Distribution & Retail

Management
- Prof. Shashank Divekar
 DISTRIBUTION

Distribution can be defined as an operation, or a series of

operations, which physically bring goods manufactured or
produced by any particular manufacturer into the hands of
the final consumer or user.

Distribution is an integral part of marketing. Its function is to

distribute or sub-divide the total product of a manufacturer on a
geographical basis to various specific markets.

Distribution creates time utility and space utility.

Distribution is estimated to account for one-quarter of the price

of the consumer goods people buy.
 DISTRIBUTION

Market Logistics Objectives

“Getting the right goods at the right place at the right time..
.. At the least cost”.
 DISTRIBUTION
Market Logistics

Primary Activities Secondary Activities

1. Transportation 5. Product Packaging

2. Warehousing 6. Product Handling

3. Order Processing 7. Acquisition

4. Inventory Maintenance 8. Product Scheduling

9. Information
Maintenance
 CHANNELS OF DISTRIBUTION

A Distribution channel is a chain of people and/ or entities

involved in the transfer of title or ownership, as the
product moves from the producer to the end-consumer.

A path through which goods and services flow in one direction

(from vendor to the consumer), and the payments generated
by them that flow in the opposite direction (from consumer to
the vendor).

The structure of intra-company organisation units and extra-

company agents, dealers, wholesalers and retailers through
which a commodity, product or service is marketed.
- The American Marketing Association
 CHANNELS OF DISTRIBUTION
Retailer : The retail outlet distributes the product to the
consumer / end-user, for personal, non-business use.
Maintains limited stock of goods for sale.

Wholesaler : Performs all activities involved in selling goods

and services to those who buy for re-sale or business use.
Maintains large stocks of goods for distribution.

Agent : Is usually a direct representative of the company in the

market. He approaches customers, negotiates and closes deals
with customers on behalf of the company. Agents rarely stock
goods with themselves.

C&FAs/ CSAs : This category is also known as ‘Facilitators’.

C&FAs (Carrying & Forwarding Agents) carry the goods
physically but do not pay for it, while CSAs (Consignment
Selling Agents) act as C&FA but also perform the selling
function and remit the collections to the company.
 CHANNELS OF DISTRIBUTION
PHYSICAL DISTRIBUTION FUNCTIONS :

1. Breaking Bulk : Buying in large quantities and selling in small

quantities - Reduces costs for both manufacturers as well as buyers.

2. Creating Bulk : Intermediary works as an ‘assembler’. Buys in

small quantities and accumulates bulk for the buyer.
3. Creating Assortments : Creation of assortments of merchandise
that would otherwise not be available. Offers a variety of
products to the buyer.
4. Reducing transactions : The no. of necessary transactions to
accomplish the exchanges necessary for economic activity is
brought down substantially.

5. Transportation and storage : Intermediaries carry goods and also

provide regional and local storage.
 CHANNELS OF DISTRIBUTION

Manufacturer/ Producer

Wholesaler

Manufacturer’s Manufacturer’s
Retailer
Chain Stores Branch Offices

Consumer
 CHANNELS OF DISTRIBUTION

TYPICAL CHANNELS OF DISTRIBUTION

For Consumer Goods & Services :

Manufacturer Consumer

Manufacturer Retailer Consumer

Manufacturer Wholesaler Retailer Consumer

Manufacturer Agent Consumer

 CHANNELS OF DISTRIBUTION
Functions of Marketing Channels
1. Provide Distribution Efficiency
Thereby leaving the manufacturer free to concentrate on other
activities.

2. Salesmanship

3. Assist implementation of a Price Mix

4. Physical distribution & Financing

5. Merchandising

6. Market Intelligence

7. Demand Generation

8. Managing Various Flows in Distribution

Physical, title, risk, negotiation, payments and information flow
 CHANNELS OF DISTRIBUTION
Designing a Physical Distribution System

• Articulating distribution objectives

• Specifying the minimum service level desired in product delivery

• Understand customer expectations in product delivery

• Evaluating channel alternatives

• Optimising costs

• Keeping the system flexible.

• Understand competitors distribution policies

 CHANNELS OF DISTRIBUTION

WHOLESALING
Buying of goods in large quantities from producers and selling
the same in small quantities to retailers is termed as wholesale
trade and the person who carries on wholesale trade is called
the "Wholesaler".

