Distribution channels

A distribution channel (also called a marketing channel) is the path or route decided by the company
to deliver its good or service to the customers. The route can be as short as a direct interaction
between the company and the customer or can include several interconnected intermediaries like
wholesalers, distributors, retailers, etc.

Channel of distribution refers to those people, institutions or merchants who help in the distribution
of goods and services. Philips Kotler defines channel of distribution as “a set of independent
organisations involved in the process of making a product or service available for use or
consumption”.

Channels of distribution bring economy of effort. They help to cover a vast geographical area and
also bring efficiency in distribution including transportation and warehousing. Retailers, Wholesalers
are the common channels of distribution. Channels of distribution provide convenience to customer,
who can get various items at one store. If there were no channels of distribution, customer would
have faced a lot of difficulties. Hence, a distribution channel can also be referred to as a set of
interdependent intermediaries that help make a product available to the end customer.

Functions of Distribution Channels

 Distribution channels provide time, place, and ownership utility. They make the product
available when, where, and in which quantities the customer wants. But other than
these transactional functions, marketing channels are also responsible to carry out the
following functions:

 Logistics and Physical Distribution: Marketing channels are responsible for assembly,
storage, sorting, and transportation of goods from manufacturers to customers.
  Facilitation: Channels of distribution even provide pre-sale and post-purchase services like
financing, maintenance, information dissemination and channel coordination.

 Creating Efficiencies: This is done in two ways: bulk breaking and creating assortments.
Wholesalers and retailers purchase large quantities of goods from manufacturers but break
the bulk by selling few at a time to many other channels or customers. They also offer
different types of products at a single place which is a huge benefit to customers as they
don’t have to visit different retailers for different products.

 Sharing Risks: Since most of the channels buy the products beforehand, they also share the
risk with the manufacturers and do everything possible to sell it.

 Marketing: Distribution channels are also called marketing channels because they are among
the core touch points where many marketing strategies are executed. They are in direct
contact with the end customers and help the manufacturers in propagating the brand
message and product benefits and other benefits to the customers.

Types of Distribution Channels

Channels of distribution can be divided into the direct channel and the indirect channels. Indirect
channels can further be divided into one-level, two-level, and three-level channels based on the
number of intermediaries between manufacturers and customers.

Direct Channel or Zero-level Channel (Manufacturer to Customer)

Direct selling is one of the oldest forms of selling products. It doesn’t involve the inclusion of an
intermediary and the manufacturer gets in direct contact with the customer at the point of sale.
Some examples of direct channels are peddling, brand retail stores, taking orders on the company’s
website, etc. Direct channels are usually used by manufacturers selling perishable goods, expensive
goods, and whose target audience is geographically concentrated. For example, bakers, jewellers,
etc.
Methods of Direct Channel are:

(a) Door to door selling

(b) Internet selling

(c) Mail order selling

(d) Company owned retail outlets

(e) Telemarketing

Indirect Channels (Selling Through Intermediaries)

When a manufacturer involves a middleman/intermediary to sell its product to the end customer, it
is said to be using an indirect channel. Indirect channels can be classified into three types:

 One-level Channel (Manufacturer to Retailer to Customer): Retailers buy the product from
the manufacturer and then sell it to the customers. One level channel of distribution works
best for manufacturers dealing in shopping goods like clothes, shoes, furniture, toys, etc.

 Two-Level Channel (Manufacturer to Wholesaler to Retailer to Customer): Wholesalers buy

the bulk from the manufacturers, breaks it down into small packages and sells them to
retailers who eventually sell it to the end customers. Goods which are durable, standardised
and somewhat inexpensive and whose target audience isn’t limited to a confined area use
two-level channel of distribution.

 Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to Customer): Three

level channel of distribution involves an agent besides the wholesaler and retailer who
assists in selling goods. These agents come handy when goods need to move quickly into the
market soon after the order is placed. They are given the duty to handle the product
distribution of a specified area or district in return of a certain percentage commission. The
agents can be categorised into super stockists and carrying and forwarding agents. Both
these agents keep the stock on behalf of the company. Super stockists buy the stock from
manufacturers and sell them to wholesalers and retailers of their area. Whereas, carrying
and forwarding agents work on a commission basis and provide their warehouses and
shipment expertise for order processing and last mile deliveries. Manufacturers opt for
three-level marketing channel when the user base is spread all over the country and the
demand of the product is very high.

Wholesalers and Retailer

Wholesalers and retailers are important middlemen who generally facilitate flow of goods from the
producers to the consumers. Let us study in details about them.

i. Wholesalers

Wholesalers are one of the important middlemen in the channel of distribution who deals with the
goods in bulk quantity. They buy goods in bulk from the producers and sell them in relatively smaller
quantities to the retailers. In some cases they also sell goods directly to the consumers if the
quantity to be purchased is more. They usually deal with a limited variety of items and also in a
specific line of product, like iron and steel, textiles, paper, electrical appliances, etc. Let us know
about the characteristics of wholesaler.

Characteristics of Wholesalers

The followings are the characteristics of wholesaler:

(i) Wholesalers buy goods directly from producers or manufacturers.

