The phenomenon of distribution arose immediately after the first trade relations between the producer of goods and the buyer were formed. Probably, for many centuries, sellers and buyers were engaged in the delivery of manufactured products and their sale / purchase, and did not even assume that all these processes were described by such a word as “distribution”. After some time, when economic processes were subjected to scientific rethinking, the phenomenon of distribution was recognized, described and classified.
Below I will try to summarize the main points concerning this phenomenon. It should be understood that this article will focus on distribution in the broadest sense of the word. Distribution - a set of independent market participants involved in the process of production and distribution of a product or service So, the product is produced; in order for it to make a profit, it must be sold to the consumer. The main problem that the manufacturer faces immediately after producing the goods is HOW TO DELIVER the manufactured product to where the consumer is located. As a rule, consumers are located geographically unevenly. And in the event that the manufacturer does not want to limit his sales (and, accordingly, profit) to consumers located in the immediate vicinity of production, he needs to build his distribution model.Distributors (participants in the distribution process) provide the manufacturer with logistics services, ensuring the delivery of manufactured products to remote territories. In addition, distributors assume the costs and risks associated with the sale and / or resale to other channels and with the storage of products. Distribution channels allow the consumer to purchase many different products in one place. Compare two charts where the consumer wants to buy salt, toothpaste and bread.
- When there is no distribution channel:
And when there is a retail distribution channel (for example, a store):
Distribution channel functions:
1. Sort: The intermediary, receiving goods similar in consumer characteristics, groups them based on various features (for example, price, size, functionality).
2. Accumulation: To ensure uninterrupted supply of consumers, the distributor keeps the estimated stock of the product on the balance.
3. Crushing: A reduction in the minimum purchase lot is implied; for example, the sale of bulk goods received in 50-kg packages in batches of 500 or 250 grams.
4. Expansion of the range: Intermediaries have the opportunity to offer goods of similar characteristics from different manufacturers; also, distributors get the opportunity to form several product groups. For example, to sell both meat products and cheese.
5. Product promotion: as a rule, the initiator of promotional activities aimed at increasing sales is the manufacturer; however, the intermediary also takes part in product promotion. For example, a wholesaler may focus on the sale of a specific product group or SKU, and a retailer may place promotional materials in the store.
6. Agreement of conditions: intermediaries participate in pricing, discussion of guarantees and quality of products / services, presenting their requirements and offering their own conditions to their own customers or the end user.
7. Acceptance of risks: intermediaries take on some of the risks of distribution. This includes the risks of damage during delivery from / to the warehouse, the risks of non-return of funds for delivered products, and others.
What are the distribution channels.
From the point of view of the vertical organization of the product promotion process, two types of distribution channels are distinguished: (1) direct and (2) indirect (indirect).
1. Direct distribution channel or zero level channel.
Distribution, in which the manufacturer sells the goods directly to the consumer, bypassing any intermediaries. Such a channel is the simplest and shortest in terms of product distribution, but the most difficult in terms of its organization.
Methods used in organizing direct distribution:
- Peddle sale (door to door sales);
- Internet sales;
- Postal orders;
- Telemarketing;
- Manufacturer's own distribution networks.
2. Channels of indirect (indirect, multilevel) distribution:
This includes all channels where there are more than two participants (producer and consumer). Indirect distribution channels vary in the length of the distribution chain.
- Producer-Retailer-Consumer (l level):
The distribution chain of the first level, unlike direct distribution, contains one intermediary. In our example, this is a retailer. A retailer can be either a single store or a large federal chain, the difference is only in market coverage.
The most striking example of such a distribution channel is the relationship between automakers and their dealers: for the sale of products, automakers in the overwhelming majority of cases involve dealers who work with the end consumer.
- Producer-Wholesaler-Retailer-Consumer (2 levels):
In this channel, an additional link appears in the form of a wholesale buyer between the manufacturer and the retailer. The need for a wholesaler may be due to a significant assortment and / or a significant distance of the distribution area from the place of production. The retailer does not have the ability to accumulate the necessary balances in its own warehouses, and the manufacturer does not have the ability to supply with the frequency that the retailer needs, which leads to the risk of an out of stock situation.
In this situation, the logical solution is to include an additional element in the channel: a wholesaler, which provides the necessary stocks and logistics in the service area.
Distribution channels of this type are typical for perfumery products, food products, and light industry.
- Manufacturer-Agent-Wholesaler-Retailer-Consumer (3 levels):
In this channel, in addition to the Producer and the Consumer, there are three more links: an agent, as a rule, providing representative and managerial functionality of the manufacturer; a wholesaler, whose tasks include the formation of balances and the delivery of goods to retail outlets of a retailer working with the end consumer.
An agent in this distribution channel can be understood as either a single intermediary or a limited number of large intermediaries who purchase products directly from production, and then organize interaction with other links of the channel within the area of responsibility. Accordingly, the chain can also (and in Russia most often) take the following form:
Producer-Large wholesaler-Small wholesaler-Retailer-Consumer
A three-level distribution channel allows you to quickly establish sales in the territories due to the fact that the product passes through intermediaries with a formed customer base and work models.
Among the shortcomings, it should be noted the low impact on the end consumer and the decrease in the marginality of products due to the need to pay for the services of several intermediaries.
Factors determining the choice of distribution channel:
- Factors determined by the specifics of the products:
(a) Product functionality: In the event that you produce specific heavy industry products (for example, machine tools or turbine blades) due to a narrow circle of consumers, it would be logical to choose direct distribution. In this case, production will be carried out within the framework of individual orders, and the need for express delivery usually doesn't matter.