Wholesaling involves sale and distribution of goods to users

other than end consumers.

Wholesaling involves selling merchandise to retailers, other

wholesalers and merchants, or to industrial, commercial and
institutional users.

Wholesaling often occurs when large quantities of goods are

re-assembled, sorted, then repackaged, and distributed in
smaller lots, at a cost significantly lower than the average
retail price.
 CHANNELS OF DISTRIBUTION

IMPORTANCE OF WHOLESALING

1. Providing retailers access to various products

2. Providing suppliers/ manufacturers access to

markets

3. Providing stocking and warehousing services

4. Value-addition to the distribution process by

participating in promotion, financing, payment
collection and market intelligence.

5. Sometimes wholesalers also share part of the

business risks.
 CHANNELS OF DISTRIBUTION

FUNCTIONS OF WHOLESALING
The primary functions performed by the wholesalers are :

1. He collects varieties of goods from different producers.

2. He performs the warehousing function. This fills up the time

gap between the production and consumption.

3. He distributes the assembled goods to the retailer or to the

consumer directly. He thus helps in the dispersion process of
marketing.

4. He helps in the transportation of goods from the place of

production to his godown and further to the retailer.

5. Bulk-breaking
 CHANNELS OF DISTRIBUTION

FUNCTIONS OF WHOLESALING

6. He provides financial assistance to the retailers by supplying

products on credit.

7. He helps in proper grading of goods as per quality, size and

colour.

8. He involves all the risks associated with the ownership as he

makes bulk purchases and makes arrangement for
assembling and warehousing.

9. Financing & Risk bearing

10. Services & training to industrial buyers

 CHANNELS OF DISTRIBUTION

RETAILER
Any business entity selling products and services to end-
consumers is ‘retailing’.

Retailing includes all activities involved in selling and/ or

renting consumer products and services directly to ultimate
consumers for their personal or home consumption.

A retailer purchases goods or products in large quantities

directly from manufacturers or through a wholesaler, and
sells in smaller quantities to the consumer for a profit.

Retailing can be done in either fixed locations, mobile outlets

or online.
 CHANNELS OF DISTRIBUTION

RETAILER
Importance of Retailing :
1. Retailing creates time, place and possession utility.

2. Makes a wide variety of goods available to consumers.

3. Plays a valuable role in creating a product and brand

image.

4. Retailer is a vital communication link between the

manufacturer and the end-user.

5. Personalised service and customising as and when

required.
 CHANNELS OF DISTRIBUTION

RETAILER
Functions of Retailing :
1. Breaking Bulk

2. Sorting and categorising of goods

3. Offer advise and guidance to help customers

make the right choices.

4. Holding stock

5. Credit services

6. Training and after-sales service to end-users

 CHANNELS OF DISTRIBUTION

Types of Retailers :

Retailers are classified based on the following factors :

• Ownership

• Merchandise Offered

• Format of Stores / Selling Method

 CHANNELS OF DISTRIBUTION

Types of Retailers :

Classification based on Merchandise Offered :

• General Stores

• Departmental Stores

• Variety Stores

• Speciality Stores

• Category Stores
 CHANNELS OF DISTRIBUTION

Types of Retailers :
Classification based on Format/ Method of selling :

• Warehouse Stores • Discount Stores

• Vending Machines • Hypermarkets/ Supermarkets

• Street Vendors • Malls

• Corporate Chains • E-Tailers

• Consumer Co-operatives
 CHANNELS OF DISTRIBUTION

Types of Retailers :

Classification Based on Ownership :

1. Independent Retailer/ Entrepreneur

2. Existing Retail Business

3. Franchise

4. Dealership

5. Network Marketing
 RETAILING

FRANCHISING
Franchising is a business model in which A parent company
allows entrepreneurs to use a successful company's strategies,
techniques and trademarks; in exchange, the franchisee pays an
initial fee and royalties based on revenues.

The parent company also provides the franchisee with support,

including advertising and training, as part of the franchising
agreement.

Arrangement where one party (the franchiser) grants another

party (the franchisee) the right to use its trademark or trade-
name as well as certain business systems and processes, to
produce and market a good or service according to certain
specifications.
 RETAILING

Advantages of franchising
To the franchisee :

1. Immediate name recognition

2. Tried, tested and successful products/ offerings

3. Standard building design/ décor

4. Detailed techniques in running and promoting the business

5. Training of employees

6. Ongoing help in promoting and upgrading the products

7. Lower financial risk and smaller gestation period due to an

established brand and goodwill.
 RETAILING
Disadvantages of franchising
To the franchisee :
1. Considerable capital allocation : In order to build
infrastructure and décor as per the franchisor’s specifications.