(ii) Wholesalers buy goods in large quantities and sells in relatively smaller quantities.

(iii) They sell different varieties of a particular line of product. For example, a wholesaler who
deals with paper is expected to keep all varieties of paper, cardboard, card, etc.

(iv) They may employ a number of agents or workers for distribution of products.

(v) Wholesalers need large amount of capital to be invested in his business.

(vi) They generally provides credit facility to retailers.

(vii) He also provides financial assistance to the producers or manufacturers.

(viii) In a city or town they are normally seen to be located in one particular area of the market.
For example, you can find cloth merchants in one area, book publishers and sellers in one
area; furniture dealers in one area etc.

Functions of Wholesalers

Following are the functions, which a wholesaler usually performs:

(a) Collection of goods: A wholesaler collects goods from manufacturers or producers in large
quantities.

(b) Storage of goods: A wholesaler collects the goods and stores them safely in warehouses, till they
are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage.

(c) Distribution: A wholesaler sells goods to different retailers. In this way, he also performs the
function of distribution.

(d) Financing: The wholesaler provides financial support to producers and manufacturers by sending
money in advance to them. He also sells goods to the retailer on credit. Thus, at both ends the
wholesaler acts as a financier.

(e) Risk taking: The wholesaler buys finished goods from the producer and keeps them in the
warehouses till they are sold. Therefore, he assumes the risks arising out of changes in demand, rise
in price, spoilage or destruction of goods.

ii. Retailers

Retailers are the traders who buy goods from wholesalers or sometimes directly from producers and
sell them to the consumers. They usually operate through a retail shop and sell goods in small
quantities. They keep a variety of items of daily use. We can classify this retailing business into two
categories: a. Small-scale retail trade; and b. Large-scale retail trade.

Small-scale retail trade is one where a limited variety and also limited quantity of goods are sold
within a local area. It requires less capital and provides goods to a limited number of customers. On
the other hand, large-scale retail trade is one where capital investment is more and it deals with
large volume of goods. It caters to the needs of a large number of customers. Super bazars,
Departmental stores and Multiple shops are examples of large scale retail trade organization.

Characteristics of Retailers

The following are the characteristics of retailers:

(i) Retailers have a direct contact with consumers. They know the requirements of the
consumers and keep goods accordingly in their shops.

(ii) Retailers sell goods not for resale, but for ultimate use by consumers. For example, you buy
fruits, clothes, pen, pencil etc. for your use, not for sale.

(iii) Retailers buy and sell goods in small quantities. So customers can fulfil their requirement
without storing much for the future.

(iv) Retailers require less capital to start and run the business as compared to wholesalers.

(v) Retailers generally deal with different varieties of products and they give a wide choice to
the consumers to buy the goods.

Functions of Retailers
All retailers deal with the customers of varying tastes and temperaments. Therefore, they should be
active and efficient in order to satisfy their customers and also to induce them to buy more. Let us
see what the retailers do in distribution of goods.

(i) Buying and Assembling of goods: Retailers buy and assemble varieties of goods from
different wholesalers and manufacturers. They keep goods of those brands and variety
which are liked by the customers and the quantity in which these are in demand.

(ii) Storage of goods: To ensure ready supply of goods to the customer retailers keep their
goods in stores. Goods can be taken out of these store and sold to the customers as and
when required. This saves consumers from botheration of buying goods in bulk and storing
them.

(iii) Credit facility: Although retailers mostly sell goods for cash, they also supply goods on credit
to their regular customers. Credit facility is also provided to those customers who buy goods
in large quantity.

(iv) Personal services: Retailers render personal services to the customers by providing expert
advice regarding quality, features and usefulness of the items. They give suggestions
considering the likes and dislikes of the customers. They also provide free home delivery
service to customers. Thus, they create place utility by making the goods available when
they are demanded.

(v) Risk bearing: The retailer has to bear many risks, such as risk of: (a) fire or theft of goods (b)
deterioration in the quality of goods as long as they are not sold out. (c) Change in fashion
and taste of consumers.

(vi) Display of goods: Retailers display different types of goods in a very systematic and
attractive manner. It helps to attract the attention of the customers and also facilitates quick
delivery of goods.
(vii) Supply of information: Retailers provide all information about the behaviour, tastes,
fashions and demands of the customers to the producers through wholesalers. They become
a very useful source of information for marketing research.

Distinction between Wholesaler and Retailer

The major differences between Wholesaler and Retailer are as under:

Wholesaler Retailer

(i) Buys goods in large quantities. (i) Buys goods in small quantities.

(ii) Buys goods directly from producers. (ii) Generally buys goods from the wholesalers.

(iii) Deals with limited variety of goods. (iii) Deals with wide range of products.

(iv) Requires more capital to start (iv) Requires less capital to start and run

and run the business. the business.

(v) Sell goods for resale purpose. (v) Sell goods for consumption.

(vi) No direct contact with consumers. (vi) Direct contact with consumer.

(vii) No special attention is given to (vii) In order to attract the attention of

decoration of shop. customers retailers give more attention to

decoration of shop.

Dual Distribution

When a manufacturer uses more than one marketing channel simultaneously to reach the end user,
he is said to be using the dual distribution strategy. They may open their own showrooms to sell the
product directly while at the same time use internet marketplaces and other retailers to attract
more customers.

