In-Depth Notes on Distribution Strategy

Definition: The process and logistics through which products are made available to consumers.
Channel Intermediaries: Interdependent organizations that facilitate the transfer of products in the distribution system.

Direct Channel: No intermediaries involved.
- Example: Tesla sells cars directly to consumers without a dealership.
- Tailored clothing directly from the producer (e.g., buying from a farmer).
Non-Direct Channels: Involves intermediaries.
- One Intermediary: Producers/Manufacturers → Retailer → End Consumer
- Examples: Target, Amazon, Macy's (B2C model).
- Multiple Intermediaries: Producers/Manufacturers → Wholesalers/Distributors → Retailers → End Consumer
- Wholesalers sell in bulk (B2B), not directly to the end consumer.

Title of Ownership: Refers to owning an item after purchase.
Manufacturer/Producers (m): Entities that create goods.
Wholesalers/Distributors: Entities that sell in larger quantities but do not deal directly with consumers.
Agents/Brokers: Intermediaries that aid transactions without taking ownership of goods.

Given:
- Let M = number of manufacturers, X = number of customers, N = total number of transactions.
Without intermediaries: N = m imes x (e.g., N = 80 = 10 imes 8)
With one intermediary: N = m + x (e.g., N = 18 = 10 + 8)

Discrepancy of Quantity: Difference between optimal quantities for manufacturers and consumers.
Discrepancy of Assortment: Consumers desire a variety of products, while producers offer a smaller selection.
Temporal Discrepancy: The gap between production and consumption times, which intermediaries help bridge.
Spatial Discrepancy: Geographical distance between production and consumption locations.

Transactional Functions:
- Negotiating
- Risk-taking
- Promotions
Logistical Functions:
- Physical storing
- Physical sorting
- Physical distribution
Facilitating Functions:
- Researching
- Financing

Intensive Distribution: Saturates market presence with products available anywhere.
Selective Distribution: Available but not everywhere; firms control accessibility.
Exclusive Distribution: Products available only at one retailer, limiting accessibility.

Market Factors: Type and size of target market (broad= intensive; small= exclusive).
Product Factors: Type of product (low-priced= intensive; high-priced= exclusive).
Producer Factors: Desired image, control over retail locations.

Analogous to human (romantic) relationships.
Arms-Length Relationships: Minimal interaction.
Cooperative Relationships: Regular yet casual interactions, often via contracts.
Integrated Relationships: Deep collaboration akin to marriage involving shared resources.

Power can stem from incentives, ownership of desirable goods, or emotional connections.
Control: Power exerted to influence behavior; typically, the most powerful entity leads interactions.
Conflicts may arise from differing objectives; resolution often favors the more powerful entity.

Vlasic vs. Walmart: Walmart's pricing power dominated due to sales dependence.
Nike vs. Footlocker: Nike retained pricing power despite retailers’ negotiations.
P&G vs. Walmart: Equal power led to negotiation without significant concessions.
American Airlines vs. Expedia: Equally matched power led to collaboration after a brief separation.

Small Independent Retailers (1950s-1960s): Mom & pop stores, less prevalent now.
Chain Stores/Corporate Stores: Dominating the market today.

Department Stores: e.g., Macy's, Dillard's; multiple sections, moderate service.
Specialty Stores: Focused on one category (e.g., sports stores), higher service but limited assortment and higher prices.
Supermarkets: Primarily food-oriented with a high selection and moderate pricing.
Convenience Stores: Extended hours, limited selection, higher prices (e.g., 7-Eleven).
Drug Stores: Sell pharmaceuticals, heavily regulated, high service level.