Marketing Channel Analysis
Sony was founded on May 7, 1946 in Tokyo Japan. Corporate headquarters is
located in Tokyo Japan along with all major research centers. Sony operates
globally and had operating revenue of 7,496,400 million yen in 2004. 1 Sony
manufactures and sells multiple products under the categories of audio, television,
video, information, communication, semiconductors and electronic components.
Sony currently has a dual distribution structure in place consisting of a “bricks and
mortar” outlet, the Sony Store, and an on-line ordering site, Sony Style.
The
success of each of these channels complements the other and has increased Sony
sales. Sony also sells its products to independent retailers including Future Shop,
Radio Shack and Best Buy.
the Sony Store
The first Sony Store was introduced to the Canadian market in 2003 and
approximately 70 additional stores have been opened across Canada since then.
2
The Sony Store displays the company’s latest products in a hands-on environment,
complete with sales staff to answer any questions consumers may have. The stores
are tailored to primarily target the female market with a tendency to be located in
up-market shopping centers.
These locations were chosen “based on a widely held
belief that conventional electronics stores do a lousy job with women”.2 Each Sony
Store also includes a “concierge desk” to greet shoppers as they enter the store
with the idea females would respond to this feature.2
The stores also act as an
alternative for consumers who are uncomfortable with purchasing items online;
“The latest…Sony Stores are designed to display products, in the full expectation
that many people will buy online”.2
This idea of allowing consumers to observe
products in a “showroom” before they purchase the item online might suggest, to
an extent, a merge of online and offline markets.
(For additional information see SWOT analysis: Appendix A)
On-line Operations
Sony’s Canadian corporate website, www.sony.ca, offers the consumer information
on all available Sony products.
The website also provides customer support and
lists locations of Sony’s authorized dealers. The Sony website contains links to the
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Marketing Channel Analysis
global corporate website, Sony Style Canada and the Sony Store website.
The
Sony Store website lists locations of stores across Canada as well as service and
warranty information. The purpose of the Sony Store website is not to showcase all
of the products available at the store but instead to offer the customer a number of
factors to consider before making a decision to purchase a product.
On-line
purchases are not available through the Sony Store website. Consumers wishing to
peruse the complete library of Sony products or make an online purchase will be
transferred via the Sony Store website to the Sony Style website.3 The Sony Style
Canada website is the online shopping homepage for all of Sony’s products. The
site provides the consumer with product and pricing information along with
financing, delivery and warranty options.
Orders can be shipped directly to the
customer’s home or can be picked up at the nearest Sony Store location. Order
status can also be checked on the Sony Style website.
(For additional information see SWOT analysis: Appendix B)
Target Market
Sonystyle.ca
is
primarily
targeted
to
consumers
who
value
convenience.
Geographical and temporal constraints are a major attraction for consumers to the
website. It also targets people who are familiar with Sony products and are not in
need of sales personnel to answer questions. Marketing activities are performed
through this site providing on-line consumers with the same promotions as those
available at the Sony Store locations.
Marketing campaigns which advertise new
products and promotions available to the website’s target market is achieved by
collecting customer email addresses when consumers register for online purchasing.
Channel Structures
The Sony Store’s current marketing channel consists of four major players:
manufacturers, warehouses, Sony Store and end consumers.
The web based
channel currently used by Sony performs all of the same flows but has changed the
channel members who perform them.
The on-line channel consists of:
manufacturers, warehouses, Sony Style and the end-consumer. (A comparison of
the channel structures can be viewed in Appendix C and D).
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Marketing Channel Analysis
Channel Flows
Payment and Financing
Credit card and financing are the two options online consumers have when paying
for orders. Sony Style accepts payment on any Canadian-issued VISA, MasterCard,
American Express or Sony Citi MasterCard. The Sony Citi MasterCard allows Sony
customers to earn points with every purchase in order to obtain Sony Rewards such
as Sony branded electronics. The financing option is available to those customers
who spend more than $499.99 on their purchase. This option requires the user to
apply for a “Sony Store Card” which will be used to finance their payments over a
three, six, or twelve month period.4
Customers who purchase products at the bricks and mortar locations have the
same payment and financing options along with the added convenience of debit and
cash.
The same financing alternative is available to the consumers who wish to
delay payments.
Risk
Each channel member in the online channel assumes risk when they receive a Sony
product. Sony will take on the majority of the risk except when the product is in
the hands of a courier, who then assumes the majority of the risk. Even after the
end-consumer receives the product, Sony will still be at risk because of warranties,
repair, and after-sale service costs.