Distribution Channels for Services

Unlike tangible goods, services can’t be stored. But this doesn’t mean that all the services are always
delivered using the direct channels. With the advent of the internet, online marketplaces, the
aggregator business model, and the on-demand business model, even services now use
intermediaries to reach to the final customers.

The Internet as a Distribution Channel

The internet has revolutionised the way manufacturers deliver goods. Other than the traditional
direct and indirect channels, manufacturers now use marketplaces like Amazon (Amazon also
provide warehouse services for manufacturers’ products) and other intermediaries like aggregators
(uber, Instacart) to deliver the goods and services. The internet has also resulted in the removal of
unnecessary middlemen for products like software which are distributed directly over the internet.

Factors Determining Choice of Channels of Distribution:

Following are the main factors which help in determining the channels of distribution:
1. Product Related Factors:

Product cost, technicality, perishability and whether they are standardised or custom-made play a
major role in selecting the channel of distribution for them. Following are the important product
related considerations in deciding on channels of distribution:

(a) Nature of Product:

In case of industrial goods like CT scan machine, short channels like zero level channel or first level
channel should be preferred because they are usually technical, expensive, made to order and
purchased by few buyers. Consumer goods Ike LCD, refrigerator can be distributed through long
channels as they are less expensive, not technical and frequently purchased.

(b) Perishable and Non- Perishable Products:

Perishable products like fruits or vegetables are distributed through short channels while non
perishable products like soaps, oils, sugar, salt etc. require longer channels.

(c) Value of Product:

In case of products having low unit value such as groceries, long channels are preferred while those
with high unit value such as diamond jewellery short channels are used.

(d) Product Complexity:

Short channels are preferred for technically complex goods like industrial or engineering products
like machinery, generators like torches while non complex or simple ones can be distributed through
long channels.

2. Company Characteristics:

Financial strength, management expertise, and the desire for control act as important factors while
deciding the route the product will take before being available to the end user. Following are the
main Company Characteristics offering choice of channel of distribution:

(a) Financial Strength:

The companies having huge funds at their disposal go for direct distribution. Those without such
funds go for indirect channels.

(b) Control:

Short channels are used if management wants greater control on the channel members otherwise a
company can go in for longer channels.

3. Competitive Factors:

The choice of the marketing channel is also affected by the channel selected by the competitors in
the market. Usually, the firms tend to use a similar channel as used by the competitors. But some
firms, to stand out and appeal to the consumer, use a different distribution channel than the
competitors. For example, when all the smartphones were selling in the retail market, some
companies partnered with Amazon and used the scarcity principle to launch their smartphone as
Amazon exclusive.

Policies and channels selected by the competitors also affect the choice of channels. A company has
to decide whether to adopt the same channel as that of its competitor or choose another one. For
example, if Nokia has selected a particular channel say Big Bazaars for sale of their hand sets, other
firms like Samsung and LG have also selected similar channels.

4. Market Factors:

This includes the number of customers, their geographical location, buying habits, tastes and
capacity and frequency of purchase, etc. Following are the important market factors affecting choice
of channel of distribution:

(a) Size of Market:

If the number of customers is small like in case of industrial goods, short channels are preferred
while if the number of customers is high as in case of convenience goods, long channels are used.

(b) Geographical Concentration:

Generally, long channels are used if the consumers are widely spread while if they are concentrated
in a small place, short channels can be used.

(c) Quantity Purchased:

Long channels are used in case the size of order is small while in case of large orders, direct channel
may be used.

5. Environmental Factor:

Economic factors such as economic conditions and legal regulations also play a vital role in selecting
channels of distribution. For example, in a depressed economy, generally shorter channels are
selected for distribution.

Importance of distribution channels:

Manufacturers may always do not always need distribution channels. As discussed, it depends on
several factors. Some of the importance’s are

1. They create exchange efficiency by reducing the number of contacts needed.

2. The distribution channels can perform many functions like transportation, storage, selling,
scale of operation and advertising better than the manufacturers.

3. Large manufacturing companies can reduce their costs and time required to reach their
products with the help of distribution channels.

4. These can offer promotion and financial support.

Role of Intermediaries in a distribution

Intermediaries in a distribution channel provide services that enable manufacturers to reach

different types of customers. A channel might include a number of intermediaries, such as agents,
wholesalers, distributors and retailers. Intermediaries act as middlemen between different members
of the distribution chain, buying from one party and selling to another. They also may hold stock and
carry out logistical and marketing functions on behalf of manufacturers.

Direct and Indirect Channels

Manufacturers sell products and services to their customers through direct and indirect channels.
Where manufacturers sell direct to customers through their own salesforce or website, they do not
require intermediaries. If they wish to sell to customers and prospects their sales teams cannot
reach, they appoint intermediaries to act on their behalf. Intermediaries may have additional
resources and relationships to supplement to a manufacturer’s own sales and marketing resources,
enabling it to reach a wider customer base.

Selling Through Agents

Agents act as independent representatives for manufacturers, selling to other intermediaries such as
wholesalers or retailers. These agents can be individuals or companies. Agents earn commission or
fees for the sales they make or the services they provide. They form a valuable extension to a
manufacturer’s internal sales resources.

