DISTRIBUTION CHANNELS,
RETAILING & WHOLESALING
1
INTRODUCTION
• When we decide to buy a product, we will consider the availability and
ease of finding the product in almost any shop or supermarket we
wanted to go.
• We wanted the product available almost everywhere we go whether in
supermarket, big superstore or even at small bus-stand corner stall.
• The availability of the product needed is depend on the effectiveness of
distribution processes implemented by the company of the product.
• If the distribution activities related to the product are effective and well
succeed, we will definitely get the product available at anywhere we go
for our consumption.
• Therefore, in this chapter, we will discuss the aspect of distribution of
products from the manufacturer (factory) until the end consumers’
home or we called as MARKETING CHANNEL or DISTRIBUTION
CHANNEL.
2
INTRODUCTION
 Good distribution network is important because it creates
a strong competitive advantage for the organization.
 Without proper distribution, products and services will
have no way of reaching the consumer.
 Examples of network and channel:
 Banking Industry – brokers, financial advisors, internet service
providers
 Insurance Industry – agents, internet service providers
 Air-lines industry – travel agencies, internet service providers
3
Basic Distribution Channel
Manufacturers/Producer
Agents/brokers
Wholesalers/distributors
Retailers
Retailers
Consumers and organizational end users
DIRECT CHANNEL
RETAIL CHANNEL
WHOLESALE CHANNEL
MULTI CHANNEL
4
FACTORS OF SELECTING THE
DISTRIBUTION CHANNELS
1. Market factors (target group customers,
geographical areas, market size, market
competition)
2. Product factors (nature of products, complexity of
products, brand value, stages of product life cycle,
perish ability level)
3. Producer factors (resources, control, facilities,
costs, image sensitivity, brand sensitivity,
marketing objectives)
5
IMPORTANCE OF
DISTRIBUTION CHANNELS
1.
2.
3.
4.
Reduction of Distribution Cost
Increase the efficiency of distribution
Increase the customers satisfaction
Reduction of time consume in handling the
goods
5. Reduce the risk of damage and risk of delay
6
THE BASIC FUNCTION OF CHANNEL
MEMBERS
1. Transporting & sorting goods
2. Collecting & disseminating market information
3. Identifying & communicating the products to the buyers
4. Matching the products with buyers’ needs
5. Ensuring product are available
6. Carrying out channel roles
7
MAIN ROLES OF
DISTRIBUTION CHANNEL
1.
2.
3.
4.
5.
6.
7.
Buying and assortment building
Bulk breaking
Warehousing/ Storage
Financing
Risk bearing
Market information
Management services and advice
8
CHANNEL CONFLICT
•
Refers to any type of disagreement and
argument among marketing channel
members on the following:
1. Goals of distributing the products
2. Roles (who should do what)
3. Rewards
9
SOURCE OF CONFLICT
1. Various objectives among channel
members
2. Overlap power of distribution
3. Overlap activities performed by channel
members
4. Different perceptions of roles
5. Abuse of powers among channel
members
10
TYPES OF CHANNEL CONFLICT
Horizontal conflict
disagreement between channel members located at
the same level of a distribution channel for a similar
product and different products
Example:
• Conflict between wholesaler of Maggi Instant Noodles and
Maggi Sauces
• Conflict between Wholesaler of Maggi Instant Noodles in
Kepong and Wholesaler of Maggi Instant Noodles in Cheras
11
TYPES OF CHANNEL CONFLICT
Vertical conflict
disagreement between channel members
located at different levels of a distribution
channel for a similar products ONLY.
Example:
conflict between wholesaler of Maggi Instant
Noodles and retailers of Maggi Instant noodles.
12
RETAILING
13
RETAILING
Shown above are two biggest retailers that you are familiar with. Here,
you can find anything you want such as fresh and frozen food,
groceries, household needs, and apparel all under one roof.
Now, let us look at the definition of retailing.
14
RETAILING DEFINITION
• Retailing refers to all the activities directly related
to the sale of goods and services to the ultimate
consumer for personal, non-business use.
• It is very important activity in distribution
process.
• A retailer or retails store is any business
enterprise whose sales volume comes primarily from
retailing activities.
• The retail stores owner are retailers. They are one
of the important member
in the marketing channel.
15
EXAMPLES OF MALAYSIAN
RETAILERS
Shown above are well-known examples of retailers in
Malaysia
16
EXAMPLES OF MALAYSIAN
RETAILERS
Shown above are well-known examples of retailers in
Malaysia
17
THE 7 TYPES OF RETAILERS
1.
2.
3.
4.