The credit card companies involved in the
online ordering process also assume risk when dealing with the end consumer and
possible non-payment. The bricks and mortar risk flow is very similar to that of the
online ordering risk flow.
Ordering
Online users can order their products to either be shipped directly to their home or
to the nearest Sony Store location to be picked up.
When ordering through
Sonystyle.ca, consumers can also place “pre-orders” and “next-in-line orders”. 5
Pre-orders refer to opportunities for the customer to order products not yet
introduced into the Canadian market. Once the product in question is available, it
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Marketing Channel Analysis
will be shipped to the end consumer immediately.6 Next-in-line orders are made
when Sony is sold out of a specific product.
The customer is then added to a
waiting list and as soon as the product becomes available again, it will be shipped.
7
The ordering flow of the Sony Store includes merchandise being purchased and
subsequently replaced. The Sony Store orders products from Sony wholesalers as
inventory replacement becomes necessary. 8 This flow is one that might become
more efficient with the addition of an electronic data interchange system to keep
track of inventory and notify suppliers instantaneously of any products that need to
be shipped.
Physical Possession and Ownership
The physical possession flow follows the logical order from manufacturer to
consumer. Costs associated with the physical possession flow include storage and
delivery costs of the Sony products. 9
Most channel members are part of the
physical possession flow, more so when dealing with online ordering since most
products will have to be shipped by a courier, adding another member to the
channel.
The ownership flow involves the Sony warehouses and the Sony Store
retailers. Costs associated with this flow include inventory carrying costs for both
the warehouses and Sony Stores.9
Promotion
The promotional flows for the bricks and mortar locations and online shopping are
interrelated. The store acts as a hands-on advertisement for the available online
purchases.
Advertising is relayed through both the store and website.
All Sony
customers have access to the same promotions and sales.
Demand Side Factors
On-line ordering provides the consumer with facilitation of search. Customers can
search the on-line ordering site and purchase products without having to visit a
traditional bricks and mortar outlet.
The search process is convenient since the
consumer can access the site from their home.
4
This process is fast, convenient
Marketing Channel Analysis
and easy. The on-line ordering process satisfies the need for assortment. With the
majority of Sony products being offered on-line, the consumer’s need for variety of
products is provided. The Sony store does not offer as many products as the online store and therefore, the on-line method of ordering satisfies this need to a
greater degree.
Supply Side Factors
The internet has provided Sony with the opportunity and ability to sell products online to end users directly. The consumer has the option of picking up their order at
the nearest Sony Store or having their order shipped to their home.10 Choosing the
former deletes the Sony Store from the channel.
Service outputs
The service outputs provided by the on-line store include bulk-breaking, spatial
convenience, waiting and delivery time and assortment and variety.
Bulk-Breaking
Customers will typically only purchase one of each item offered by Sony.
It is
unlikely that large numbers of each product will be sought by consumers. Both the
Sony Store and Sonystyle.ca allow customers to purchase single units.
Spatial Convenience (Ordering)
The Sony Store and Sonystyle.ca address spatial convenience in distinctive ways.
The Sony Store allows customers to physically obtain the product whereas the
website makes ordering the product convenient regardless of geographic location.
Waiting and delivery time
The Sony Store reduces or eliminates the consumer’s waiting time provided the
product is available in store.
When the consumer orders a product on-line,
depending on the size and number of products and the desired shipping method,
waiting time can range from one to seven days. Sonystyle.ca offers a feature on
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Marketing Channel Analysis
the website allowing customers to check the status of their order, tracking its
progress from the warehouse to the destination.
Assortment and Variety
Thirty percent more products are available at Sonystyle.ca than the Sony store.8
There are some products that are sold exclusively through each channel.
For
example, Sony Playstation and Playstation2 consoles and accessories are not
available for purchase through the Sonystyle.ca website but are available at the
Sony Store. Playstation accessories can be purchased through the playstation.com
site.
Also, there are certain laptops which are exclusively available through the
Sonystyle website.
On-line Support System
Many consumers are hesitant to order products on-line because they prefer the
touch and feel aspect of traditional shopping. Sony has developed an extensive online support system for its product offerings. The site offers tutorials and emulators
which allow the consumer to explore features and functions of Sony products over
the internet. This on-line support system acts as an additional after-sales service
offering.
When the consumer has an operational problem or is in need of
information, the website can be accessed to solve these issues.
Each product
model has a frequently asked questions page which helps the consumers in solving
problems that may occur. The consumer receives correct and timely information
from this site which may not be provided consistently from sales personnel.
Conflict
Both the Sony Store and Sonystyle.ca may face resistance from retailers who
currently carry Sony products.
