Distributing Products

Transcription

1 Chapter 15: Distributing Products Distribution Functions Distribution Channels Distribution Players Non-store Retailing Channel Conflict Logistics Customs clearance Warehousing Returns (a.k.a. Reverse Logistics) Crossover Functions (Distribution/Promotion) Merchandising Personal Selling Advertising Sales Promotion 1

2 The planning and execution of the movement of people and/or materials. Classic examples: Military operations Red Cross field operations Traveling rock bands Traveling Broadway shows Inbound logistics: is concerned with bringing raw materials, packaging, and parts from suppliers to your company efficiently and effectively. Materials handling: The movement of raw materials, parts, and goods within the company efficiently and effectively. Walmart is world-class good at these! Outbound logistics is concerned with managing the flow of finished products from your company to your customers

3 Truck (Motor Freight) Train (Rail Freight) Ship (Ocean Freight) Air Pipeline U.S. figures for 2007 Mode Billions of ton-miles % Value per ton Truck 1, $934 Train 1, $201 Ship $253 Air $59,464 Total 2, $909 Examples: Truck + Rail + Truck Truck + Ship + Truck Truck + Air + Truck 7 8 Zero tier, a.k.a. Direct selling Manufacturer Consumers Manufacturer Industrial Users Single-tier Manufacturer Wholesalers Industrial users Manufacturer Retailers Consumers Two-tier Manufacturer Distributors VARs Industrial Users Manufacturer Wholesalers Retailers Consumers Three-tier Farmer Brokers Wholesalers Retailers - Consumers 3

4 Zero tier, a.k.a. Direct selling Manufacturer Consumers Manufacturer Industrial Users Single-tier Manufacturer Wholesalers Industrial users Manufacturer Retailers Consumers Two-tier Manufacturer Distributors VARs Industrial Users Manufacturer Wholesalers Retailers Consumers Three-tier Farmer Brokers Wholesalers Retailers - Consumers Carriers Transportation Intermediaries, also known as Third-Party Logistics (3PL) firms Freight brokerage firms Freight forwarders Other Types of Marketing Intermediaries Retailers Wholesalers Agents and Brokers 4

5 Have historically been: Motor carriers Water carriers Rail carriers, or Air carriers Have traditionally owned transportation assets, such as trucks, ships, railcars, or airplanes; and possibly some warehouses as well, and have made their money by providing transportation for goods for a fee. Have traditionally been divided into 3 groups: Parcel carriers Full Truck Load (FTL) carriers Less than Truck Load (LTL) carriers However, many motor carriers today offer both FTL and LTL services. In addition, many former motor carriers today offer additional logistics services, such as intermodal transportation and/or freight brokerage, and are therefore no longer simple carriers in the traditional sense. Parcel carriers The U.S. Postal Service Federal Express United Parcel Service (UPS) Rail carriers BNSF Railway CSX Transportation Air carriers American Airlines Southwest Airlines Water carriers Maersk Line NYK Evergreen MSC Hapag-Lloyd APL Cosco Motor carriers C.R. England Knight Transp

6 Name Old Dominion Freight Line Schneider National, Inc. J.B. Hunt Transport Services % of Revenue from Traditional Motor Freight Services 90% 10% 62% 28% 39% 61% 16 Charge their customers a fixed price for the haul. Assume legal responsibility for safe transport. Make a profit by charging their customers more for the haul than the carriers that make the haul charge. Some maintain truck fleet or other transportation assets. Most maintain warehouses. C.H. Robinson Has no truck fleet or railcars of its own. Hires carriers to do all the actual transportation work. Has contractual relationships with over 63,000 transportation companies, including motor carriers, railroads, air freight carriers, and ocean carriers. Annual revenues: $13 billion % From Intermodal, Freight Brokerage, and other nontraditional

7 None maintain truck fleet or other transportation assets. Most pay the carrier, then present an itemized bill to their customer showing the cost of the haul separate from their commission, which averages 5-11%. These brokers will need short-term financing to pay carriers. The rest get paid by the carrier after the carrier bills the shipper (and is paid). These do not need short-term financing, but have to wait longer to get paid. 19 Sell products they own to consumers. Most of the products they sell they do not make they buy them already made. But what started as break-bulk services has grown into on-site preparation of ready-toeat food products in many modern retailers. Examples: Soft goods: Macy s, Nordstrom, Kohl s Hard goods: Best Buy, Home Depot Grocery: Safeway, Lucky, Whole Foods Break-bulk 2. Assortment 3. Form 4. Time 5. Place 6. Possession 7. Information 8. Service 21 7

8 The word Retailer derives from the old French word tailler, which means to cut off, clip, pare or divide. Retail was first defined in 1433 as sale in small quantities. Thus from the time of this word s invention, one of the main services retailers have provided is making goods available for sale to consumers in small quantities when manufacturers will only sell to people who are willing to buy a large quantity. This is called breaking bulk. 22 By bringing a wide variety of products made by dozens or even hundreds of manufacturers under one roof, retailers provide their customers the convenience and time savings of one stop shopping. This is called providing assortment utility

9 25 The 15 7/11 Locations Nearest You 26 Anything that facilitates the transfer of ownership, which could mean transfer of legal title or physical possession. Including: The ability to buy on credit Delivery and/or Installation 27 9

