12. Place: Channels, supply chains, and retailing

P of Place

Supply chain

= Set of three or more entities directly involved in the upstream/downstream flows of product, service, finances, and/or information from a source to a customer

• Inbound logistics

  • Involves the processes related to receiving, storing, and transporting raw materials from suppliers to a business

• Outbound logistics

  • Processes of transporting goods from a business to the consumers

• Reverse logistics

  • Moving goods from the customer back to the business

• Distuptions during the logistics

  • Ex. Ship stuck in the Suez Canal, War in Ukraine

Marketing channel

= Distribution channel (distributes finished goods to end consumer)

= Set of interdependent organizations involved in the process of making a product or service available for use or consumption

Main elements of marketing channels

1. Management of intangible aspects

   1. Ownership

   2. Control

   3. Flow of communication (How well does information transfer to further entities?)

2. Management of tangible aspects

   1. Logistics

3. Retailing

   1. Access (Make sure customers have easy access to the desired products)

Value delivery network

= a network where every partner in the chain enhances and adds value to the goods

• Interdependence: Rely/Depend on each other

• Share/Reduce uncertainty

  • Work together, to have less risk

2 types of value delivery (win-win)

1. Upstream

   1. Ensures smooth collaboration with those who provide input

   2. Good relationship with suppliers

2. Downstream

   1. Everything after manufacturing, who hande/recieve the finished product

   2. Good relationship with who recieves the finished product

Reduced complexity

• Fewer channel transactions (use an intermediary instead of direct contact)

• Reduced cost: Each actor can focus on their core business

How channel members help reduce uncertainty

• Increasing value and competitive advantage

  • Intermediaries are specialized in selling goods to customers

• Routinization

  • Improving transaction efficiency

  • Allow distribution costs to be reduced

• Specialization

  • Producers prefer to produce large quantities of a small range of goods

  • End users only want a limited quantity of a wide variety of goods

  • → Sorting and smoothing

    • Focus on what they specialize in

    • Doing so via intermediaries

Specialization

• Place utility

  • Bring products to a convenient location

• Time utility

  • Provide time (storage) between manufacturing & consumption

• Ownership utility

  • Ownership can be passed on easily

• Information utility

  • Information about the product & usage

Disadvantages of using intermediaries

• Lack of control

• Unable to influence intermediaries (In-store merchandising, pricing…)

• Intermediaries may be susceptible to competitor inducements

• Time, money, and staff need to be invested in sustaining relationships with intermediaries

Types of intermediaries (!!!)

• Agent/Broker

  • Between seller and buyers

  • No ownership → Brings customer and business together

• Merchant

  • Same actions as an agent, but it does take ownership of a product

  • More control

  • Buying and selling products

• Distributors/Dealers

  • Distribute the product

  • Offer value through services associated with selling inventory…

• Franchisee

  • Contract to supply and market an offering to the requirements or blueprint of the franchisor

• Wholesaler

  • Stocks goods before the next level of distribution takes both legal title and physical possession of the goods

  • Divide over different retailers

• Retailers

  • Sell directly to end consumers

• Infomediraries

Channel design

• What’s the most effective and efficient way of getting the offering to the consumer?

• Three key decisions

  • Distribution intensity: Level of effort required of consumer to find the product

  • Channel configuration: Numbers/Types of intermediaries in supply chain

  • Multichannel decision: Number of differently used channels

Key considerations of channel design

• Economics

• Coverage: Be more available than competitors (not always: exclusiveness)

• Control: More actors = less control about the product

• Convencience & location

  • Where are we present?

  • Ex. McDonald’s being next to a highway

• Different ordering options

  • Online, offline, department store?

• Waiting time & delivery period

  • Try to reduce it by working with the best intermediaries

• Purchase quantity

  • What and how much do the consumers actually require?