These retailers may believe that sales of Sony
products will decrease because consumers will be able to access the entire Sony
product line, both on-line and in a retail setting directly from the manufacturer.
Due to the fact that Sony sells its product line in its own stores as well as
conventional electronic retailers, Sony may face cannibalization of sales revenue as
6
Marketing Channel Analysis
consumers move to purchasing their Sony products online or at the Sony Store
instead of existing retailers.
Gap Analysis
In the traditional Bricks & Mortar system, there is a demand and supply gap evident
(Refer to Appendix E). On the demand side, consumers must travel to major urban
centers in order to buy Sony products from the Sony Store. Furthermore, the Sony
Store only stocks seventy percent of all Sony products.
Having only seventy
percent of Sony products available in retail outlets increases the chances of
consumers not being able to purchase the desired item which leads to stock-out
costs, creating a supply-side gap. Due to restricted inventory space, stock-outs are
more likely to occur than with on-line ordering.
Since going on-line, Sony has addressed the spatial convenience deficiency of their
stores. Customers are able to order a greater assortment and variety of products
from any computer with access to the internet.
However, purchasing online
presents a demand-side gap by increasing delivery times from the wholesaler to the
end user (Refer to Appendix F). In order to reduce this gap, a second distribution
center should be established in Western Canada. The end result is delivery of Sony
products to consumers within four days, as well as reduced variable costs due to
less frequency of shipping from one warehouse.
Recommendations and Conclusions
Sony’s existing dual distribution channel structure is a benchmark for global
businesses desiring to increase sales by going on-line.
By having both channel
structures complementing one another, Sony has experienced synergies within its
business model. They have made a greater connection with the consumer which
has increased brand recognition and equity. Sony’s bricks and mortar store exists
to address consumer’s needs to physically observe products and to reassure them
of their choices. The Sonystyle.ca site addresses consumers’ need for convenience,
support and eliminates many barriers such as geographical constraints.
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Marketing Channel Analysis
In order to increase efficiencies and operational effectiveness, Sony could
implement the following:

Establishing a distribution warehouse in Western Canada to reduce shipping
times and costs. Fixed costs will be a large capital outlay but the increased
capacity and decreased variable costs will offset this in the long-term.

Increasing the product offerings at the Sony Store locations to be consistent
with product offerings on the website.
This will provide for consistency
between the two channels.

Implementing the use of EDI systems within Sony Stores. This will ensure
adequate inventory is available when it is needed and will provide for timely
delivery of products.

Increasing the capacity of floor space in stores and inventory storage to
accommodate additional product offerings and to reduce potential stock-outs.
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Marketing Channel Analysis
Bibliography
Sony . 2005. 12 Mar. 2005
<http://www.sony.net/SonyInfo/CorporateInfo/index.html>.
1
Spagatt, Elliot. "Sony makes big changes with small stores." Marketing News . 15
Nov. 2004: 12. Proquest . University of Saskatchewan Library, Saskatoon. 13 Mar.
2005
<http://proquest.umi.com/pqdweb?did=742080241&sid=1&Fmt=2&clientId=
12306&RQT=309&VName=PQD>.
2
Sony Style Canada Sony Style Canada. 2005. 12 Mar. 2005
<http://www.sonystyle.ca/commerce/servlet/HomepageView?storeId=1000
1&langId=-1&catalogId=10001>.
3
On-line Financing Sony Style Canada . 2005. 12 Mar. 2005
<http://www.sonystyle.ca/view/ShoppingCart/Financing/main.shtml >
4
Sony Style Customer Care. 2005. Sony Canada. 1 Apr. 2005
<http://www.sonystyle.ca/view/ShopConfidence/swccustomer.shtml?tid=
conf_swccustomer_tab>.
5
Placing a Pre-Order. 2005. Sony Style Canada. 31 Mar. 2005
<http://www.sonystyle.ca/view/ShopConfidence/swccustomer_book_in_ad
vance.shtml?tid=conf_swccustomer_tab>.
6
Placing a Next-in-line Order . 2005. Sony Style Canada. 31 Mar. 2005
<http://www.sonystyle.ca/view/ShopConfidence/swccustomer_next_in_line.shtml?t
id=conf_swccustomer_tab>.
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8
Keller, Dean. Personal interview. 30 Mar. 2005.
Lane, Brian. Channel Flows and Efficiency. University of Saskatchewan, Saskatoon,
SK. Jan. 2005.
9
Delivery Sony Style Canada . 2005. 12 Mar. 2005
<http://www.sonystyl...sc_pickup_home.html>.
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