UNIT 6: DISTRIBUTION CHANNELS PDF

UNIT 6: DISTRIBUTION CHANNELS E-commerce Dominance - Global Growth: E-commerce is projected to reach $6.09 trillion in global sales by 2024. - Direct-to-consumer (DTC) Expansion: Brands are increasingly bypassing traditional retailers to sell directly to consumers, enhancing control...

UNIT 6: DISTRIBUTION CHANNELS E-commerce Dominance - Global Growth: E-commerce is projected to reach $6.09 trillion in global sales by 2024. - Direct-to-consumer (DTC) Expansion: Brands are increasingly bypassing traditional retailers to sell directly to consumers, enhancing control over pricing and customer experience. Omnichannel Strategies - Seamless Integration: Companies integrating online and offline channels report higher customer satisfaction and increased sales. - Buy Online, Pickup In-Store (BOPIS): This model has gained popularity, especially in sectors like groceries and fashion, driving foot traffic to physical stores. Sustainability Focus - Eco-friendly distribution models, such as carbon-neutral shipping and localized production, are becoming standard expectations. Cross-Border Commerce - Cross-border e-commerce accounts for approximately 22% of all e-commerce sales worldwide. Subscription-Based Models - Industries from fashion to pet care are embracing subscription services, creating consistent revenue streams and deepening customer loyalty. Platforms like Instagram and TikTok now allow users to shop directly through their apps, turning social media into both a marketing and distribution channel. Challenges in Logistics: - “Las-mile delivery” remains the costliest and most logistically challenging part of the supply chain, comprising up to 53% of total shipping costs: o High Labour and Operational Costs o Dispersed Delivery Points o Smaller Shipment Sizes o Customer Expectations (“same-day”, “60 minutes”…) o Flexibility and Customization (specific delivery time slots) o Reverse Logistics o Environmental and Regulatory Challenges o Failed Deliveries 1. Distribution channels: definition and typology A value delivery network is a network composed of the companies´ suppliers, distributors and customer. Few producers sell their products directly to final users. Most of them use intermediaries to market their products and use marketing channels (or distribution channels). Channel decisions directly affect the company´s performance and often involve long-term commitments with other companies. How channel members add value? They transform the assortment of products into assortments wanted by customers. They bridge the major time, place and possession gaps that separate goods and services from users. - Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange. - Promotion: Developing and spreading persuasive communications about and offer. - Contact: Finding and communicating with prospective buyers. - Matching: Shaping and fitting the offer to the buyer´s needs. Including activities such as manufacturing, grading, assembling and packaging. - Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred. - Physical distribution: Transporting and storing goods. - Financing: Acquiring and using funds to cover the costs of the channel work. - Risk taking: Assuming the risk of carrying out the channel work. Number of Channel Levels: Channel level is a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. Direct marketing channel is a marketing channel that has no intermediary levels. Indirect marketing channel is a marketing channel containing one or more intermediary levels. Horizontal conflict occurs among firms at the same level of the channel. Vertical conflict occurs between different levels of the same channel. For the channel as a whole to perform well, each channel member´s role must be specified, and channel conflict must be managed. A conventional distribution channel consists of one or more independence producers, whole sellers and retailers each a separate business seeking to maximize its own profits. Vertical marketing systems (VMS) are one of the biggest channel developments over the last years. Producers, wholesellers and retailers act as a unified system.  VMS include: Corporate vertical marketing systems combine successive stages of production and distribution under single ownership. Contractual vertical marketing systems consist of independent firms at different levels of production and distribution who join together through contracts. Franchise organization is a vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process. An administered vertical marketing system is a VMS that coordinates successive stages of production and distribution through the size and power of one of the parties. Horizontal marketing system is a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. 2. The design of the distribution channel: omnichannel distribution Omnichannel distribution is a strategy where retail, wholesale and ecommerce channels merge together, allowing retailers to offer a seamless experience to their customers across multiple channels. 3. Retail business forms 4. Physical distribution challenges 61% of businesses believe that the last mile is the most inefficient part of their supply chain. a) Traffic congestion b) High costs c) Limited access to remote areas d) Last-mile delivery costs e) Seasonal demand fluctuations f) Real-time visibility g) Delayed deliveries h) Outdated technologies i) Reduced efficiency j) Inefficient route planning