2. Lesser operational freedom and autonomy : Since all

operations are directed and monitored by the franchisor.

3. Benefits could be superficial/ illusory : Unless the franchisor

is a well-established brand and product, the benefits of
franchising arrangements could be limited or non-existent to
the franchisee.

4. Reduced margins : On-going royalty payments as well as

share in revenues/ profits can lead to reduced margins for the
franchisee.
 RETAILING
Advantages of franchising
To the franchisor :
1. Capitalised expansion : Rather than investing own or
borrowed funds and human efforts for expansion,
franchising facilitates faster expansion with the
franchisee’s funds.

2. Brand development : The faster multi-unit expansion

serves to supplement and expand the brand
geographically.

3. Economies of scale : Larger volumes generated by multi-

unit expansion results in higher volumes of purchases
and leverage with suppliers and vendors.

4. Continuing revenue streams : Continuing royalty serves

as a steady cash inflow.
 RETAILING
Disadvantages of franchising
To the franchisor :

1. Greater risk of losing brand value and goodwill due to mistakes

or poor customer service on part of the franchisee.

2. Risks associated with sharing of confidential information,

techniques, trade secrets etc. with the franchisee.

3. Legal hassles : Franchising agreement involves lot of legal

formalities as well as government regulation, paperwork etc.

4. Limited control : Since a franchisee is an outsider to the parent

organisation, the franchisor has limited control over the way
business is carried out.
 RETAILING

Why is location so important for a retail outlet ?

• Location determines a large part of the

capital investment

• Location affects transportation costs

• Location affects labour and HR costs

• Location determines customer traffic

• Location affects volume of business

 RETAILING

Retail Location Decision

Location is typically the prime consideration in a customer’s
store choice decision. Locations are also used to develop a
sustainable competitive advantage.

An ideal location for a retail outlet is determined by

• Target market
• Competition
• Costs

Location of the retail store affects all aspects of business, such as :

• Attracting customers
• Convenience for labour/ employees
• Transportation and logistics
• Safety and security
 RETAILING
Primary Factors determining locations :
• Business Requirements (Type of merchandise)
• Accessibility
• Traffic/ Footfalls
• Availability
• Costs (Acquisition, maintenance & security)
• Unique business requirements
 Lighting & display
 Fire safety
 Sanitation service
 Children
 Disabled persons

Secondary Factors determining locations :

• Demographics/ Target customers
• Competition
• Merchant Associations
• City rules/ by-laws
• Future Growth
 RETAILING
LEVELS OF RETAIL LOCATION DECISION

LOCALITY
CITY CHOICE SITE CHOICE
CHOICE

• Trading area • Shopping District • Cost & Capacity

• Population & • Competition • Passing Customer

Growth trends Traffic
• Accessibility
• Economic • Interception
Conditions • Civic body rules & Potential
Restrictions
• Purchasing power • Complementary
• Expanding Outlets
• Trade potential localities
• Parking &
• Competition • Law & Order Convenience

• Visibility
 RETAILING
STORE DESIGN

Store design, architecture and layout are critical factors for the
success of any form of retail business. The physical
environment determines the shopping behaviour, mood and
hours spent by the customers.

Space, atmosphere, placement and illumination are important

since these affect the perception and interest generated in the
merchandise.

Carefully designed physical atmosphere :

• Attracts customers
• Enhances display effects
• Generates interest in the merchandise
• Improves quality of shopping experiences
• Helps customer retention efforts
• Helps brand positioning for the store
 RETAILING
STORE DESIGN

Key Components of Retail Atmosphere :

1. Exterior Atmosphere

2. Interior Atmosphere

3. Store Layout

4. Visual Merchandising

External Atmosphere : This includes all elements of physical

environment found outside the store, including the exterior,
entrance, approach road, traffic, windows, lighting, signages etc.