Consumer goods (like televisions or refrigerators) that have a significant number of consumers can be sold within distribution channels that have a larger number of links.
(b) Product expiration dates:
It is logical here: for the sale of perishable products, one should choose the shortest distribution channels or strive to minimize existing ones; for products with long shelf life, the length of the distribution chain will not be a critical factor.
(c)Volumes of production/sales of products:
Products of mass production and consumption require significant storage space, respectively, it is necessary to organize the distribution channel in such a way that the necessary balances are formed at the places of consumption. If the manufacturer does not have the ability to organize its own distribution centers, then it is forced to transfer this functionality to intermediaries (small or large wholesalers), lengthening the chain.
In cases where production and sales volumes do not have significant volumes, a channel with a minimum number of participants is used. An example would be jewelry manufacturers' own stores: they create direct distribution channels by working directly with the consumer.
(d) Technical complexity of manufactured products:
The more complex the product or service, the closer the manufacturer should be to the consumer. For simple products, the absence of a manufacturer at the place of consumption is not essential.
- Factorsdetermined by the characteristics of the manufacturing company:
(a)Manufacturer's financial stability: Companies with large quantity free funds and generating profits, may allow the organization of shorter distribution channels. If the manufacturer does not have significant resources to spend on establishing direct distribution channels, he should lengthen the chains, as it is cheaper.
(b) Producer chain control:
Short channels are better and easier to manage than longer ones.
- Factors determined by competitors: when organizing the distribution chain, the manufacturer must always take into account how competitors are marketing. You need to implement the risks and rewards of your own model and the competitor's model.
So it should be understood that long chains are cheaper, but worse managed; direct distribution channels require significant investments, but provide the manufacturer with a direct impact on the consumer.
- Market factors:
(a) Market size:
The less potential consumers in the market, the shorter the distribution chain should be. And vice versa: the more consumers, the longer the chain the manufacturer can afford.
(b) Market Density:
The higher the concentration of consumers in a particular territory, the higher the margin, the more intermediaries can be used in the chain.
(c)Sales market volume:
If you plan to sell significant volumes of products in the territory, you need to use a longer chain. For example, in order to ensure the necessary inventory.
- Other external factors.
Stage 1 - until 1993
- Decrease in production volumes in Russia
- A large number of wholesale companies import everything from oil to computers from abroad.
- Huge turnover, the market is not structured
Stage 2 - 1993-95
- Domestic producers are still weak
- Foreign companies open representative offices in Russia
- Competitions for the right of exclusive distribution, market structuring
Stage 3 - 1995-98
- Strong domestic producers begin to emerge
- Expansion of foreign manufacturers to the regions with the help of distributors
- Rejection of the services of one exclusive distributor, creation of a system of several distributors
Stage 4 - 1998 -2001
- Development of domestic producers, exit from the market of many foreign companies
- Reduction in the number of distributors, development of the remaining
- Creating your own distribution system
- Building relationships with retail chains
The growth in the share of sales through network retail and the increase in their market power will require manufacturers to develop new distribution strategies
Today, the consumer goods market is undergoing the following changes:
Saturation of markets and local crises of overproduction lead to the fact that the distribution system becomes one of the decisive success factors.
3. Increased competition, consolidation of players
National leaders have been identified on the market, which largely determine the strategy of their smaller partners and competitors
- The laundry detergent market
P&G, Henkel - Juice market
WBD, Multon, Lebedyansky - milk market
WBD, Petmol, Danone, Parmalat, Ostankino
4. Growth in the share of retail sales through networks
The share of sales through retail chains in Russia will increase
Key challenges in the consumer goods market
| Consequences for manufacturers | Consequences for distributors |
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| Change behavior final consumer | > |
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| Slowdown industry growth | > | Leadership through distribution strategy | A period of qualitative, not quantitative growth |
| Gain competition, enlargement players | > | ||
| Share growth retail sales through networks | > |
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Change and adaptation of the distribution system is becoming one of the main factors of competitiveness manufacturers
The key question in the field of distribution: what should be done in the field of distribution independently, and what should be given "to the side"?
Business choice becomes a key issue for distributors: to qualitatively change the current business or develop other areas of activity?
Answers to the challenges of the time
Manufacturers responses
1. Reducing the number of distributors
- Sun Interbrew from 430 to 12
- American Tobaco up to 3
- Ochakovo from 300 to 6
- P&G - from 3 to 1
2. Creation of a system of distributors
- Kalina abandons its own regional warehouses and develops dealers
- The baker forms a network of dealers
- "Mars" created the position of a sales personnel recruiter in St. Petersburg
- Liggett-Ducat refused the Moscow distributor "Megapolis"
- Wrigley is 30-40% more efficient on its own than any of its distributors
- For WBD, the development of its own distribution channel and the strengthening of independent work with retail is a strategic priority
4. Creation of a trading apparatus for working with key clients
- "Baker" - creates a KAM apparatus
- P&G - key account only, separate network division
- "Gradient" - develops the KAM division as the main strategic direction
Distributor Answers
1. Creation of own retail chains
- Temp One - network of small wholesale stores "Nakhodka" 2002 - 17th Mag, 2003 - 36th Mag
- Thunder - about 400 mag. South and Center of Russia, shifting focus from the wholesale business
- Image stores: Perfume - "Perfume", Gradient - "Beauty" k "
- Uniland - 3 retail formats: Dixy, Unisam, Megamart
2. Marketing or own brand production
- Oil production "Anna Maria"
- MBK - "Three Little Pigs"
3. Strengthening logistics, building our own terminals
- "TD Era" own logistics center
4. Creation of divisions for work with professionals
- "Perfume" - department of hygiene
5. Creation of a staff of merchandisers and promoters
- "Soyuz - Kvadro" and "Parfum" - create promotion departments
II. Alternative distribution models abroad and in Russia
The economy in Russia developed in non-market conditions until 1991. Now business and the market have appeared in Russia. All over the world, business and the market developed naturally. It follows that the development of business, the organization of industries, as well as the practice of doing business and managing companies, will tend to take the same forms and develop according to the same laws as in other countries. At the same time, only "unique assets" or "skills" that are difficult to copy can be a long-term competitive advantage. This means that the desire to introduce new products, technologies or management methods used by foreign leaders is not always appropriate and justified.