5.
6.
7.
Specialty store retailers
Department store retailers
Supermarket retailers
Discount store retailers
Convenience store retailers
Drug store retailers
Food store retailers (restaurants)
18
SPECIALTY STORE
RETAILERS
19
TYPES OF RETAILERS
• Specialty store retailers
– A retail store that offers specific and
specialized types of items.
– The retailers that only specializing in selling
special and specific products brand or product
category.
– It focuses on selling a particular brand, or a
particular type of item.
– Specifically to cater the specific needs of
customers and markets.
– The product line is not length but very deep
inside.
20
EXAMPLES OF SPECIALTY STORE RETAILERS
Specialization
Example
Shoes
Toys
Perfumes & Toiletries
Beauty & Cosmetics
21
EXAMPLES OF SPECIALTY STORE RETAILERS
•Al-Ikhsan - specializes in sporting goods.
•Ms Read - focuses on plus size women's apparel.
•Poney - specializes in children's apparel.
22
DEPARTMENT
STORE RETAILERS
23
TYPES OF RETAILERS
• Department store retailers
– This store usually carry a wide variety of product lines typically
clothing, home furnishing, electronic goods, furniture, cosmetics
and household goods.
– There are different departments that handle different types of
product groups.
– Each of this department is has its own “buyer”, a department
head, who is responsible in choosing the merchandise for the
department, promotion and human resource of the department.
– Sales are made within each department rather than at one
central checkout area.
– Each of the department is treated as separate buying centre to
achieve economics in promotion,
buying, services, and control.
24
EXAMPLES OF DEPARTMENT STORE
Metrojaya and SOGO are the good examples of a department stores in Malaysia
25
SUPERMARKET
STORE RETAILERS
(SUPERSTORE)
26
TYPES OF RETAILERS
• Supermarket retailers (Superstore)
– This store is large, self-service, low cost, low margin and
high volume retailer.
– It is a self service stores.
– They serve customers’ total needs for fresh foods, dried
food, and some non-food items such as laundry, and
households maintenance products.
– Located normally at business centres in housing areas or
in shopping centres.
– It also sometimes offer discounts at the end of every year or
during festivals through mega sales or year end sales.
27
EXAMPLES OF SUPERMARKET
STORE
Cold Storage, Parkson Grand, Jaya Jusco, Giant, Tops, Hankyu Jaya, The Store
are the good examples of supermarket stores in Malaysia and they offer a great
variety of groceries and fresh foods.
28
DISCOUNT STORE
RETAILERS
29
TYPES OF RETAILERS
• Discount store retailers
– This store is operated by retailers that offer goods to their
customers with a special low price
– The purpose is to attract larger number of customers and catch
high turnover of their merchandise.
– There are various types of discount stores including full line
discount store or mass merchandisers, hypermarket and super
center.
– Discounters can be classified into four major categories:
• full-line discount stores,
• speciality discount stores,
• warehouse clubs,
• off-price discount retailers
30
EXAMPLES OF DISCOUNT STORE
Makro, Reject Shop, IKEA, TESCO and Toys “R” Us are the good examples of
discount stores in Malaysia and they offer a great variety of products.
31
DISCOUNT STORE:
FULL-LINE DISCOUNT STORES
• A retailer that offers very limited service
and carries a broad assortment of wellknown, nationally branded “hard goods”.
• The goods are housewares, toys,
automotive parts, hardware, sporting
goods, and garden items, as well as
clothing, bedding, and linens.
32
EXAMPLES OF FULL-LINE DISCOUNT STORES
Carrefour and TESCO are the good examples of Full Line Discount Stores
in Malaysia
33
DISCOUNT STORE:
SPECIALITY DISCOUNT STORES
• A retail store that offers a nearly complete selection
of single-line merchandise and uses self-service,
discount prices, high volume, and high turnover to
their advantage.
• Often termed category killers because they so
heavily dominate their narrow merchandise
segment.
• They generally offer an extensive selection of
merchandise at prices so low that smaller stores
cannot compete.
34
EXAMPLES OF SPECIALTY DISCOUNT STORES
Toy “R” Us and IKEA are the good examples of Specialty Discount Stores in
Malaysia
35
DISCOUNT STORE:
WAREHOUSE CLUBS
• A limited service merchant wholesaler that sells a
limited selection of brand name appliances,
household items, and groceries.
• The term of sales is the cash-and-carry basis to
members, usually small businesses and groups.