Storefront is considered very important in competitive markets as

strong differentiating factors. It is equally important for attracting
new shoppers in unknown markets.
 RETAILING
STORE DESIGN

Elements of Exterior Atmosphere :

• Storefront
• Building Size and Height
• Visibility
• Surrounding Stores and marketplace
• Approach
• Marquee
• Parking Facilities
• Entrance
• Display Windows
• Illumination
• Uniqueness
 RETAILING
STORE DESIGN
Interior Atmosphere includes all elements of physical environment
found inside the store. Its importance lies in the fact that it
determines to a great extent the time spent, behaviour of the
visitors and the sales.

The internal retail environment contains various stimuli that play

upon the customer’s senses and influence the shopping
behaviour. The important aspects of internal environment are :

• Cleanliness, fragrance and freshness of air

• Floorings
• Wall colours and Textures
• Lighting
• Fixtures
• Width of aisles
• Personnel & Service quality
• Merchandise and display
• Vertical Transportation
 RETAILING
STORE DESIGN

Store Layout is the internal retail store arrangement of

departments and groupings of merchandise.

A carefully planned, customer-friendly layout encourages the

customers to move around the store and shop for more than
what they have planned for.

The main objective of the layout should be :

1. Facilitating smooth and easy movement through the store,
without missing any section and without any confusion.
2. Uplifting the display and attracting the customers towards
specific merchandise.
3. Enhancing the overall impression about the store, its
contents, variety of goods and all relevant information.
4. Making the entire experience pleasant and satisfying for the
customers.
 RETAILING

STORE DESIGN MIX

Parking
Frontage
Area
&
Available
Entrance

Neighbor-
Location
hood
Building STORE
Architecture DESIGN

Access
Visibility

Health &
Safety

Store Theme

Target Merchandise
Customers Mix
 RETAILING
Principals of Store Design

• Totality
The entire store has to be concieved as one unit,
thereby incorporating the retailers image, positioning,
target customers, merchandise and services together.
• Focus
The primary focus for the retailer is the goods or
merchandise. This aspect should not be lost while
designing the décor and ambience.
• Ease of Shopping
The layout and interiors should facilitate ease of
navigation, access, information and service to
the customers.
• Change & Flexibility
Store designs have to be adaptable to the environment.
There should be adequate provision for changes,
modifications, expansions and up-gradations, from
time to time.
 RETAILING
Store Display
Product placement plays a key role in enhancing the effect of
display and the selling opportunities. It attracts, creates desire
and also encourages the buyers to pick complimentary or related
items to the one already chosen.

Display decisions are determined by 3 key elements :

• Display Theme
• Location for the display
• Display Components

Display Concepts are based on a combination of one or more of

the following themes :
• Seasons
• Festivals
• Moods and Colours
• Special Days
• Zodiac Signs
 RETAILING
Store Layout :

The layout of the store is the manner in which merchandise or

products are arranged in a retail store.

It describes the interior arrangement of departments, sections or

groupings of merchandise.

While designing a customer-friendly layout, the following factors

are considered most important :
1. The number and flow of customers at peak hours
2. The shopping space allotted to the customers
3. Sufficient space for merchandise display
4. Safety and security

A customer-friendly store layout is likely to motivate the shoppers

to move around the store and shop more than what they planned.
 RETAILING
Store Layout :

The layout of the store may vary across retailers, depending upon
the types of merchandise, customer habits and the space
available.

The objective of the layout should be to facilitate ease of

movement, ease of understanding the locations of different
merchandise and also take the customer through all the sections.

Typical store layout patterns are catagorized as below :

a) Grid Layout
b) Race-Track Layout
c) Freeform Layout
d) Storeyed Layout
 RETAILING
Grid Layout :

This is the most commonly followed system which facilitates

movement within the area and uses space effectively.

The grid comprises of long gondolas with merchandise displayed

along the passages in a repetitive form.

The grid form is mostly employed by retail stores primarily selling

grocery items, FMCG goods or drugs (Medicines). The system
also facilitates display of large variety and quantity of goods
because of large shelf spaces.

Grid layout is not very appealing aesthetically but it facilitates

smooth shopping movement and ensures optimum space
utilisation, and is therefore cost efficient.
 RETAILING
Grid Layout :

Bakery

Fruits

F&B
 RETAILING

Race-Track Layout :

This is also known as the ‘Loop’ layout. Here, the display is in the
form of a loop or a race-track, wherein a major aisle runs through
the store.

The aisle provides access to various smaller shops or

departments within the store. This design encourages impulse
purchasing, as shoppers are taken through various departments.