FMCG Market Abroad: Models of Producers
| Transnational companies | Local manufacturers | Specialized companies |
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Example: Nestle, Hershey's Many global brands Various distribution channels | Example: World Finest Choco Doesn't have its own brand The company produces chocolate and chocolate sets on order: production of private label., personalized gift sets | Example: Guittard Chocolate Co. Specialization - expensive chocolate Guittard Sales through distributors |
Exel logistics company
Excel - a complete range of supply chain management services
- Warehousing and distribution
- Road transportation
- International operations and customs
- Integrated IT solutions for supply chain management
- Service for electronic business (e-fulfillment)
- Additional services
- Assembly and packaging
- Home delivery
- Quality control
- Returns processing
- Customer Service Center
- Annual turnover (2001) $6.5 billion
- 60,000 employees
- Operations in 120 countries
Access Business Group - national logistics and distribution company
3 areas of activity of Access Business Group:
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| Logistics services | Production under the contract | Creation and development corporate brands |
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Supervalu is the largest distributor in the USA
Number of employees 54,700 people.
Development models
3 drivers of change in China
- With the entry into the WTO, it became possible for foreign companies to acquire local distributors
- Increase in the share of network retail. The emergence of "clubs".
- Growth in the share of direct distribution, development of 3PL companies.
Distributor specifics
The main component of the business of Russian distributors and wholesalers is commerce, and in the West - logistics.
III. The logic of determining and selecting development alternatives
Alternatives for the manufacturer
- Release of a higher quality product
- Brand promotion
- Entering the national and international market
- Private label production for retail chain
- Refusal of distributors and independent work with retail
- Changing the quality and quantity of distributors, as well as their motivation
- Creation of own distribution centers
- Creation of own retail network
Distributor Development Alternatives
Corporate and business level strategies
- Other business: manufacturing, retail
- Marketing your own brand
Level of product-market strategy and distribution strategy
- Logistics: movement and storage, retail inventory management
- Remote and hard-to-reach regions
- Exclusive distribution of goods of foreign manufacturers wishing to enter the Russian market
- Specialized customers (airlines, restaurants, etc.)
- Specific product groups (frozen foods, etc.)
- Expansion of the range beyond FMCG
- Alliances with national distributors and wholesalers: consolidation
- Alliances with manufacturers and retailers
- Transfer of control to international companies
Topical issues
General logic of strategy development
Strategic Analysis: Internal Factors
Strategy of corporate and business levels | Product-market and distribution strategy |
ECONOMY
RESOURCES and ABILITIES
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ORGANIZATION
ECONOMY
RESOURCES and ABILITIES
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- How is the demand?
- How is the industry structured?
- How are companies organized?
Setting up a business abroad: a distribution model
- How are distribution channels arranged?
- What players are on the market?
- What are the principles of the relationship between the players?
- How are the players structured?
Strategic forecast: product-market and distribution strategy
1. Forecasts of demand development
- How will our consumer behavior change?
- How will the structure of demand change in the market as a whole and in a specific segment?
- How will demand change in the market?
2. Forecast of the development of distribution channels
- How will the share of sales in different channels change?
- What channels will be priority for us?
3. Forecasts of changes in distribution models
- How will our direct competitors develop?
- How will manufacturers, distributors and retailers change?
- How will the relationship between the participants in the distribution system change?
Formulation and selection of alternatives
Formulating strategic alternatives is more of an art than a clearly formalized procedure
1. Preconditions for formulating alternatives
- WHAT TO SELL?
- TO WHOM TO SELL?
- WHERE TO SELL?
2. Formulating Distribution Alternatives
3. Formulation of criteria for choosing a strategic alternative
- RESOURCES
- CAPABILITIES
- CURRENT DISTRIBUTION SYSTEM
Example: decision tree
Approach to resolving the issue "on his own - not on his own"
Example: strategic choice
Detail of the selected alternative
Organization
- Sales, promotional and logistics divisions of the company and counterparties: trading house, sales department, VS
- Organization of logistics: regional warehouses, distribution centers, own retail delivery
- Positions: KAM, sales representatives, merchandisers, HORECA sales representatives
Rules of the game
- Pricing Rules
- Intermediary rules. Motivation of channel members: distribution agreement
- Internal sales regulations
Staff
- Recruitment criteria
- Principles of training of own employees and employees of partners
Common Problems
At the stage of strategic analysis:
- Russian and foreign markets and competitors are rigorously differentiated and evaluated differently ("double standard"). The analysis within the Russian market dominates.
