Distribution, Retail, and Merchandising: Key Concepts
Distribution Concepts
Distribution Concepts:
- Supply Chain: Obtains materials, transforms them into intermediate/finished products, and distributes them to the consumer.
- Internal Logistics: Plans, implements, and controls the flow (back and forward) and the effective storage of goods, services, and related information from the point of origin to the consumption point.
- Value Chain: From raw material/design to the form of payment/delivery to consumer. (Firm infrastructure, HR management, tech development, procurement → Inbound logistics → Operations → Outbound logistics → Marketing & Sales → Service)
Distribution Profiles
- Intensive: (Products of convenience: producer-wholesaler-distributor-client) = Reaching the largest number of points of sale with the biggest exposure. Typical in products of frequent purchase which require a long distribution channel. Wide range products, big sales, hard to control, lot of advertising, lot of sales.
- Selective: (Durable products) = Reduces the number of distributors that fulfill requirements, but without being exclusive. Limited channels, risk to brand image, high investment in channel, niche market.
- Exclusive: (Premium goods) The manufacturer gives the right of sale to an intermediary, and in return, this one does not sell products of the competition. Planned purchase decision, after-sale service, little rotation, risk of brand image, fidelity, low growth opportunity.
Channel Design Stages
- Analyzing Client Needs: (Mission, target group, products that compromise assortment…)
- Establish Channel Objectives: (Is market coverage intensive, exclusive, strategy of sales and positioning, is product new, traditional…)
- Identify Channel Alternatives: (Types/number of intermediates, functions…)
- Evaluate Them: (Compensatory or not, control criteria)
- Select Channel Member: (Staff, financial capacity, customer service, new tech)
- Channel Monitoring: (Plan B, contingency plans…)
Transformation of Retail/Distribution
Change in value chain (more tech, single source suppliers, sustainable), globalization of supply, changes in purchasing and consumption habits, digitalization, disruptive business models, vertical integration of supply, concentration of distribution, disintermediation (remove middlemen)
Marketing Mix (5Ps)
Everything a company can do to influence demand for its products. Well blended, match corporate resources, competitive advantage, match client needs.
Trade Marketing (Producer-Retailer)
Aims to penetrate products and sell the most product quantity. It’s a system of collaboration between manufacturer and distributor to optimize channel resources. This marketing needs to respond to customer needs while combining the drawbacks of having a retailer-dominant situation into business opportunities.
Objectives: Generate traffic in establishment, avoid stock breaks, accelerate sales with merchandising…
Examples: Invest in tech, plan well the inventory, create incentives so retailers help you highlight product (Oreo), adapt promotions with each retailer (El Corte Inglés and Aldi different)
Retail Marketing (Retailer – Consumer)
Focuses on customer experience in shop. Aims to optimize assortment and point-of-sale profit.
Objectives: Create sensations on customers, stimulates our instincts so we go where they want us to.
Examples: Make products and shelves look attractive, promotions, good client experience, loyalty programs.
Merchandising
Sum of techniques put in place by distributors, retailers, and producers to increase profit at point-of-sale and flow of products. Consists of adapting assortment to market needs and presenting products well.
Types of Merchandising
- Visual: Determines the place of the products in the shelf, by type, by rooms like IKEA, by ages in games…
- Seduction: Smell, music, illumination.
- Management: Optimizing of shelf depends on the number of brands, facings…know rotations, size of sections, profitability.
Pillars of Merchandising
Product, place, price, quantity, timing, formats.
Principles of Merchandising
Promote, self-service, high stock rotation.
Benefits of Merchandising
Maximize surface area, easier purchases, impulses consumer to move around, tests circuits finding best flows and product presence, reduces replenishment movement, equilibrates high/low margin products.
Impact of Shelves (Most to Least)
Eye-hands-ground-head.
Category Management
A function in both physical retail and e-commerce where related products are grouped together under separated categories to manage performance better.
How to Set a Category Management
Define category, assign roles, evaluate its volume, define metrics of success like its costs, choose strategy, implement tactics, execute plan, revise it.