Reaching More Customers through Retailers

Independent stores and retail chains sell products to consumers and business customers. By
appointing retailers, manufacturers can reach different areas of the country and target smaller
customers they could not afford to serve directly. Retailers buy products for resale direct from
manufacturers or from wholesalers. They generally stock goods from many different suppliers,
including competitive offerings in the same product category, so manufacturers must use incentives
and discounts to encourage retailers to push their products in order to achieve strong sales.

Simplifying Logistics through Wholesalers

Wholesalers buy products in bulk from a number of different manufacturers, stocking them in
warehouses and selling them to retailers. By holding stock, wholesalers enable manufacturers to
supply customers in different regions without investing in their own warehousing facilities.
Wholesalers also help manufacturers reduce their logistics costs by delivering stock to retailers or
offering stores a collection service.

Cooperative Marketing through Distributors

Distributors carry out similar functions to wholesalers, but generally have closer working
relationships with manufacturers. Distributors may have exclusive arrangements with manufacturers
and do not carry competing products. They may be part of a franchise, only offering the products of
one manufacturer. Like wholesalers, they provide valuable warehousing and logistical functions for
manufacturers. They may also participate in cooperative marketing programs with suppliers,
improving sales for manufacturers.

Channel intermediaries are responsible for ensuring the product is available at the right quantities,
at the right time and place for end user consumption. They also serve as a channel of
communication between the consumer and producer regarding such issues as product quality.
Intermediaries may sometimes provide transport and logistics management for the distribution
process. They also offer storage and handling of the product as it makes its way towards the
consumer. Channel intermediaries may also facilitate payment processing for certain products.
Intermediaries act as a link in the distribution process, but the roles they fill are broader than simply
connecting the different channel partners. Wholesalers, often called “merchant wholesalers,” help
move goods between producers and retailers. The functions that a merchant wholesaler fulfils are as
under:

Purchasing
Wholesalers purchase very large quantities of goods directly from producers or from other
wholesalers. By purchasing large quantities or volumes, wholesalers are able to secure significantly
lower prices.

Imagine a situation in which a farmer grows a very large crop of potatoes. If he sells all of the
potatoes to a single wholesaler, he will negotiate one price and make one sale. Because this is an
efficient process that allows him to focus on farming (rather than searching for additional buyers), he
will likely be willing to negotiate a lower price. Even more important, because the wholesaler has
such strong buying power, the wholesaler is able to force a lower price on every farmer who is
selling potatoes.

The same is true for almost all mass-produced goods. When a producer creates a large quantity of
goods, it is most efficient to sell all of them to one wholesaler, rather than negotiating prices and
making sales with many retailers or an even larger number of consumers. Also, the bigger the
wholesaler is, the more likely it will have significant power to set attractive prices.

Warehousing and Transportation

Once the wholesaler has purchased a mass quantity of goods, it needs to get them to a place where
they can be purchased by consumers. This is a complex and expensive process. McLane Company
operates eighty distribution centres around the country. Its distribution centre in Northfield,
Missouri, is 560,000 square feet big and is outfitted with a state-of-the art inventory tracking system
that allows it to manage the diverse products that move through the centre. It relies on its own vast
trucking fleet to handle the transportation.

Grading and Packaging

Wholesalers buy a very large quantity of goods and then break that quantity down into smaller lots.
The process of breaking large quantities into smaller lots that will be resold is called bulk breaking.
Often this includes physically sorting, grading, and assembling the goods. Returning to our potato
example, the wholesaler would determine which potatoes are of a size and quality to sell individually
and which are to be packaged for sale in five-pound bags.

Risk Bearing

Wholesalers either take title to the goods they purchase, or they own the goods they purchase.
There are two primary consequences of this, both of which are both very important to the
distribution channel. First, it means that the wholesaler finances the purchase of the goods and
carries the cost of the goods in inventory until they are sold. Because this is a tremendous expense,
it drives wholesalers to be accurate and efficient in their purchasing, warehousing, and
transportation processes.

Second, wholesalers also bear the risk for the products until they are delivered. If goods are
damaged in transport and cannot be sold, then the wholesaler is left with the goods and the cost. If
there is a significant change in the value of the products between the time of the purchase from the
producer and the sale to the retailer, the wholesaler will absorb that profit or loss.

Marketing

Often, the wholesaler will fill a role in the promotion of the products that it distributes. This might
include creating displays for the wholesaler’s products and providing the display to retailers to
increase sales. The wholesaler may advertise its products that are carried by many retailers.
Wholesalers also influence which products the retailer offers. For example, McLane Company was a
winner of the 2016 Convenience Store News Category Captains, in recognition for its innovations in
providing the right products to its customers. McLane created unique packaging and products
featuring movie themes, college football themes, and other special occasion branding that were
designed to appeal to impulse buyers. They also shifted the transportation and delivery strategy to
get the right products in front of consumers at the time they were most likely to buy. Its
convenience store customers are seeing sales growth, as is the wholesaler.