10 Making the customer aware of product features and differences Teaching the customer how to choose the right product for them Letting the customer closely inspect and try the product in ways they cannot by looking at a picture of the product online. 28 Properly fitting the customer to the right product Teaching the customer how to use the product Making merchandise returns easy Aesthetics of the store environment Shop-u-tainment 29 10

11 $10 flat fee delivery and installation of a refrigerator from Lowe s Possession utility Free training on how to use your new Windows 8 desktop computer from Central Computers Service utility A proper fitting to your new Burton snowboard, boots and bindings at REI Service utility 31 Customer service Selection, quality, price Store environment, merchandising, and in-store sales promotion Advertising and outside sales promotion Return policy Brand management 32 The sum of the acts and elements that allow consumers to receive what they need or desire from your retail establishment. Greet/make feel welcomed/important Make yourself available Give undivided attention Help him/her find what they are looking for Make sure they leave satisfied 33 11

12 Store displays, including seasonal Store layout Facing or franking the product Goals Keep it fun and fresh Make it pretty and appealing so customers come back often, stay longer, and buy more Make it easy 4 customers 2 find products Provide information/close the sale Sell products they own but did not make to retailers, resellers, or industrial users. Go by a variety of names: Distributors Jobbers Drop shippers Merchant wholesalers 36 12

13 Merchant Wholesalers Independentlyowned firms that take title to the goods they handle. There are two main types: 1. Full-service wholesalers perform all eight of the distribution functions listed in the left column of figure Limited-function wholesalers perform some of the distribution functions listed there, but not all of them Maintain a sales force 2. Communicate manufacturers advertising deals and plans to retailers 3. Hold inventories to which they have taken title and for which they have paid 4. Offer trade credit 5. Gather market intelligence for suppliers, and 6. Arrange for or provide transportation. Limited-function wholesalers Cash-and-carry wholesalers Drop-shippers Full-service plus wholesalers Rack Jobbers -- Furnish racks or shelves of merchandise such as music, magazines, and hosiery for retailers for display and generally sell them on consignment

14 Neither take title to the goods Both bring buyers and sellers together in exchange for a commission. Agents maintain a long-term relationship with the people they represent. Examples: Manufacturer s agent (rep) Sports agents Insurance agent Usually hired on a temporary basis. Examples: Insurance broker Real estate broker Farm products broker Direct selling Vending machines, kiosks, and carts Multilevel marketing Electronic retailing

15 Selling to people in their homes or places of business. Also known as door-to-door selling or in-person selling. Very common in B2B. A kind of non-store retailing in which a sales commission is paid on each sale to more than one person in the sales hierarchy. Examples: Amway, Mary Kay Cosmetics Terminology Upliner: The person who recruited you Downliners: The people you recruited, and the people they have recruited

16 Fred Byron 3% Fred is my upliner, the person who recruited me. Marsha Alice 1%.5% Tom John First level 2nd level My downliners are the people I recruited, and the people they have recruited. 46 Selling to consumers via the Internet. Amazon.com is the undisputed champion. Year U.S. Electronic Retailing Revenue % of All U.S. Retail 2009 $137 billion 3.7% 2010 $210 billion 5.3% 2011 $198 billion 4.8% 2012 $227 billion 5.2% 2013 $263 billion 5.8% Occurs when the same customer has multiple channel partners to choose from to obtain a product, and market conditions do not permit the survival of all channel partners. B2B manufacturers have historically minimized channel conflict by assigning geographic territories to distributors and resellers. B2C manufacturers were not overly concerned in the past because retail stores were separated by geography, and each type of store in a given area offered a unique combination of service, selection, and price

17 Lately, channel conflict between online retailers and traditional brick-and-mortar retailers has been changing the retail landscape for both books and electronics. Example: Showrooming in book retail A October 2011 survey showed that 24% of those who bought a book online had seen it in a store first. Of those who bought the book on Amazon, 39% had seen it in a store first. Looking at a product in a brick-and-mortar store, then buying it online. Having strong negative effects on brick-andmortar profitability in books, electronics, furniture, and clothing. One possible outcome: Most brick-and-mortar stores go out of business in a given product category, then consumers can no longer physically inspect the product before buying : Amazon.com opens 1997: Crown Books has a loss of $49 million 1998: Crown Books declares bankruptcy, closing 196 stores 2003: Barnes & Noble profit: $152 million : 10% of the nation s bookstores close (1,000 of the 11,600 stores) 2011: Borders declares bankruptcy, closing 686 stores 2013: Barnes & Noble loss: $158 million 51 17

18 1999: Amazon.com starts selling electronics 2006: Sears has 3,800 stores and a profit of $1.5 billion 2007: Best Buy has a profit of $1.4 billion 2008: Circuit City declares bankruptcy, closing 567 stores 2013: Best Buy has a loss of $120 million 2013: Sears has 2,429 stores and a loss of $1.1 billion In 2012, Target sent a letter to its suppliers, asking them for help to protect them from showrooming. They have since launched their Up&Up brand which they say is as good as the manufacturer s brand. Best Buy and Costco have created their own bar codes of products to make it harder for consumers to compare products online by scanning bar codes with their smartphones, then asking apps to check the availability and price of the product at an online retailer