Distribution channel strategy

• Direct structure: Direct connection with consumers

• Indirect structure: Through intermediary

• Multichannel structure: Combination

Types of distribution channels: Consumer channels

1. Producer → Customers (ex. Web shops)

2. Producer → Retailer → Customer (ex. Walmart) → ONLY when retailer is big

3. Producer → Wholesaler → Retailer → Customer (Usually the case)

4. Producer → Agent → Wholesaler → Retailer → Customer

   1. When companies want to enter a foreign market → Agents possess knowledge about these things

Hybrid marketing system

= Benefit of multi-channel structure (indirect & direct)

• Using 2 or more marketing channels to reach one or more customer segments

• Ex. Make product available in your own stores, and other stores (ex. Nike)

Benefits of a multichannel structure

• Increased reach

• Producer control (Directly linked with customers)

• Greater compliance (Part of a greater whole)

• Optimized margins (The more intermediaries, the more divided margins)

• Improved market insight (Working with only intermediaries → You don’t know the customer behavior)

Flex shopping

Switching channels to find the best prices

Omnichannel marketing

• Better compared to multichannel (Different channels live separately)

• Create a seamless experience for customers across channels

• Ex. Disney

Why omnichannel marketing?

• Customer-centric

• Data integration

• Flexibility (Multiple outlets to find your product)

Channel intensity

• Intensity

  • Available everywhere (ex. Coca Cola)

  • Use all available outlets

  • When there are many alternatives

• Selective

  • Specialized stores (ex. Washing machinesà

  • Distributions through multiple but not all reasonable outlets

• Exclusive

  • Small amount in different stores (ex. Versace)

Disintermediation

Elimination of intermediaries

Re-intermediation

Introduction of additional intermediaries into the distribution channel

Channel conflict

Disagreement with channel members on goals, task, division or reward

Horizontal channel conflict

Conflict between two or more players at the same level of the supply chain

• Price conflicts

  • Sell the cheapest: Race to the bottom

• Turf wars

  • Outlets located in the same customer segment

• Policy variations

  • Different intermediaries → Different discounts or promotions

• Grey marketing

  • One of the outlets selling in an illegal way

Vertical channel conflict

Conflict between two or more parties at different levels of the supply chain

• Ex. A retailer that stops selling a certain producer’s products

Supply chain

Set of three or more entities directly involved in the upstream or downstream flows of product, service, finances, and/or information from a source to a customer

Supply chain management activities and goals

• Fulfilment—Delivering the products in a reasonable time frame

Sypply chain management goals

• Competitive advantages

  • Doing the right things (quality, availability…)

  • Doing things fast

  • Doing things on time

  • Being able to change

  • Being low-cist

• Just-in-time management (JIT)

• Circular supply chains

Supply chain management activities

• Demand management

• Flow management

  • Good transportation of goods

• Returns management

• Order fulfillment

Retailing

= All the activities directly related to the sale of products and services to consumers for personal use

4 key elements of convenient product acquisition (retailing)

• Access—Being easy to reach

• Search—Customers can easily identify what they want

• Possession—Easy to obtain, immediate ownership

• Trabsactions—Different payment methods

Difference retailer and wholesaler (!!!!)

• Retailers sell tp customers

• Wholesalers sell to different businesses (who in turn sell to customers)

Retail store classification

• Department stores: huge variety of products

• Convenience store: smaller stores, open at specific times

• Limited lines: specific for a certain category

Customer needs in online stores

• Conveniece

  • User-friendly interface: Has to look professional (otherwise, it might be perceived as low quality)

  • Sorting & filtering products: find goods according to your own criteria

  • Search function: able to find a specific item

  • Multiple delivery options

• Trust

  • Safe payment

  • Free delivery: no transportation cost

  • Free returns: if it doesn’t suit you

Customer needs in physical stores

• Experience: providing sensations (touch, feel, smell)

• Service & advice: interaction with in-store staff

• Time utility: ex. no lines

Lightning speed of change

= Businesses need to invest in innovation and be ahead using new tech to improve their products

Consolidation

= Different businesses are coming together: joint ventures

Advantages:

• Scaling up

• More professionalism

• Global expansion