The departments place fresh or new merchandise on the aisles to

attract customers into the department. Different surfaces or
colours are used to differentiate between various departments.

This arrangement is not very common but offers an interesting

and entertaining shopping experience.
RETAILING
RACE-TRACK LAYOUT
 RETAILING

Free-Form Layout :

This format is used in large departmental stores, having several

sections.

Under the free-form format, the various sections or departments

are scattered across the retail floor, in different directions. There
is no particular route or pattern of movement of the customers.

This format provides an informal setting to the shoppers, allowing

them to roam around and browse at their will. Sales staff on the
retail floor have a challenging task to perform in this layout since
the customers are not drawn automatically.

Free-form layout may not provide for maximum utilisation of the

retail space available. There is also litlle or no possibility of
storage facility on the retail floor.
RETAILING Free-Form Layout
 RETAILING

Storeyed Layout :

Under this layout a multi-storeyed retail store can devote every

floor to a different category of goods and services.

This is a common form of store-layout design among leading retail

chains in India.

This layout offers not only the best utilisation of avaiilable floor
space but also provides comfort and ease to shoppers. It also
helps the retailers to manage the goods display more effectively.

Storeyed layout is more popular among leading fashion

department stores and supermarkets in India. Such
establishments can also provide restaurants, coffee shops and/
or entertainment and other services within the premises.
 RETAILING
Factors affecting store layout :

1. Available floor space (Retail & Storage)

2. Variety of departments and sections

3. Other services offered

4. Types and variety of merchandise

5. Expected customer traffic

6. Display and demo requirements

7. Safety and security requirements

8. Horizontal and vertical transportation requirements

 RETAILING
Floor Space Management :

FSM is about best possible allocation of space to various

departments, product categories and customer movements.

FSM not only attracts business by offering convenience to

customers, but also places the merchandise strategically so as to
help the sales efforts.

Space Planning affects the following factors :

• The location of various departments

• Placement of various products within the departments

• Specific locations for impulse buying, seasonal products

and complimentary products

• Revenue and profits per unit of space

 RETAILING
Floor Space Management :

The retailer has to work out the best possible utilisation of the
limited space available.

Space allocation is the process of allocating the right amount of

space, to the right merchandise, at the right time according to the
customer demand.

Effective store space management requires a thorough

understanding of the following factors :
• The nature of merchandise, suppliers and departments
within the store.
• The quantity of the merchandise the store wants to carry
and display
• The location and proportion of space allotted to different
types of merchandise
 RETAILING
MERCHANDISING

Deciding the merchandise mix and quantity to be purchased is

one of the most strategic aspects of retail business.

Merchandise Planning is the planning and control of the

merchandise inventory of the retail firm, in a manner which
balances the expectations of the target customers and the
strategy of the firm.

Merhcandise Management is the process by which a retailer

attempts to offer the right quantity of the right product at the
right place and time, while meeting the retail firm’s financial
objectives.

Merchandise management drives a retailer’s business strategy

and has immense cost and profit implications.
 RETAILING
MERCHANDISING

The merchandise mix management involves decisions on

important factors such as –
• The variety of merchandise to be offered
• Assortment
• Support

Merchandise variety refers to the number of different product

lines to be stocked in the store.

Merchandise assortment refers to the number of different

product items within a particular product line.

Merchandise support deals with the planning and control of

the number of units the retailer needs to have on hand to meet
the expected sales for a particular product.
 RETAILING

MERCHANDISE PLANNING

Merchandise planning is the financial tool for planning and

controlling the retailer’s investment in merchandise inventory.

Retailers use the merchandise plan to determine and control

sales volumes, inventory levels, procurement and profit
margins.

The four important components of the merchandise budget

plan are as follows :
1. Sales Projection
2. Inventory Plan
3. Estimated Reductions
4. Estimated Purchase
 RETAILING
CATEGORY MANAGEMENT

The phrase "category management" was coined by Brian F.

Harris.

A Category is an assortment of items that the customer views

as products reasonably substituting each other.

Category Management refers to the practice of managing a

retail business with the objective of maximising the sales and
profits of a category rather than the performance of individual
models or brands.

Category management involves managing product categories

as business units and customizing them

It is a systematic, disciplined approach to managing a product

category as a strategic business unit.
 RETAILING
CATEGORY MANAGEMENT

Category management enables the retailers to devise

merchandising strategy and to maximise the total return on the
resources assigned.

