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Terence Kong

on 23 July 2013

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Transcript of Distribution

Contractual Relationship
Franchise Disclosure Document (FDD)
Franchisor to provide to potential Franchisees
Franchise Agreement
Made when potential Franchisee become genuine
Ten Commandments
Franchisees have more power than they think
Franchisees should always relate to successful Franchisees
Franchisees need to document violations of their Franchise agreement
Franchisees must accept a strong Franchise agreement in order to protect the system
Franchisees have a vested interest in the Financial Viability of the Franchisor
The most successful Franchisees are those who follow the program
Profitability should precede Franchisee expansion
Franchisee Unity is Power
Franchisees must always select the most accomplished, articulate and reasonable Franchisees for the Franchise Advisory Counsel
The Franchisee should use an experienced Franchisee attorney
Ten Laws
The Franchise Agreement must favor the Franchisor in order to maintain stability
Never limit a Franchisees ability to earn more money
Franchisees must relate to successful Franchisees
Franchisees will always place their own security first
Most Franchisees will avoid criticizing the Franchisor directly
Franchisors should avoid disputes that they are not willing to fight for
Franchisees abhor a vacuum and will join together to fill one
When Franchisees complain about the same thing they are usually right
The most dangerous Franchisee is a wounded Franchisee
Franchisors must never be surprised by the actions of their Franchisees
Wholesale = (re)
of products to a
Intermediate player between manufacturer and retailer
Distribution Channel

Wholesale in Japan
Traditionally a lot of wholesalers in comparison to other countries
In 1988 – 437,000 in Japan (only 376,000 in US)

Chain of wholesalers before retailers =long distribution channel
Regarded backwards and not efficient
Today – increase in chain stores and bigger companies → decline in wholesalers

By 2007, only 334,000 wholesalers (23.6% decline from 1988)

Westernization – short distribution channel
Transfer of factories oversea
Wholesale in Japan Cont.
Traditional wholesale → Disappearing

Increase in direct marketing between manufacturers and retailer
Lower cost and more control

Use of wholesale online
Amazon, etc
Wholesale Today
1.1 Traditional Japanese Retail Structure
Excessive Number of Stores

Although Japan has only about 40% of the population of the US, the number of retail stores is approximately the same as in the US.
Since WWⅡ, an extensive public transportation system has been developed. This leads to concentration of the population in the vicinity of the railroad stations with many retail shops forming shopping districts in these areas.

Small- Scale Stores

Although Japan has only about 40% of the population of the US, the number of retail stores is approximately the same as in the US.

1.Structural Feature of Japanese Retailing

Non- Corporate Stores
Small and medium-sized retail stores do not have a legal management. They do not pay tenant fees and personal expenses as they use their own homes as the store’s location.

Delay of Large Store Development
In 1973, the Large Scale Retail Store Law came into effect. The amount of selling space, store opening days, store opening hours, and yearly amount of business holidays had been regulated to protect smaller retailers. The speed of new large retail stores have been slowed down.
1.2 Changing Structure of the Retail Sector
Decreasing sales in large- scale retail stores and specialty stores.
Increasing sales in middle- sized general supermarkets, clothing specialty supermarkets and convenience stores.
Open of Discount Store
After the bubble economy burst in 1990, Japan entered a long period of recession from 1992. The rise in consumption tax to 5% in 1997 led to an atmosphere that provided the ground for the retail industry to open discount stores that attract customers with low prices.

Consumers remain price sensitive in 2012
With a difficult economic situation in Japan, consumers expenditure remained modest and retail sales continued to be flat in 2012.
Traditional grocery retailers continued to exit the market, Modern grocery retailers continued to launch private label products to appeal to affordability. Department stores continued to lose sales .Internet retailing demonstrated one of the strongest growth rates in 2012.

Outlets with small selling space increase in urban cities
As urbanization advances with growing inflow of population into large cities, there was increasing demand for grocery retailers in central areas. As land space is limited in urban areas, retailers started to open outlets with small selling space.
2.Recent retail trends in Japan

2.Recent retail trends in Japan
Retailers try to attract elderly consumers’ attention
With the growing population of elderly Japanese, retailers increased services and product varieties targeted at older consumers.

AEON Group and 7-Eleven Japan Co Ltd maintain leading positions
AEON Group maintained its leading position with a 3% share of retail value sales in 2012. However, 7-Eleven Japan Co Ltd has closely followed AEON Group over the review period and may claim the number one position over the forecast period. 
Both AEON Group and 7-Eleven Japan Co Ltd increased their variety of private label products and appealed to price-sensitive consumers in 2012.

Tax increases in 2014 and 2015 expected to negatively affect consumption
Increase the consumption tax rate from 5% to 8%, starting form April 2014.
Retailers are expected to run pre-tax increase sales promotions to encourage purchase among consumers in 2013. Although sales will temporarily grow before the tax increase, retailers will need to be prepared for a fall in sales after the tax increase is implemented over the forecast period.

Japanese agricultural products are more expensive compared to any other developed countries.

One of the reasons is complexity of distribution in Japan

Problems 1
Also, many Japanese small farmers tend to depend on Nokyo (JA, Japan Agricultural Cooperatives) traditionally and JA commits the products to wholesale or retail.

As a result, farmers can draw a little income because of many middlemen.

Problems 2
In these days, however, some farmers challenge usual distribution system of agricultural products in Japan.

They make use of direct sales stores, which are usually at their local area, and sell the products directly.


New Tactics! 1

Why they can make vast money only by changing their method of sale?

Japanese people recently have tended to concern about what they eat because of camouflage of food by companies or uneasiness against foreign agricultural products.

Thus consumers interests does not clash with farmers’.

New Tactics! 2

exists to manage the time, place, and quantity of product manufacturing and safely getting the product to the customer

<Logistics Cycle>
Manufacturing                 Warehousing and storage      

Supplies  Port Transportation
What is Logistics?

Centered in La Coruna, Spain
central distribution center

Covers everything: textile, design, production, distribution (only 10% logistics rely on outsourcing)

reduces time from manufacturing to selling,
reduces costs, corresponds to changes in
markets better

Case of Inditex (ZARA)
Received “Logistics Grand Reward” in 2010
… for applying the Frozen Center to their transportation
freezer box used to transport frozen products, with the aim of energy usage reduction

Was praised by JILS (Japan Institute of Logistics Systems) for their effort in boosting level of product quality, boost in service, and cutting costs)

Case of Seven and I Holdings

Intensive - product sold to as many appropriate retailers or wholesalers as possible.

Selective - lies between intensive and exclusive distribution, through multiple, but by not all possible wholesalers and retailers

Exclusive - only a limited number of dealers allowed to distribute products in an area

Distribution Strategies
Combined Delivery System – products from different suppliers and manufacturers to be delivered on the same truck
Seven and I Holdings

Combining technology with traditional routes
Seven and I Holdings
Terence Kong
Marie Friberg
Zhuang Jun
Masamichi Toguchi
Reina Tanaka
Marcus Fujita
Yosuke Hatakeyama

To Price Reduction, Disintermediation is in Progress

The Price control by the manufacturer

Modern Distribution

Retail transmit their own information

Online distribution
Mail order using the internet
Continues to increase sales

Future of Distribution
Full transcript