Unit 6 Distribution channels

E-commerce Dominance

• Global e-commerce sales projected to reach $6.09 trillion by 2024.
• Brands increasingly use direct-to-consumer (DTC) models, bypassing traditional retailers.
• DTC models provide more control over pricing and customer experience.

Omnichannel Strategies

• Companies integrating online and offline channels see higher customer satisfaction and increased sales.
• "Buy Online, Pickup In-Store" (BOPIS) model is gaining popularity, especially in grocery and fashion.
• BOPIS drives foot traffic to physical stores.

Sustainability Focus

• Eco-friendly distribution models like carbon-neutral shipping and localized production are becoming standard.

Cross-Border Commerce

• 22% of global e-commerce sales are cross-border transactions.

Subscription-Based Models

• Industries like fashion and pet care are adopting subscription models to build consistent revenue and customer loyalty.
• Social media platforms allow user-to-user shopping, acting as both marketing and distribution channels.

Logistics Challenges

• Last-mile delivery is the most expensive and logistically challenging part of the supply chain (up to 53% of total shipping costs).
• Operational costs are high due to dispersed delivery points and smaller shipment sizes.
• Customer expectations for speed and flexibility (e.g., same-day delivery, specific time slots).
• Challenges due to reverse logistics, environmental concerns, and regulations.
• Failed deliveries are an issue.

Distribution Channel Definitions & Typology

• A value delivery network includes suppliers, distributors, and customers.
• Most producers use intermediaries to market their products via marketing (distribution) channels.

Channel Member Value

• Transform product assortments to meet customer needs.
• Bridge time, place, and possession gaps for products and services.
• Provide information, generate transactions, and offer promotion and matching.
• Conduct negotiation, physical distribution, financing, and risk-taking.

Channel Levels

• Channel level: Intermediaries that bring a product closer to the final buyer.
• Direct marketing channel: No intermediary levels.
• Indirect marketing channel: One or more intermediary levels.
• Horizontal conflict: Problems between firms at the same channel level.
• Vertical conflict: Issues between different levels of the same channel.

Vertical Marketing Systems (VMS)

• Unified system where producers, wholesalers, and retailers work together.

Omnichannel Distribution

• Retailers, wholesalers, and e-commerce channels merge for a seamless customer experience across multiple channels.

Retail Business Forms

• Specialty Stores: Narrow, deep product lines (e.g., books, art)
• Department Stores: Wide variety of product lines; promotional pricing; store brands.
• Supermarkets: Grocery and household goods (decreasing sales due to competition); slow population growth.
• Convenience Stores: Small stores with high-turnover goods (evolving to offer more).
• Superstores (Supercenters): Larger supermarkets with food, non-food items, and services.

Physical Distribution Challenges

• Traffic congestion, high costs, limited access to remote areas, last-mile delivery costs.
• Seasonal fluctuations in demand, real-time visibility issues, delayed deliveries.
• Inefficient routes, outdated technologies, reduced efficiency.