In recent times, emergence of multiple brands in every product

category and availability of a variety of substitute products has
led to the emergence of category management as a retail
business practice.

ADVANTAGES OF CATEGORY MANAGEMENT :

1. Increased Sales

2. Reduced inventory investment

3. Improved warehouse efficiency

 RETAILING
CATEGORY MANAGEMENT

The category management 8-step process :

Define the role of Assess the

Define the
the category current
category
(Within the retailer) performance

Set objectives
Review and targets for
the category

Devise specific Devise an overall

Implementation
tactics strategy
 RETAILING
PRIVATE LABEL BRANDS :

Private Labels are also known as ‘Store Brands’.

These are typically products which are manufactured by a

company under exclusive contract with another, which sells
and markets these brands through its own retail network.

Private Label brands are made available to consumers

through certain exclusive retail outlets, carrying the name and
brand owned by the retailer, and are not widely available
through conventional retailers.

Store brands/ Private labels have become a way for retailers

to differentiate themselves from their competitors and to
create loyalty to their stores in a tightly concentrated
marketplace.
 RETAILING
PRIVATE LABEL BRANDS :

Retailers have extended the concept of private label to identify

a brand with a store, a concept known as the store brand. This
can be a far more profitable business than selling nationally
advertised brands.

Use of private labels is most visible in food products and

certain FMCG categories such as soaps and detergents.
However it has also seen increasing application in clothing,
apparels and cosmetics.

Private Label may be an extremely profitable business for

companies or corporations already commanding an important
share of the market, with certain products that enjoy a high
customer recognition.

In the US, Private labels represent 20 percent of grocery store

and 18 percent of supercenter sales.
 RETAILING

ADVANTAGES OF PRIVATE LABEL BRANDS :

1. Control over quality

2. Control over pricing

3. Own ideas on positioning and marketing

4. Create unique identity, thereby leading to customer loyalty

5. Flexibility in pricing and selling strategies

6. Differentiation for retailer

 CHANNELS OF DISTRIBUTION

Integrated Marketing Channels :

Channel integration involves streamlining the distribution

process, thereby enhancing the distribution and information
efficiency by way of establishing channel partnerships and
strategic alliances with channel members at all levels of the
distribution chain.

Channel integration offers great benefits not only to the

manufacturers but also to other channel members.

Successful channel integration leads to efficiency in

delivery, effective inventory control, reduction in transaction
costs, better customer support and service.
 CHANNELS OF DISTRIBUTION
Channel Systems

Vertical Marketing System :

Under this system, every channel member (Producer, distributor,
retailer etc.) act together as one team to provide service to the
end user.

This coming together improves operating efficiency and

marketing effectiveness.

Vertical Marketing Systems are also of three types :

• Corporate VMS
• Administered VMS
• Contractual VMS
 CHANNELS OF DISTRIBUTION
Corporate VMS : One company owns and operates the other
channel members at different levels. It has complete control
over the entire channel system.

This system is preferred when the company is confident of

protecting its key processes or trade secrets, maintaining
accuracy and high quality in the channel activities.

Administered VMS : Here the level of control on the channel

members is greater than that in the conventional system, but
lesser than the corporate system. This system is most
prevalent in the retail sector.

Contractual VMS : Here, an organisation and the channel

members are bound contractually. The distribution
operations are integrated by contracts.
 CHANNELS OF DISTRIBUTION
Channel Systems

Horizontal Marketing System :

This is a mutually beneficial arrangement between two unrelated
companies. Here the two companies benefit from each other’s
strengths. The products are marketed together, allowing the two
companies to combine their marketing resources and
accomplish much more than either one might accomplish alone.

Corporations in a horizontal marketing system also have the

option of combining their capital and production capabilities,
in addition to their marketing and distribution resources, to
produce synergistic benefits for all members.

Promoting a product or service to potential customers having

characteristics that are common and are spread among a wide
range of industries.
 CHANNELS OF DISTRIBUTION
Channel Systems

Multi-Channel Marketing System :

Under this system, a producer uses more that one channel of
distribution to reach customers.

commonly, producers who use multichannel marketing systems

operate their own retail stores, as well as sell through other
wholesalers and retailers.