Distribution

As distribution channels have evolved, some retailers, such as Walmart and Target, have grown so
large that they have taken over aspects of the wholesale function. Still, it is unlikely that wholesalers
will ever go away. Most retailers rely on wholesalers to fulfil the functions that we have discussed,
and they simply do not have the capability or expertise to manage the full distribution process. Plus,
many of the functions that wholesalers fill are performed most efficiently at scale. Wholesalers are
able to focus on creating efficiencies for their retail channel partners that are very difficult to
replicate on a small scale.

RETAILING
Retailing

A retailer is a person or a business who sells small quantities of goods to the customers for the actual
use. Retailing is the distribution process of retailer getting the goods (either from the manufacturer,
wholesaler, or agents) and selling them to the customers for the actual use. In simple terms, retailing
is the transaction of small quantities of goods between a retailer and the customer where the good
is not bought for the resale purpose. The most common examples of retailing are the traditional
brick-and-mortar stores like Walmart, Best Buy, Aldi, etc. But retailing isn’t limited to them. It also
includes small kiosks at the malls, online marketplaces like Amazon and eBay, and even the
restaurants which sell food and service.

Importance of Retailing

Retailing is important for the creators, customers, as well as the economy. Retail stores are the
places where most of the actual sales to the customers take place. They act as both a marketing tool
for the brands and a support tool for the customers to exchange and communicate important
information. Retail works on a simple revenue model of mark-up. The retailers buy the goods at a
cost price, add up the cost of labour, equipment, and distribution to it along with the desired profit
margin, and sell it at a higher price.

Besides this, retailing is a great asset to the economy. It provides jobs, adds to the GDP, and acts as a
preferred shopping channel during the holiday season.

Retailing Types
Retailing can be divided into five types. Here are the types of retailing that exists today –

 Store retailing: This includes different types of retail stores like department stores, speciality
stores, supermarkets, convenience stores, catalogue showrooms, drug stores, superstores,
discount stores, extreme value stores etc.
  Non-store retailing: Non-store retailing is a type of retailing where the transaction happens
outside conventional shops or stores. It is further divided into two types – direct
selling (where the company uses direct methods like door-to-door selling) and automated
vending (installing automated vending machines which sell offer variety of products without
the need of a human retailer).

 Corporate retailing: It involves retailing through corporate channels like chain stores,
franchises, and merchandising conglomerates. Corporate retailing focuses on retailing goods
of only the parent or partner brand.

 Internet retailing: Internet retailing or online retailing works on a similar concept of selling
small quantities of goods to the final consumer but they serve to a larger market and doesn’t
have a physical retail outlet where the customer can go and touch or try the product.

 Service retailing: Retailers not always sell tangible goods, retail offerings also consists of
services. When a retailer deals with services, the process is called service retailing.
Restaurants, hotels, bars, etc. are examples of service retailing.

Single Brand and Multi Brand Retailing

Single-brand retail refers to a business that sells goods to individual customers (not other
businesses) and such goods are all sold under the same brand. Nike, for example, sets up stores in
India in which the foreign parent of Nike (Nike Inc.) invests. Such stores can only sell Nike products
under the 'single brand' route. Some more e.g. includes Allen-Solly, Peter England, Zara and H&M.

Multi-brand retail are businesses that sell goods to individual customers and such goods can carry
several different brands. Walmart is an example of multi-brand retail, which stocks and sells goods
from various brands. Some more e.g. includes Levi’s, Starbucks, Ikea, TESCO, Shoppers Stop, Big
Bazar and Croma Stores.

Characteristics of Retailing
Retailing can be differentiated from wholesaling or manufacturing because of its certain distinct
characteristics which include –

Direct contact with the customer – Retailing involves direct contact with the end customer and are a
mediator between the wholesaler and the customer or the manufacturer and the customer
depending upon the distribution channels used.

Relationship with the customers – Retailers form a bond with the customers and help them decide
which products and services they should choose for themselves.

Stock small quantities of goods – Retailers usually stock small quantities of goods compared to
manufacturers and wholesalers.

Stock goods of different brands – Retailers usually stock different goods of different brands
according to the demand in the market.

Customers’ contact with the company – Retailers act as the representatives of the company to the
end customers who give their feedback and suggestions to them.

Have a limited shelf space – Retail stores usually have very limited shelf space and only stock goods
which have good demand.
Sells the goods at maximum prices – Since retailing involves selling the products directly to the
customers, it also witnesses the maximum price of the product.

Major Problems of the Retail Industry

Employee Turnover

Lack of worker continuity, or employee turnover, is one of the major problems faced by the retail
industry. Employees coming in and out of your business as if it were a revolving door only creates
problems for human resource professionals who must constantly find and train new staff, which can
eat up valuable time and resources.

Auditing

Auditing is another problem that the retail industry faces on a regular basis. Retail businesses are
regularly engaged in competition with one another, and this competition can create price wars,
forcing a need to keep tight control over inventory and other important data. Today, the retail
industry is often faced with inefficient and poor auditing plans that make competing with other
companies difficult. The existing auditing systems may be outdated and provide inadequate audits
needed to stay competitive.