- Competitors are underestimated. Competitiveness and market prospects own products overestimated.
- Weak signals (threats and opportunities) are not taken into account, which in the future can play a decisive role in the development of the company.
At the stage of strategic forecasting:
- Uncritical extrapolation of the current situation and trends for the long term, in particular - a formal trend approach.
- Inconsistency of forecasts with limitations and trends identified at the analysis stage
- Rejection of "bad" forecasts. For example, if it turns out that we are becoming unprofitable, then the forecast is wrong and it needs to be "improved"
At the stage of formulating strategic alternatives:
- The formulated alternatives do not have qualitative differences, the range of considered alternatives is initially narrowed.
- Alternatives are an uncritical reflection of the opinion of the company's leaders
- Alternatives are difficult to compare, their advantages and disadvantages are not formulated
At the strategy implementation stage:
- Inconsistency of the company's final development program with the chosen strategic alternative - avoidance of the most fundamental decisions in favor of operational improvements
- Declarative nature of the development program, lack of strict deadlines, measurable results and specific responsible
- Declaring the developed strategy obsolete due to the emergence of new circumstances and transition to operational management mode
© Research and consulting firm "ALT"
Good day! The question of who are distributors and who is a dealer is one of the most common among people who are considered new to the business. At first glance, these two concepts practically do not differ from each other, but in fact there is a difference, and it is striking.
In order not to get confused in terms, let's try to understand what is the main difference between what is called a dealer and a person called a distributor, and also consider what responsibilities each of these categories of people working in the business world has.
The concept of "dealership" and "distribution" and their main differences
To begin with, let's deal with the question of who a distributor is.
A distributor is a company that distributes the products of the corporation with which it works. Only after that the goods are resold to the company, which is a dealer.
A distributor can be either one person or a large company, so let's figure out what a distribution company is. This is a relatively large organization with a large staff and, as a rule, engaged in bulk purchases of goods directly from the manufacturer.
Distribution companies are usually divided into the following groups:
- Distributors providing their customers with a full range of trading services.
- DFs that have a limited list of services provided.
Distribution of products occurs in two ways:
- Direct deliveries of goods to the company-realizer.
- Work in network marketing.
Understanding what distribution is in trade, and what role it plays in this area of business, we can conclude that:
- distributors can independently act and make specific decisions in a particular market;
- they are in the area of financial risk, so they must act very carefully and carefully;
- in the case of granting a loan to business partners, the intermediary is responsible for the possible risks of financial losses;
- the distributor has the right to independently regulate the price category, as well as organize discount programs, promotions, sales. It can also set deadlines for the sale of certain groups of goods.
Who are the dealers?
A dealer is an intermediary who acts as a repurchase in the trading system. This means that when buying products from a distributor, the dealer then resells them either wholesale or retail.
Having dealt with the question of what a dealer and distributor are, it is important to understand what is the difference between these two terms.
Whoever is engaged in the purchase of certain goods with a view to their further sale, both firms necessarily deal with wholesale trade. However, the difference between a dealer and a distributor is that he only buys the product without having direct contact with its manufacturer. At the same time, a dealer company may have several branches scattered not only throughout the country, but throughout the world, and therefore the distributor with whom the contract was concluded has much more responsibility and obligations.
Difference in concepts
What is the difference between a dealer and a distributor? There are 4 main differences here:
- The difference between a dealer and a distributor is that the second one works for a company engaged in the production of goods, and therefore is obliged to act strictly on its behalf and obey the prescribed charter. In particular, established rules also relate to the issue of prices, so the distributor cannot make independent decisions on this matter.
- A dealership is an independent enterprise that acts solely on its own behalf, buying goods with the help of a distributor for its own money. Upon receipt of the purchased product, the dealer may sell it at the prices that he has the right to establish at his own discretion.
In some cases, the difference between a distributor and a dealer can be quite fine line, therefore, many people who are not versed in the conduct of trade and everything connected with it confuse these two concepts. However, sometimes work as a distributor can be directly intertwined with dealership. In what cases is this possible? Let's figure it out.
Before concluding an agreement between the intermediary and the manufacturer, all the nuances, as well as the conditions for joint work, are carefully discussed, and then fixed in the contract. In some cases, the distributor may act as a dealer, buying goods for his own money. With such a development of events, the buyer is no longer an intermediary, and can sell the purchased goods at a price that he sets himself. Or do with the acquisition what he sees fit.
Two other differences between these concepts are presented below:
- A distribution company is an enterprise engaged in the creation and development of a network specializing in the sale of products. In addition, her responsibilities include the promotion and promotion of the brand that she represents. So, the representative of the company is the same distributor.
- Dealership is a business area, the main task of which is the delivery of goods directly to the consumer, that is, its successful implementation.
It should be noted that the distribution network is not required to work exclusively for one manufacturer. She has the right to choose partners, and may well represent the interests of several firms at once. At the same time, dealers have the right to hire several distributors to purchase the necessary products. Thus, the owners of outlets have the opportunity to sell different types of goods, from food to household chemicals. In this case, each intermediary will be engaged in the delivery of products belonging to a particular category.
Having dealt with the topic of differences between a dealer and a distributor, it is necessary to dwell in more detail on the specifics of the work of each of these parties.