Multi-channel marketing systems are utilised mostly by the

FMCG sector. One can purchase such articles thru local shops,
doorstep salesman or through online shopping.
 CHANNELS OF DISTRIBUTION
Channel Systems

Multi-Channel Marketing System – Major benefits :

• Better coverage of the market geographically as well as
demographically.
• Companies can build customized channels to serve
important customers.

Multi-Channel System is used where :

 The same product is sold to different market segments.
 Unrelated products are sold in the same market.

 Buyer-size varies
 Geographic concentration of target customers varies (Rural-Urban)
 Unique geographical conditions in different markets
 CHANNELS OF DISTRIBUTION
Patterns of Distribution
Intensive Distribution :
This strategy is used to ensure that the product is made
available in as many outlets as possible so that the consumers
should be able to obtain the product wherever he goes.

Selective Distribution :
In this case the company wishes to make its product available
only at specific outlets, carefully selected for the purpose.
Such strategy is adopted for products which are positioned as
‘lifestyle’ products and therefore ‘special’.

Exclusive Distribution :
This strategy is used for products which are exclusive and
identified as ‘status symbols’. Only one outlet in a city may
keep the product. Besides, exclusive company showrooms
may also be counted in this category.
 SUPPLY CHAIN MANAGEMENT

Supply Chain Management (SCM) is the management of a

network of interconnected businesses involved in the ultimate
provision of product and service packages required by end
customers (Harland, 1996)

SCM is the integration of key business processes across the

supply chain for the purpose of creating value for customers
and stakeholders (Lambert, 2008).

A Supply Chain is a set of organizations directly linked by one or

more of the upstream and downstream flows of products,
services, finances, and information from a source to a customer.
Managing a supply chain is 'supply chain management'
(Mentzer et al., 2001).

A Supply Chain consists of all parties involved – directly or

indirectly – in fulfilling a customer request.
 SUPPLY CHAIN MANAGEMENT

A Supply Chain is dynamic and involves the constant flow of

information, product and funds between different stages.

The product flow includes the movement of goods

from a supplier to a customer, as well as any
customer returns or service needs.

The information flow involves transmitting orders

and updating the status of delivery.

The financial flow consists of credit terms,

payment schedules, and consignment and title
ownership arrangements.
 SUPPLY CHAIN MANAGEMENT

The objective of a supply chain is ‘Customer Satisfaction’.

The primary objective of supply chain management is to fulfill

customer demands through the most efficient use of resources,
including distribution capacity, inventory and labor.

The higher the supply chain profitability, the more successful

the supply chain.

Supply chain success should be measured in terms of supply

chain profitability and not in terms of the profits at an
individual stage.

A supply chain seeks to match demand with supply and do so

with the minimal inventory.
 SUPPLY CHAIN MANAGEMENT

Five Inter-dependent Processes :

1. Customer response (CR)

2. Inventory Planning and Management (IP&M)

3. Supply

4. Transportation & Distribution (T&D)

5. Warehousing
SUPPLY CHAIN MANAGEMENT

LOGISTICS

Supply
 RETAILING
Retail Communication :

Location, merchandise and price are crucial elements in

attracting customers to a retail outlet and in generating
business. However, the retailer also has to undertake
promotional activities in order to publicise the business.

The retailer has to design an effective communication

programme to provide information to the customers and
to persuade them to visit and shop at the store.

Retail promotion is a philosophy that revolves around

customer expectations and satisfaction. Its function is to
invite, persuade and stimulate interest in the retailer.
 RETAILING
Retail Promotional Objectives :

Retailers develop a promotional mix in order to

accomplish several objectives, such as:

1. Positioning of the retailer

2. Immediate customer visibility

3. Increasing the customer traffic

4. Increasing sales

5. Announcing special events

6. New Products
 RETAILING

Retail Promotional Objectives :

7. Information about the store location

8. Information about the merchandise offered

9. Develop repeat purchases

10. Develop Brand loyalty

 RETAILING
Planning retail communication :

A promotion plan put together skilfully, plays an important

role in the retailer’s effectiveness in communicating with
the customers.