Economic Challenges

Another area of challenge for the retail industry is the economic uncertainty it faces moving forward.
The retail industry as a whole is largely dependent upon the economic well-being of the nation. As
the nation prospers and people have more money to spend, the retail industry generally flourishes.
However, in more difficult economic times, the retail industry is often faced with potential shrinkage.
The future uncertainty of global economic markets makes economic planning difficult in the retail
world.

Technology

Keeping up with the pace of modern technology is another problem the retail industry faces. For
instance, retail point of sale technology often uses computer systems that are several years behind
the computer industry as a whole. Given the rate of turnover and the constantly changing economic
environment, constantly upgrading and keeping their equipment and networks running on the
newest technologies can be difficult for retail leaders.

CHALLENGES FACED BY RETAIL OUTLETS

1. Lack of Technology Adoption
2. Lack of Infrastructure and Logistics
3. Scarcity of Skilled Workforce
4. Frauds in Retail
5. Inefficient Supply Chain Management
6. Price War
7. Complexity in Tax Structure
8. Escalating land and rental prices
9. Online selling companies
10. High Cost of Operation
Internet Marketing
Internet marketing refers to the strategies used to market products and services online and through
other digital means. These can include a variety of online platforms, tools, and content delivery
systems, such as:

 Website content and design

 Email marketing
 Social media
 Blogging
 Video/podcasting
 Online ads
 Sponsorships and paid promotions

While internet marketing's apparent purpose is to sell goods and services, or advertising over the
internet, it's not the only reason a business will do it. A company may be marketing online to
communicate a message about itself (building its brand) or to conduct research. Online marketing
can also be an effective way to identify a target market, discover a marketing segment's wants and
needs, build long-term relationships with customers, or establish authority and expertise within an
industry.

Alternate names: E-marketing, web marketing, digital marketing

Importance of Internet Marketing

Internet marketing is important because:

 It drives a better return on investment (ROI): Internet marketing strategies are more cost-
effective than traditional marketing strategies. These strategies have a better ROI because
you target more interested leads, making them more likely to convert.

 It allows you to reach more interested audiences: Online marketing enables you to reach
audiences interested in your products or services. Using Internet marketing, you can reach
these audiences interested in your business, whether they’re local or international.

 It allows you to interact with audiences regardless of the time: With automation and other
techniques available with Internet marketing, you can stay in contact with your audience
24/7, so you can be there right when they’re ready to convert, no matter the time, no
matter the time zone.

 It can be tailored to any industry and any size business: No matter what industry or size
your business is, Internet marketing can adjust perfectly to provide the results you want
because your audience is guaranteed to be online.

 It provides easy and convenient ways for audiences to convert: The Internet makes it easy
for your audience to convert. All it takes is the push of a button to buy, sign-up, download,
or contact.

4 steps to developing an Internet marketing strategy

Internet marketing allows you to communicate your brand’s message to your audience, so when
building your Internet marketing strategy, it’s essential to keep your audience and brand in mind.

Use these four steps to help you build your Internet marketing strategy:
1. Identify your Internet marketing goals

The best Internet marketing plan is built around and continuously works towards a set goal. Without
something to work towards, your Internet marketing strategies will fail to produce the results you
want.

When building an Internet marketing strategy, identify what you want to achieve with your online
marketing. Possible goals you could choose from are:

 Driving traffic to your site

 Boosting engagement

 Earning calls

 Encouraging downloads

 Gaining subscribers

 Netting sales

 Growing followers on social media

 And more

2. Define your audience

To create a proper Internet marketing strategy, you need to identify your audience first. You want to
identify who is interested in your products or services.

Take a look at your typical customer. What attributes define them?

You can document information like:

 Demographics

 Socioeconomic status

 Interests

 Hobbies

 Occupation

 Buying habits

 And more

Without researching your audience, you run the risk of improperly targeting your audience. You’ll
drive less than satisfactory results with your campaigns if you don’t target the right people.

3. Identify the strategies you want to use in your Internet marketing campaign

After you have identified your Internet marketing goal as well as your audience, the next step is to
determine which Internet marketing strategies would work best for your business.

You’ll want to use strategies that enable you to reach your target audience. Where is your audience
likely to engage with your business? You’ll want to consider what keywords they’re searching or
what social platforms they use.
It’s also important to consider your budget, too. You want to ensure you’re investing in strategies
that fit within your budget, so you don’t overspend.

4. Monitor your strategies

For Internet marketing strategies to drive the best results, you need to analyze the data from your
campaigns.

Online data tracking tools such as Google Analytics can help you keep track of data from your
Internet marketing strategy in real-time. This platform is great for SEO and PPC strategies. You can
track:

 How many people visit your site

 How long they stay on your pages

 How many people click your ad

 How many conversions you receive

 And more

The metrics these tools pull in will help you determine how well your Internet marketing strategy
performs.

This data will help you optimize your Internet marketing strategy. By monitoring your campaigns’
performance, you can see what’s working and not working for your business. As a result, you can
optimize your tactics to drive better results for your business.

Service Marketing
Service Marketing is marketing based on relationship and value. It may be used to market a service
or a product. With the increasing prominence of services in the global economy, service marketing
has become a subject that needs to be studied separately. Marketing services is different from
marketing goods because of the unique characteristics of services namely, intangibility,
heterogeneity, perishability and inseparability.