Types of distributors and dealers. Their duties and functions
Distribution is one of the key areas in trade, so people working in this area must be competent and have a steely character. At the same time, their duties to the dealer include:
- providing a detailed report on the results of transactions (purchase and sale of goods);
- timely submission of information to a business partner about the state of the sales market, the activities of competing firms, any changes pricing policy etc.;
- preparation of a detailed marketing plan for purchased products;
- development of characteristics of clients with whom the intermediary cooperates;
- providing a business partner (one or more) with all the necessary information about their activities for a certain period of time (the so-called reporting period).
In this case, the type of distribution does not matter - absolutely all distributors are required to comply with these rules.
Types of distributors can be very diverse:
- General distributors involved in importing products to other countries on their own or with the help of dealers (a dealer network is one of the most effective sales, but for safety reasons, its choice should be taken very seriously and responsibly).
- An exclusive distributor is a company that has the right to cooperate exclusively with one manufacturer. In turn, the manufacturer cannot enter into a cooperation agreement with anyone other than this distribution company.
There is also such a thing as a regional representative. If the question of who the dealers and distributors are and what they do was fully disclosed, then this position has not yet been mentioned. But many people who are just taking their first steps in the field of trade, or intend to infiltrate it, may misunderstand the meaning of the term and get into an awkward position. Therefore, let's dwell on this issue in more detail.
A regional representative is a person who is a rank above a regular distributor. In other words, his responsibilities include:
- promotion, that is, advertising promotion of the products of the company whose interests he represents;
- organization of promotions, auctions, sales;
- work with distributors, etc.
However, this profession is not as simple as it seems, and the regional representative has many more responsibilities than you might think. So, his efforts should be directed to the organization of work not in one particular city, and sometimes not even in the region, but in the whole region. What is the scale of this region, decides the company that has concluded a labor contract with a regional representative. Sometimes it can even be federal district, therefore, such a member of the trade sphere must spend a lot of time and effort on work.
Dealer types
Having dealt with the concept of who a dealer is in trading, it is important to understand the classification of this term. Like distributors, dealers are also divided into 2 groups, in particular, the following:
- Exclusive dealers are companies engaged in cooperation and marketing of products of only one manufacturing company. However, do not confuse them with branded stores or retail outlets - these are completely different concepts.
- What is a franchise dealer and what does he do? Such companies are called authorized dealers. They have the right to sell the products of one or several manufacturers at once, however, they are responsible for the quality of the goods sold only to the consumer.
On top of all of the above, it is worth noting that the relationship in the trading market plays a huge role, both for the distributor and for the dealer. That is why almost all their actions are regulated by an agreement, the violation of which can result in a serious financial collapse for someone who has crossed the established rules.
DISTRIBUTION CHANNELS channels of distribution, COD) - structures connecting the internal divisions of the manufacturing organization with consumers, incl. with the participation of external wholesalers and retailers through which the sale of products and services is carried out. D. to. carry out three groups of functions: the organization of purchase and sale; physical distribution - transportation and storage of stocks; sales service support - financing, insurance, Information Support, pre- and after-sales service. Participants of D. to. - the organizations, divisions and the separate workers united in D. to. and occupied in the course of distribution - creation of consumer value of production ("chain of creation of value", value chain). With their help, the spatial, organizational-temporal, service and financial conditions of accessibility necessary for the consumer are formed. Synonyms of the term "participants of D. to." - “partners in D. to.”, “members of D. to.” (channel members). The organizational form of a distribution channel is a set of characteristics of a distribution channel that determine the type and stability of partnerships between channel participants, the nature and vector of their interaction.
In a competitive environment, the winner is the one whose distribution system is able to provide the necessary level of intensity and quality of distribution. One of critical factors that affect these parameters of distribution efficiency is the organizational form of the channels, which depends on the level of D. to., the type and vector of integration of its participants and other parameters. Their combination determines the variety of organizational forms of the D. c. The choice of the organizational form of the D. c. is an important strategic decision. Under the influence of this decision, power and stable partnerships are formed in the channel, network forms of channels are developing that allow managing distribution, preventing conflicts and, on this basis, achieving strategic market goals. All distribution channels can be conditionally divided into two types: direct and indirect distribution channels. This typology of channels gives an idea of the length (or level) of the channel - the number of channel participants of different order located between the producer and the consumer, who, performing their wholesale or retail functions, "bring" the product closer to the consumer. The level of the distribution channel reflects its formal vertical structure, which can be represented as a zero-level channel, short and long channels, depending on the number of mediation links of different order. Direct distribution channels are zero-level channels. They are of two types: direct marketing channels and personal (personal) sales channels, and are formed by the manufacturer's sales staff and non-resellers. The structure of this channel may include service intermediaries that provide delivery services, mailing list, lending and insurance transactions, etc. Resellers are not included in this structure. In direct marketing channels, sales of products and services occur using mass media and communications, such as traditional and electronic catalogs, the Internet, television, radio, telephone, mail.
In personal sales channels, sales (sales) personnel present products directly during direct contact with the buyer. To do this, the product manufacturer (service provider) can use its sales staff or use the services of an independent sales team of specialists (agency) as performers. Indirect distribution channels include independent resellers - companies that buy and resell products (services) at their own expense, as well as assist in the transfer of ownership from the manufacturer to the buyer (consumer). Depending on who is their main end customer, resellers are divided into wholesalers and retailers. Wholesale and retail intermediaries form channels of indirect (mediated) distribution. Wholesale intermediaries (see) happen two types: wholesale dealers and wholesale agents. Retail intermediaries (see) (retailers - retailers) on their own initiative carry out purchase and sale at the expense of their own and borrowed funds for the subsequent resale of products mainly to individual buyers for final consumption. Indirect distribution channels have one, two, three or more levels and can be short or long. A short channel, as a rule, consists of a manufacturer, one trade (wholesale or retail) intermediary and the end consumer. The long channel is represented by the manufacturer, wholesalers (distributor, dealer) and retail intermediaries (hypermarket), as well as end customers. Depending on the stability of partnerships, three types of channels can be distinguished: single transaction channels, traditional channels and integrated channels / systems. The distribution channel of single transactions is characterized by minimal interdependence of participants, since business relations of channel participants is a one-time phenomenon. The only tool for managing such a channel is the legal framework governing transactions in different commodity markets, and the obligations of the parties governing the process of buying and selling. Such channels are in demand in the real estate, securities, industrial equipment long-term use and in other situations when the buyer's need is of a one-time and non-systematic nature.