The planning process involves the following steps :

1. Setting the communication objectives

2. Determining the promotional budget

3. Assigning the budget to various activities

4. Implementation and evaluation

 RETAILING
Deciding the Promotional Budget :

Promotional budgets can be decided using any of the

following methods :

• Marginal Analysis

• Objective and task method

• Thumb rule method

 Affordability
 Percentage of sales
 Competitive parity
 CHANNELS OF DISTRIBUTION
CHANNEL CONFLICT
Channel conflict is a situation in which channel partners have
to compete against one another or the vendor's internal sales
department.

Channel conflict may also occur among various segments of

corporate departments, such as the sales channel. For example,
the direct contact component of the sales department may have
to compete with other sales channels, such as telephone, online
and mail campaigns.

Multi-channel conflict - occurs when two or more different

marketing channels destructively compete against each other
when selling to the same market;
Horizontal channel conflict - occurs when two or more partners
of the same marketing channel destructively compete against
each other.
 CHANNELS OF DISTRIBUTION
Causes of Channel Conflict
1. Badly designed channel structure and lack of appropriate
planning while inclusion of new or emerging channels.

2. Resource scarcity - too many channels (or channel partners)

compete for too few customers.
3. Goal incompatibility - the channel principal and channel
partners have incompatible or misaligned goals
4. Poorly defined roles and responsibilities - the channel
principal and channel partners' roles and responsibilities are
unclear or not matched to their capabilities.
5. Poor channel management - unstructured channel
management processes, such as partner recruitment, pricing
structures, incentive systems and promotional strategies can
all lead to channel conflict.
 CHANNELS OF DISTRIBUTION
Managing/ Mitigating Channel Conflict
Strategies to manage channel conflict include:
• Designing the channel structure to reflect the products/services
being sold, customers' needs, locations, customers' buying
behaviours and the profitability of each transaction.

• Establishing mutually agreeable and aligned business goals

with the channel partners.

• Effective communications - Take every opportunity to

communicate with channel partners, eg include channel
partners in business planning events

• Segment customers and align channels according to their

ability to meet specific customer segment needs.

• Develop specific channel products or offers which are not

available to all channels.
 CHANNELS OF DISTRIBUTION
Managing/ Mitigating Channel Conflict
• Encourage specialisation among channel partners, and create
customer segment specific campaigns and align these with
specific channels

• Clearly define channel roles and responsibilities, and use

pricing solutions, rebates and incentives to encourage
desired performance.

• Check behavioural performance through role audits, and

regularly monitor channels for early warning signs of
damaging behaviour.

• Ensure that partner agreements are clear and exercise your

rights when necessary.
 DISTRIBUTION & RETAIL
Bar Coding :

Bar Coding is a series of parallel vertical lines (bars and space),

that can be read by bar code scanners. It is used worldwide as
part of product packages, as price tags, carton labels, on invoices
even in credit card bills and when it is read by scanners, a wealth
of data is made available at the users and when use with GS1.UCC
(Global India one Numbering Uniform Code Council Inc. USA)
numbering system.

A barcode system comprises of a network of hardware and

software, consisting primarily of mobile computers, printers,
handheld scanners, infrastructure, and supporting software.

Barcoding facilitates unique product identification through use of

international symbologies / numbering system, promotes brand
image and enables timely and accurate capture of product
information.
 DISTRIBUTION & RETAIL
Bar Coding :

A combination of barcode technology with computer and

application software significantly improves performance,
productivity and profitability.

The first commercially successful barcode reading system was

patented in November 1969 by John F. Keidel for the General
Atronics Corp.

Benefits of Barcoding :
• Establishes unique identity of every product
• Data input accuracy
• Avoids manual inputs
• Cost efficient
• Real time data
• Accurate W.I.P
• Rapid data compilation and calculation
• Effective management of resources & inventories
 DISTRIBUTION & RETAIL
Radio Frequency Identification (RFID):

RFID is a set of wireless non-contact system that uses radio

frequency electromagnetic fields to transfer data from a tag
attached to an object.

The RFID device serves the same purpose as a bar code or a

magnetic strip on the back of a credit card or ATM card; it provides
a unique identifier for that object.

A significant advantage of RFID devices over the others mentioned

above is that the RFID device does not need to be positioned
precisely relative to the scanner. RFID devices will work within a
few feet (up to 20 feet for high-frequency devices) of the scanner.

RFID tags are used in many industries. An RFID tag attached to an

automobile during production can be used to track its progress
through the assembly line. Pharmaceuticals can be tracked through
warehouses. Livestock and pets may have tags injected, allowing
positive identification of the animal.