• Member of warehouse clubs is charged low or no
membership
36
EXAMPLES OF WAREHOUSE CLUBS
Makro which already ceased operations in Malaysia was an example of a
warehouse club
37
DISCOUNT STORE:
OFF-PRICE DISCOUNT RETAILERS
• A retailer that sells at prices 25 percent or more
below traditional department store prices because it
pays cash for its stock and usually doesn’t ask for
return privileges.
• Off-price retailers buy manufacturers’ overruns at
cost or even less.
• They also absorb goods from bankrupt stores,
irregular merchandise, and unsold end-of-season
output.
38
EXAMPLES OF OFF-PRICE DISCOUNT STORE
Reject Shop in Malaysia,T.J. Maxx, and Factory 2 U in the United States are
the good examples of Off-Price Discount Stores .
39
CONVENIENCE
STORE RETAILERS
40
TYPES OF RETAILERS
• Convenience store retailers
– A miniature supermarket, carrying only a limited line of highturnover convenience goods.
– This store is small.
– It is usually set up near residential areas and remain open
long hour (24 hours), seven days a week.
– It is usually charging high prices to make up for higher
operating costs and lower sales volume.
– Typically located near residential areas and are open 24
hours, seven days a week.41
EXAMPLES OF CONVENIENCE STORE
7-Eleven, Tiger-Mart Esso, Mobil-Mart, Kedai Mesra Petronas, ProJet and
KK Super Mart are examples of convenience stores that are open 24-hours
42
and seven days a week .
DRUG STORE
RETAILERS
43
TYPES OF RETAILERS
• Drug store retailers
– Also known as pharmacies
– Sell medicines, healthcare products like
vitamins, treatment oil, and toiletries.
– Have pharmacists that give advises and
distribute controlled and doctors’ prescribed
medicines.
44
EXAMPLES OF DRUG STORE
Guardian, and Vitacare pharmacy are examples of drug stores in Malaysia .
They can be found throughout Malaysia.
45
FOOD RETAILERS
(RESTAURANTS)
46
TYPES OF RETAILERS
• Food retailers
– Restaurants overlap between retailing
establishments and service establishments.
– Apart of selling tangible products such as food
and drink, they also provide a valuable service
for consumers in the form of food preparation
and food service.
– Restaurants could even fall into the definition
of a speciality retailer if they concentrate their
menu offerings to a distinctive
type of cuisine.
47
EXAMPLES OF FOOD STORE
Starbucks coffeehouse, Chicken Rice shop, and Pizza Hut pizza are examples of
food stores in Malaysia . They can be found throughout Malaysia. they are the type
48
of restaurants offer speciality in their menu offerings.
FACTORS FOR CLASSIFYING RETAILERS :
OWNERSHIP
OWNERSHIP
EXAMPLES
Independent
Retailers
Laundry
Chain Stores
The
Franchises
shop
Shoe stores
Florists shop
Store,
The Parkson
Group
Starbucks
Daily
Fresh
England Optical
Secret
Recipes
49
FACTORS FOR CLASSIFYING RETAILERS:
LEVEL & AMOUNT OF SERVICE
• Retail stores can be categorized in accordance to the level of
service they provide. They are:
– Self-service:
– Self-service retailers allow customers to perform the process of search,
compare, and collect goods for saving time or money purpose.
– For some consumers self-service is considered a benefit while others may
view it as an inconvenience.
– It is mostly used in discount stores and by sellers of convenience goods
and fast moving shopping goods.
– Full-service:
– Full-service retailers offer full retail-related customer services in a store.
– They hire salespeople to assist customers in every phase of shopping
process.
– Limited-service:
– The store offers some of the services provided by the full-service stores.
– It is suitable for stores that sell shopping goods because customers may
50
need information about products
in store.
FACTORS FOR CLASSIFYING RETAILERS :
LEVEL & AMOUNT OF SERVICE
LEVEL
Self-service
EXAMPLES
7-11
Tiger
Mart
Mesra Petronas
Full-service
Limited-service
Vuitton
KLCC
Gucci stores KLCC
Cold
Storage
Jaya Jusco
Giant
51
FACTORS FOR CLASSIFYING RETAILERS :
PRODUCT LINE & ASSORTMENT
• Retail stores are divided based on the width (number
of different product lines) and depth (number of
different products within a product line) of the products
they carry.
– Specialty stores - narrow product lines with deep assortment
– Department stores - wide variety of product lines
– Convenience stores - limited line of high turnover goods
– Superstores - large assortment of routinely purchased food
products, non-food items and services
52
FACTORS FOR CLASSIFYING RETAILERS :
PRODUCT LINE & ASSORTMENT
PRODUCT LINE
EXAMPLES
Narrow
Specialty stores
Wide
Department stores
Limited
Convenience
stores
Large assortment
Supermarket
stores
53
FACTORS FOR CLASSIFYING RETAILERS
PRICE
• Retailers can also be classified according to the pricing strategy
they adopt.