The traditional distribution channel consists of one or more resellers, each of which seeks to maximize profits without regard to the opportunities for maximizing profits for this channel as a whole. With such an organization, the participants of the D. to. do not use the potential advantages of stable partnerships and client relationships, giving priority to maintaining autonomy to the detriment of effective integration in the interests of the end consumer. In traditional D. to. the greatest probability of occurrence of conflicts is noted. In the conditions of stabilization of partnership relations in the channel and when the dominant (key) position of one of the participants is established, the participants of the D. to. come to the need for controlled interaction or the formation of integrated channels / systems. Integrated channel/distribution system - an organizational form of a distribution channel in which manufacturers, wholesalers and retailers representing different levels of the channel, and their service partners interact within a single system under the auspices of the channel captain, who determines the integration vector, type of power and nature partnerships. The captain, or integrator, of the channel is one of the channel participants (it can be not only, but also the manufacturer, and sometimes) who has the power necessary to ensure cooperation and interaction of all participants. The vector of integration in the distribution channel gives an idea of the priority orientation of the formation of partnerships. As a rule, there are vertical and horizontal integration of participants in D. to., which results in vertical and horizontal integrated D. to. or vertical and horizontal marketing systems (VMS and HMS, respectively). Vertical integrated distribution channel - VMS consists of a manufacturer, wholesalers and retailers representing different levels of the channel, which interact as a single system for creating customer value of products under the auspices of the channel captain. The type of power of the captain in D. to. determines the nature of partnerships in the Navy and the ways in which its participants interact.
Power in D. to. - the ability of one channel participant to control decision-making in marketing strategy another participant functioning at a different level. In marketing practice, it is customary to distinguish at least three types of power in D. to .: 1) the power of the owner, who owns the entire supply chain in the channel; 2) the power stipulated by the contract, agreement or license agreement of the channel participants; 3) power due to the dominant market position of one of the channel participants. The nature of partnerships under the first type of power is corporate. The contractual nature of relations is formed in accordance with the legal basis (agreement, contract, etc.), which establishes the rights, obligations, and motivation system of participants in a cash market. The objectively dependent nature of relations in a cash market arises under the influence of market conditions, when the volume of production the market share and/or brand capital of one of the channel participants provides him with a dominant position, and the rest of the channel participants fall into an objectively dependent position. The type of power and the nature of partnerships predetermine the organizational forms of the Navy, which are traditionally divided into corporate, contractual and managed. Corporate BMCs coordinate efforts and channel management based on the fact that all channel levels actually belong to one integrated structure (holding, corporation, group of companies, etc.). The instrument of influence and interaction between channel participants of all levels in this case is direct actual ownership. Contractual BMCs assume that the interaction of channel participants of different levels is achieved on the basis of a contractual partnership of participants that form a contractual supply chain. At the same time, contractual IUDs are organized at different levels of retail chains (wholesale, retail) in the form of distribution networks. The distribution network is an integrated channel structure in which there are at least two levels: a distribution wholesale center and trading partners (small wholesale and / or retail) various types interacting under the auspices of Captain D. k. under a single program (agreement). The type of network channel depends on the level at which the integration of its partners takes place (for example, the level of distributor, dealer, retailer). The traditional types of network channels are distribution, dealer, agency, retail networks operating under the auspices of the channel captain, who forms the distribution center, determines the number of its partners, the conditions for their interaction with the distribution center and among themselves, and manages their trading activities. In this case, the channel captain, for example, a manufacturer, has the ability to quickly manage the inventory of a trading partner who works directly with end consumers. This one actually manages the state of inventory in the warehouses of his client, independently carries out all the necessary operations related to deliveries, on behalf of the latter. The supplier is guided by information about the sale or use of a particular product. Customers pay the supplier for goods only when they are sold or used. Contractual naval forces allow the formation of modern integrated logistics systems. Franchise systems/franchise networks are the most effective and most common form of contractual VMS. In this case, relatively small participants in D. to. - franchisees interact with the franchisor (manufacturer - channel captain and license holder), who granted them the exclusive right to sell products, use their trademark, reproduction of technology, business format, standard, which are the object of licensing and sale.
