufacturers must have a reason not to sell to other companies
-Purchase minimums are set so that companies cannot order the iPhone without ordering a certain amount (decreases the chances of the potential reseller following through with the purchase) Why Selective Distribution? Companies that wish to sell their product in a wide range of locations use intensive distribution. These businesses want to sell their products everywhere so that consumers are able to access them easily- wherever they are, whenever they want to. Intensive Distribution Channels of Distribution An example of this is Sprite, a soft drink owned by the company Coca Cola. This product is easily found in many locations, including vending machines, concession stands, grocery stores, and more. Why Intensive Distribution? -Sprite is an internationally known product
-Having this product accessible everywhere ensures maximum profit for company
-Gathering places like movies, restaurants, sporting events are prime areas to sell Sprite
-Sprite is found in retail and in alternative places as well
-Company uses place & time utility; easy to purchase anywhere, anytime Martha Stewart has released a new home office collection which is sold exclusively through Staples. The fact that this product is sold only through one company sets her office supplies apart from what Staples and other companies currently have in stock. Customers will believe they are purchasing "brand name" office supplies. Why Exclusive Distribution? -The manufacturer is able to dictate some of the sellers decisions (Ex: where the product(s) is displayed, whether or not the company provides special offers pertaining to the manufacturers products)
-Store becomes an exclusive distributor (generates traffic in store)
-Manufacturers approach retailers who attract the consumers the manufacturer wishes to target
-Relationship benefits both the manufacturer and retailer Advantages Disadvantages Trucks Planes Trains Channels of Distribution Sprite iPhone 5 Martha Stewart for Staples Sprite iPhone 5 Martha Stewart for Staples -door to door delivery -door to door delivery -door to door delivery -large shipments normally sent, trucks are suitable -"less than a truckload" shipments help goods move quickly -"full truckload" shipments can be sent for less money -company has to wait for consolidation (until the truck sent is full), takes more time -products handled with less care, iPhones could be damaged -company has to wait for consolidation (until the truck sent is full, takes more time) -product can reach destination within hours -product can reach destination within hours (excellent for consumer demand) -product can reach destination within hours -very costly alternative -very costly alternative -very costly alternative -used for large, heavy shipments (Sprite is shipped in bulk)
-good for long distances -good for hard to handle goods
-good for long distances -large quantities can be sent
-good for long distances -can take days to reach destination -can take days to reach destination
-items must be sent in bulk -can take days to reach destination
- Overstocks Carrying inventory costs money for a business. This is why having more inventory than a business can sell is costly.
-inventory is part of a company's capital and must be paid for
-inventory requires storage facilities which takes up space (could be used for alternative purposes)
-some inventory purchases have interest on loans For example, if Staples believed the Martha Stewart collection was going to do exceptionally well, the company may order the products in bulk. If the stock is sitting on the shelves and in the warehouse, it is doing more harm to the company than benefiting it. Controlling overstocks reduces costs, increases a company's return on investment and helps with marketing. Customers are more likely to buy newer looking products. If the products are not clearing the shelves quickly enough, there are a number of ways the business can reduce the stock. Markdowns- reduce the price to sell products quickly End-of-season sales- seasonal items are cleared out (sunblock, sandals, etc.) Clearance- gets rid of products that aren't selling Out-of-Stocks Not having a particular product in stock can cost a company customers that may never return. It is important to have the right amount of stock to satisfy demand, especially around holidays like Christmas. For example, if Apple runs out of iPhone 5's around Christmas time, customers may decide to purchase a Blackberry as a gift instead and become loyal to this company. Since stock was low, Apple lost a potential relationship with a customer who could have given them steady profit over the years.

Inventory management must monitor inventory to make sure that a product is re-ordered every time the stock is low to prevent an out-of-stock. The impact of technology.. Channels of Distribution: Internet The internet is a very important tool in marketing. It is the fastest growing communication technology, and is a fast grow method of distribution. Technology allows cosumers to shop online and have products delivered right to their doorstep without having to leave their homes. Television Television used to be an extremely useful channel of distribution. However, technology has impacted this greatly. Consumers are now able to fast forward through things they don't want to see such as infomercials, and they are able to watch any show they want whenever they want through programs like Netflix. This decreases the chances of consumers seeing products for sale on TV and purchasing them. Inventory Control Systems Smart Shelves Automated Billing Technology has impacted inventory control systems and the way retailers are able to keep track of the items they have in stock. Specially designed shelves called "Smart Shelves" can now read radio frequency waves emitted by microchips embedded in millions of products.
The shelves can scan the contents of the shelves and, via computer, alert store employees when supplies are running low or when theft is detected. Smart shelves are innovative, high tech versions of computers and UPC scanners that retailers must use in order to monitor stock levels and hold information about products. Technology has affected the way businesses are able to bill customers as well. Automated billing is an action in which the invoicing for goods and services occurs without the need to prepare the invoice by hand. Many billing systems of this type provide the ability to generate and send electronic copies of the invoices to customers. The use of this type of billing software makes it possible to manage the invoicing process with greater efficiency, saving the company both time and money. When the invoice form does not have to be filled out, the customer can obtain their product faster, and the seller is able to assist other customers faster as a result.
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