• Most retailers charge regular prices and offer normal-quality
goods and customer service.
• Others offer higher-quality goods and service at higher prices.
• Discount stores-sell standard merchandise at lower prices
• Off-price retailers-low-price, high volume
54
:
FACTORS FOR CLASSIFYING
RETAILERS : PRICE
PRICE
EXAMPLES
Higher
Specialty
stores
Supermarket stores
Convenience stores
Lower
Discount
stores
“Off-price”
retailers
55
NONE-STORE
RETAILING
56
NON-STORE RETAILING
• Although store retailing is still popular in
Malaysia, non-store retailing is making its
presence felt in Malaysia.
• Non-store retailing is shopping without
visiting a store
• Among the popular mediums of non-store
retailers which are popular today are
vending machine, mail-order, television,
telephone and on-line
shopping
57
EXAMPLES OF NON-STORE RETAILING
Non Store
Description
Example
Selling
through coin or
currency-operated machines
Automatic
Vending
Machine
Direct
Retailing
Can
be found in college,
shopping mall, hospitals, bus
and train stations, and office.
Examples
of goods sell are
drink, candy, and snack
The selling of products by
representatives who work
door-to-door, office-to-office,
or at home parties.
58
EXAMPLES OF NON-STORE RETAILING
Non Store
Description
Example
So
called as direct-response
marketing
Direct
Marketing
Refers
to the techniques
used to get consumers to
make a purchase from their
home, office, or other non
retail setting
Examples Direct mail,
catalogues and mail order,
and telemarketing
Growing
Online
Retailing
tremendously with
the fast growth of Internet
technology and increasing
access worldwide.
Online
shopping is made
easy 24 hours per day at a
click as payment and security
issues improve.
Example:
Amazon.Com
59
WHOLESALING
60
WHOLESALING
• It is the process of making a product or service available for use
or consumption by the consumer or business user.
• It is also known as the reselling of new and used goods to other
business users such as retailers, to industrial, commercial,
institutional or professional users, or to other wholesalers,
• The parties that practice wholesaling is called wholesalers and
they act as an agent or broker in buying merchandise for, or
selling merchandise to other channel members such as retailers.
• They can be persons or companies.
61
ROLES OF WHOLESALING
1. Selling & promoting manufacturers’ products
2. Breaking bulk in a small quantities based on
specific categories for resell to retailers
3. Providing logistic functions such as
transportation, warehousing, inventory
management.
4. Offering credit services to buyers (other
business buyers such as retailers and other
wholesalers)
62
CONCLUSIONS
• Distribution is very important in marketing because
the availability of the product needed is depend on
the effectiveness of distribution processes
implemented by the company of the product.
• If the distribution activities related to the product
are effective and well succeed, we will definitely
get the product available at anywhere we go for
our consumption.
63
List of References
Victor Ong (2010) Marketing Strategy: Module, Center for Graduate Studies,
Open University Malaysia.
Subash C. Jain (2004) Marketing: Planning & Strategy, 7th Edition, Thomson.
Boone, L., & Kurtz, D. (2009). Contemporary Business. Denvers: John Wiley &
Sons, Inc.
Cravens, D.W. (2000), Strategic Marketing, 6th Edition, McGraw Hill.
Kotler P& Armstrong.G., (2004) Principles of Marketing, 10th edition, Pearson.
Kotabe, Masaki & Kristian Helsen (2001). Global Marketing Management 2nd
Edition John Wiley & Son. Inc New York.
64
Topics
List of References
Ebert, R., & Griffin, R. (2003). Business Essential, 4th Edition. New Jersey:
Prentice Hall.
Ferrel, O., Hirt, G., & Ferrel, L. (2009). Business: A Changing World. New York:
McGraw Hill.
khalid, K. e. (2008). Business Management: A Malaysian Perspective. Kuala
Lumpur: Oxford University Press.
McDaniel, C., & Gitman, L. (2008). The Future of Business. Ohio: ThomsonSouth Western.(2008). The Future of Business. Ohio: Thomson- South
Western.
65
Topics
List of References
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http://www.buckinvestor.com/basics/economic_systems.shtml
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http://www.econguru.com/econ/production-factors.shtml
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.htm
Boone, L., & Kurtz, D. (2009). Contemporary Business. Denvers: John Wiley &
Sons, Inc.
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Topics