In practice, two main forms of franchising systems are widely represented: - a system of retail franchisees under the auspices of the manufacturer. The latter licenses retailers the exclusive right to sell their products or operates under the auspices of a service firm that licenses retailers the right to provide services under the franchisor's standards, know-how and trademark;
The system of wholesale franchisees under the auspices of the company (manufacturer). The manufacturer gives wholesale intermediaries exclusive licensing rights for assembly, packaging, bottling of products and their subsequent sale under the franchisor's trademark. Managed BMCs are characterized by the fact that the coordination and interaction of channel participants is ensured due to the exclusive influence of one participant with significant brand capital, a well-known trademark, exclusive know-how technology or other key factor in the formation of added consumer value of the products sold. Horizontal marketing system, HMS - an agreement between several participants of D. to. at one of its levels on joint activities to use existing and new marketing opportunities. Channel members combine their marketing efforts and financial resources to jointly form the greatest added value of products (services) for the consumer, which dramatically expands the market potential, improves the quality of products sold, and expands the range of services provided to the consumer. One of the effective modern forms of managed Navy is the so-called "shell" company (hallow corporation). Unlike the corporate Navy, where the entire supply chain is effectively owned by a single owner, the "shell company" acting as an integrator actually owns the brand, as well as the system of partnerships and customer relationships. This means that in such an almost virtual company, the object of outsourcing is not only auxiliary functions in the value chain (supply, supply, etc.), but also the production process itself. Despite the well-known shortcomings of "shell" companies (high degree of dependence on suppliers and contractors, unstable level of labor quality, the possibility of fake goods appearing on the market), this form of managed IUD is becoming more and more popular in Russian market. High degree the flexibility of this business format allows the "shell" company to quickly update, bypassing investments in core production assets, as well as to concentrate marketing efforts on the formation of key competitive advantages, including its own . Modern organizational form A horizontal marketing system is cross-marketing, in which one company uses its existing production facilities, marketing resources, and sales network to market and sell another company's products.
Russian and foreign insurance companies are actively using the possibilities of cross-marketing when they form their partnership programs, for example, together with car dealerships, gas stations, service and repair companies, with authorities state registration cars and with other participants interested in partnership. This allows them to increase the added consumer value of the main product by expanding the range of additional related services that the buyer can purchase at the same time at the point of sale (for example, cars). According to various expert estimates, corporate and managed vertical marketing systems still dominate in Russian distribution practice. Contractual Navy and HMS, which require maximum responsibility, stability of partnerships, contractual discipline and quality of deliveries from the participants of D. to., are developing less dynamically. This circumstance, which limits the potential for regional growth of the domestic industry, is a promising direction for the formation of managed marketing systems based not on financial investments in the supply chain, production and distribution, but on the marketing of partnerships and client relations. L.N. Melnichenko, V.V. Nikishkin Bowersox D. J., Kloss D. J. Logistics: an integrated supply chain. M.: Olimp-Business, 2001. Doyle P. Management: strategy and tactics. St. Petersburg: Peter, 1999. Melnichenko L.N. Fundamentals of marketing management of product distribution channels. Moscow: VNIITE, 2001. Melnichenko L.N., Nikishkin V.V. Distribution Marketing Dictionary // Distribution Channel Management. 2005. No. 1; No. 3. Solovyov B. A. Marketing: textbook. M.: INFRA-M, 2005. Pankrukhin A.P. Marketing: textbook. 6th ed. M.: OmegaL, 2007. Ch. 10. Fukolova Yu. Empty case // Secret of the firm. 2005. No. 23 (110). P. 13. Stern L., El-Ansari A., Cofflan E. Marketing channels. 5th ed., M.: Williams, 2002. Rolincki K. Management channels of distribution. AMACOM, American Marketing Association, 1998. The international encyclopedia of marketing. European Marketing Confederation. Butterworth-Heinemann. Linacre House, Jordan Hill, Oxford OX2 8DP, 1997.
Marketing: a large explanatory dictionary. - M.: Omega-L. Ed. A. P. Pankrukhina. 2010 .
See what "DISTRIBUTION CHANNELS" is in other dictionaries:
sales channels- Way of distribution of products on the market. [Department of Linguistic Services of the Sochi 2014 Organizing Committee. Glossary of terms] EN sales channel Means of distributing products to the marketplace. [Department of Linguistic Services of the Organizing Committee… … Technical Translator's Handbook
Direct (direct) distribution system (direct distribution system) was once called unilateral distribution system, which consisted in selling the product directly to consumers by the manufacturer (Figure 82). So, this is the shortest distribution channel in the vertical section (zero level channel, direct marketing channel). This type of distribution is used by enterprises of air, rail, bus, water transport, hotels, restaurants, etc. The widespread use of direct sales comes from the fact that tourism services can be consumed only in the process of their creation.
Direct implementation has significant advantages when it deals with single services that are in high demand. More complex measures (for example, foreign excursions) with the offer to purchase a package of servants require, as a rule, the use of intermediary services (travel agencies, travel agencies). Most global manufacturers have state or regional sales offices (especially the union of air carriers, shipping lines, large hotel chains). Points of sale of their products (own, shared with other distributors or on a lease basis) are located at airports, railway stations,
bus stations, in business centers and other places of congestion of travel. Customers can purchase the desired services with the intention of immediate use or order for further consumption. Many services are purchased through tickets.
In recent years, automated methods of direct distribution have become widespread. Vending machines for various tickets are installed at airports, bus and railway stations and in the central part of the city. Astin cities. Automation has covered cooking, currency exchange, cash withdrawal from bank accounts through ATMs. Various computer networks and databases are used to obtain aircraft schedule information, as well as the arrival and departure times of various vehicles. Computer networks are designed for different purposes, including for booking (teleshoppinging).
The big advantage of direct distribution is its simplicity, since the travel agent communicates directly with the supplier and avoids unnecessary information, and often takes advantage of additional benefits (for example, many carriers reduce return fares, airlines change economy class seats to tourist category seats). At the same time, if the conditions of corporate transactions are met, direct distribution will ensure high profits for manufacturers. As already mentioned, the price of such a tourist product for the buyer does not depend on his purchase at all.