In most countries, services add more economic value than agriculture, raw materials and manu-
facturing combined. In developed economies, employment is dominated by service jobs and most
new job growth comes from services.

Jobs range from high-paid professionals and technicians to minimum-wage positions. Service
organizations can be of any size from huge global corporations to local small businesses. Most
activities by the government agencies and non-profit organizations involves services.

The American Marketing Association, defines services as activities, benefits, or satisfactions that are
offered for sale or provided with sale of goods to the customer, that is, pre-sale and after-sales
services. Berry states, ‘while a product is an object, devise or physical thing, a service is a deed,
performance, or an effort’.

Features of Services:
1. Intangibility: A physical product is visible and concrete. Services are intangible. The service cannot
be touched or viewed, so it is difficult for clients to tell in advance what they will be get ting. For
example, banks promote the sale of credit cards by emphasizing the conveniences and advantages
derived from possessing a credit card.

2. Inseparability: Personal services cannot be separated from the individual. Services are created
and consumed simultaneously. The service is being produced at the same time that the client is
receiving it; for example, during an online search or a legal consultation. Dentist, musicians, dancers,
etc. create and offer services at the same time.

3. Heterogeneity (or variability): Services involve people, and people are all different. There is a
strong possibility that the same enquiry would be answered slightly differently by different
people (or even by the same person at different times). It is important to minimize the differences in
performance (through training, standard setting and quality assurance). The quality of services
offered by firms can never be standardized.

4. Perishability: Services have a high degree of perishability. Unused capacity cannot be stored for
future use. If services are not used today, it is lost forever. For example, spare seats in an aeroplane
cannot be transferred to the next flight. Similarly, empty rooms in five-star hotels and credits not
utilized are examples of services leading to economic losses. As services are activities performed for
simultaneous consumption, they perish unless consumed.

5. Changing demand: The demand for services has wide fluctuations and may be seasonal. Demand
for tourism is seasonal, other services such as demand for public transport, cricket field and golf
courses have fluctuations in demand.

6. Pricing of services: Quality of services cannot be standardized. The pricing of services are usually
determined on the basis of demand and competition. For example, room rents in tourist spots
fluctuate as per demand and season and many of the service providers give off-season discounts.

7. Direct channel: Usually, services are directly provided to the customer. The customer goes directly
to the service provider to get services such as bank, hotel, doctor, and so on. A wider market is
reached through franchising such as McDonald’s and Monginis.

Problems in Marketing Services:

1. A service cannot be demonstrated.

2. Sale, production and consumption of services takes place simultaneously.

3. A service cannot be stored. It cannot be produced in anticipation of demand.

4. Services cannot be protected through patents.

5. Services cannot be separated from the service provider.

6. Services are not standardized and are inconsistent.

7. Service providers appointing franchisees may face problems of quality of services.

8. The customer perception of service quality is more directly linked to the morale, motivation and
skill of the frontline staff of any service organization.

Advantages of Service Marketing:

Service marketing has grown exponentially over the past decade because of the variety of benefits it
offers companies. Some of the benefits of service marketing include:
Continuous Sales: When service marketing focuses on meeting the needs of customers, it causes
repeat sales. Happy customers come back for another purchase. For example, a customer who has a
saving account with Citibank and is happy with services such as online banking. Phone banking etc
will go to Citibank to apply for the loan. Thus, Citibank’s service marketing efforts translate into
higher sales.
Reviews and Verbal: A happy customer is likely to spread the word about his or her experience to
many. Today, in the era of the Internet and rapid communications, reviews play an important role in
deciding whether or not to buy a product. Negative reviews about product service are rapidly
spreading. With the appropriate in-service marketing strategy, companies can ensure that customers
are satisfied with their positive experiences.
Contributing to Economic Growth: Service marketing is particularly beneficial to developing
countries. It provides an opportunity to showcase their skills and commitment to quality when it
comes to services. By applying proper service marketing strategies, companies can gain customers
’trust. Nationally, this leads to an increase in employment levels, an increase in foreign exchange
reserves, an increase in exports and GDP.

Challenges of Service Marketing:

Growing and profiting with product and service businesses can be challenging tasks. But the
challenges here are different from one to the other. Listed below are some of the most common and
difficult challenges, such as developing and managing consulting, professional or technical service
businesses that are not relevant to product businesses. And price-fixing.
Services are often produced and consumed simultaneously: Services are often produced and
consumed simultaneously this creates special challenges in service quality management that even
product companies do not consider it. The products will be tested before they go out the door. If a
product has quality problems in the product, the company can fix them and none of the customers
are smart. Service production occurs by creating the most diverse and challenging volatility the
customer currently has.
Trust is essential: Some level of trust must be established in the service organization and its people
before customers can engage in services. This is very important. Sometimes service offerings and
their value are more important than the proposal.
Clients cannot see or touch services before buying them: this makes services difficult to
conceptualize and evaluate from the client’s perspective, creating greater uncertainty and risk
perception. From the company’s perspective, the intangibility of the service can make services
difficult to promote the quality of control and set a price.
Brand marketing extends beyond: Brand in service businesses is about who you are as you say it.
Like external communications, internal brand management and communications are equally
important to marketing success.
Creating active leadership generation difficulty: Many service companies have tried and failed to
use lead generation strategies that work wonders for product companies. If it is implemented
correctly, the traditional production techniques such as direct marketing and sales can work for
services, but the spatial dynamics of how customers buy services should be carefully tied into your
strategy.
Service providers often make sales: No product companies have dedicated sales force. In terms of
services, sales are often split between sales marketing, professional and administrative staff.
Marketing and sales lose momentum: Most product companies are dedicated to marketers and
sellers. They continuously market and sell regardless of the amount of revenue they generate.
Multiple services manage and deliver marketers and sellers in companies. This often leads to a
widespread switching between service revenue roller coaster revenues and job overflows and
earnings and job drought.
Interest is still elusive: Your employees bring more passion, spirit, buzz, and desire to the company
every day, and you get more revenue and success. The relationship between employee interest and
financial success is direct and measurable.

Non-Profit Marketing
Non-profit marketing is the use of marketing tactics by a non-profit organization to promote the
message and the organization, as well as raise donations. Find out how non-profit marketing works
and consider these tips for developing your non-profit organization's marketing strategy.

Non-profit marketing is the use of marketing tactics by a non-profit organization. Marketing goals
may include promoting the organization and its message, raising funds, encouraging membership,
engaging volunteers, and driving political or social change. Marketing is as important for non-profit
organizations as it is for businesses and uses many of the same marketing strategies to connect with
donors and volunteers. Non-profit marketing can be challenging, as the organization must convince
its audience to give money without getting anything concrete in return.

Working of Non-profit Marketing

Non-profit marketing works by serving multiple functions in keeping charitable organizations
running.

1. Creating awareness. Like any business brand, a non-profit must make its audience aware of
the organization and the causes it supports.

2. Promoting a cause and services. Donors, volunteers, and groups the non-profit works with
need to know about the work the organization is doing.

3. Fundraising. Non-profits rely on donations in order to pursue their charitable initiatives.

Fundraising is an essential function of non-profit marketing, and it can take the form of
encouraging general donations or promoting specific fundraising events or campaigns.

4. Encouraging memberships and recurring donations. Non-profit marketing should be used to

encourage long-term membership. This increases the relationships that the non-profit can
draw on for fundraising initiatives and helps provide recurring donations.

5. Engaging volunteers. Most non-profits need people to take action or participate in

initiatives, as well as donate.

6. Driving political and social change. Skillful non-profit marketing can put pressure on opinion
leaders, politicians, and ordinary people to create social and political changes addressing the
non-profit's causes.

Examples of Non-profit Marketing

No matter what specific goals are pursued using non-profit marketing, most campaigns fall into one
of four categories.
 1. Traditional fundraising asks consumers to make a monetary donation to a cause or
charitable campaign. Some businesses partner with non-profits to create long-
term fundraising around causes that their employees care about.

2. Consumer charity is a partnership with a for-profit business that encourages consumers to

use their purchasing power to assist charitable organizations. This usually takes the form of
cause marketing, in which consumers buy products because part of the purchase price will
be donated to a specific cause.

3. Message-focused campaigns attempt to build awareness, encourage political change, or

affect consumer behavior. They are generally paired with or followed by specific fundraising
or volunteer sign-up campaigns.

4. Event marketing is focused around a single charitable drive or promotional event, usually
one at which donations will be collected or the cost of admission will go directly to the
nonprofit. These marketing initiatives often include a special guest or celebrity partner
whose public image and connections are used to drive attendance.

Platforms for Non-profit Marketing

Non-profits can take advantage of many of the same platforms for marketing that for-profit
businesses use. The main difference is often that non-profits have a smaller budget and must be
strategic about how they contact donors and spread the word about their work.

There are many free and inexpensive marketing platforms out there, and non-profits should use a
variety of them to create an effective marketing mix.

1. Social media. Platforms like Facebook, Twitter, and Instagram can be used to share
important information, keep in touch with your audience, and comment on current events.

2. Online ads. Take advantage of programs like Google's ad grants to run targeted campaigns at
no expense.

3. Search engine optimization. Use SEO techniques to drive visitors to your website, where you
can encourage them to volunteer, donate, or sign up to receive news via your email list.

4. Partnerships. Corporate and celebrity partnerships allow your non-profit to take advantage
of another organization's brand or connections to drive publicity and build public
involvement in specific events or campaigns.

5. Email marketing. Use an email service provider to fundraise, welcome new subscribers,
spread the word about initiatives, encourage involvement, and share success stories with
your members.

6. Events. Organizing high-profile events to raise money or awareness for your cause can
create a surge of donations, along with generating press coverage and increasing public
interest.

7. Public relations. Like for-profit businesses, non-profits can use public relations campaigns to
spread the word about their work, as well as establish their authority and trustworthiness.
 8. Infographics. Use design tools like Canva to create informative graphics that can easily share
important information with the public through websites, social media, and blog posts.

9. Webinars. Use free webinars to educate volunteers, roll out fundraising campaigns, and
answer questions about your work and cause.

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