832 Indirect distribution systems
Opportunities for the development of direct distribution are limited for two main reasons: firstly, for many manufacturers, selling a product through their own network is inefficient, and secondly, for many tourists in a profitable niche to buy from an intermediary than a manufacturer.
The concept of an intermediary covers various institutions of intermediaries that deal exclusively or primarily with direct customer service, commonly referred to in the scientific literature as retailers. The main group of retailers are travel agencies representing the interests of various manufacturers by selling their services. In some countries, manufacturers use social (trade union) distribution channels to the iddil of enterprises and corporations. Supermarkets and shopping malls are increasingly acting as intermediaries for the sale of services.
Travel firms can be considered "pure" retailers. They are also digging out the functions of producers, because, regardless of mediation, they are engaged in the formation of their own product offerings (for example, hell, detours with rich cultural programs), selling them directly to consumers. Large agencies in the sale of their compositions use numerous other intermediaries, acting as a wholesaler.
Presentation and delivery of products from producer to consumer is only one of the many tasks of the distribution channel, because its role is to facilitate the inflow of both material flows (money, product ti) and information (negotiations, order, popularization.
The benefits associated with the functioning of intermediaries in distribution channels can be considered from the point of view of the producer of the tourism product and from the point of view of its consumer.
The cooperation of the manufacturer with intermediaries is an increase in the possibilities for the expansion of additional markets. Creating your own sales network may be an irrational decision for a manufacturer, especially in the context of a small volume of services provided and a small capacity of the local market. Then the right to sell the product should be granted to an intermediary who is already engaged in such activities with other products in this territory. Using a network of a specialized intermediary who has information on the formation of demand in various market segments and extensive contacts with various institutions, built a distribution network in the country and abroad, often for the manufacturer more efficient crocodile.
Intermediary firms also provide many different amenities to tourists themselves. The decision to travel is associated with the need to search for various information, the receipt of which from many manufacturers requires a significant investment of time and money (correspondence, telephone conversations, etc.). A good vacation requires the effort of choosing an interesting area, providing yourself with accommodation, meals, excursion programs and additional services. Contacting an agency facilitates obtaining various information, reducing the frequency of contacts between the manufacturer and the consumer, is of particular importance for both parties (Figure 83-8.3):
b) frequency of contacts = 3 3 = 6. Figure 83. Influence of intermediaries on the frequency of contacts
Access to wide tourist information (brochures, price lists, oral information), which is owned by intermediaries in the place of permanent residence of the consumer, allows not only to save time and costs, but also to make the right choice of place and time and method of travel. The agency offers alternative compositions and service standards in different countries and in different areas. Intermediary chains along distribution channels thus bring the territories where services are created and consumed closer, while causing economic and entrepreneurial activation of the local population.
As the role and economic potential intermediaries, the relationship between the participants in the distribution channel changes. If earlier the manufacturer independently chose an intermediary, then in market conditions large world-class travel agencies were formed as independent entities that perform the functions of channel integrators. They independently choose co-operators and performers who offer certain after gi, considering them as integral parts of the distribution mechanism used in various ways.
A multilevel distribution system allows two or more resellers to operate (Figure 84). Such channels are typical for the sale of service packages. Individual manufacturers drop their products to wholesalers (wholesalers or tour wholesalers) as well as travel organizers (tour operators), who package services and offer retail. Sometimes additional organizations with a certain specialization are involved in the distribution process, organizers of congresses, conventions, competitions, travel consultants, public organizations, local history societies, hunting clubs, etc. a set of basic services, such as accommodation, meals and transport, as well as the type and equipment of the local area for holding "round tables", information support, selection of a team of translators, organization of a press conference, etc. The second part of such activities is knowledge cultural and local lore features of the surroundings, requires the cooperation of the travel agency with various organizing committees.
Figure 84. Tini of distribution channels for a tourist product: a - direct distribution channel b - distribution channel a with one intermediary (single-stage) c - distribution channel with two intermediaries (two-stage new) d - distribution channel with three intermediaries (three-stage)
A multi-level distribution system (see Figure 84, b, c, d) provides consumers with similar conveniences as a two-level one. Additional benefits arise from the participation of wholesalers in the channel, who, by buying products from manufacturers together, cause an expansion of the offer for consumers. Bulk selling allows wholesalers to apply low prices. It should be noted that, unlike retail, the wholesaler does not receive commissions from the proceeds from the sale of services, and the source of his income is a share in the price of the product.
The choice of distribution channel is a decision that will have an impact on the future activities of the enterprise, and changing it can be difficult. The choice of distribution channels is associated with the convenience that constant contacts with certain market partners bring (short negotiations, knowledge of needs and strategies, knowledge of customs, greater mutual trust, etc.). However, in different periods (as well as at the same time), the adoption may use various channels distribution. Each channel can also promote the sale of the product to other sales systems not related to the specific firm. Members of the article channel also sell other manufacturers' products on par with their own. Many air and bus companies, as well as some railway carriers, sell tickets from other carriers, shipping lines offer not only certain routes for sea sightseeing lovers, but also tickets for air transport, car rentals, and hotel reservations. Wholesalers and retailers provide not only transportation and accommodation services, but also the services of tour guides and organizers of entertainment events, which a tourist can buy on occasion, being in a certain area. So, cutting services and their packages are available in one link of the distribution channel.