ch02channel participants

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Chapter 2Chapter 2

The Channel Participants


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Major Participants in the Marketing ChannelMajor Participants in the Marketing Channel22

Objective 1:

Producers&

Manufacturers

WholesaleIntermediaries

RetailIntermediaries

Intermediaries

Consumers Industries

Final Users

* Commercial Channel * Target Markets


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11Objective 2:

Why shift distribution tasks to intermediaries?Why shift distribution tasks to intermediaries?

Producers

&Manufacturers

lack expertise

lack economies of scale

Intermediaries

spread high fixed costs

over large quantities ofdiverse products

achieve economies of

scope and economies of

scale


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22

Example:Example: Distribution of CrayonsDistribution of Crayons

Huge order processing

facility

Huge inventory

Several warehouse

locations

Transportation of

product to consumers

= cost prohibitive

Manufacturerdirect

to customers


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22Objective 3:

Major Types ofWholesalersMajor Types ofWholesalers

Merchant

wholesaler

Agents, brokers,

&commission

merchants

Independentmiddlemen

Manufacturers'

sales branches&

offices

Manufacturerowned

All Wholesale Firms


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22MerchantWholesalersMerchantWholesalers

BuyTake title to

Store

Handle

Large quantities of products

Resell to

Retailers

Industrial,

commercial,

or

institutional

concerns

other

Wholesalers


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22

Owned & operated bymanufacturers

Distributemanufacturers

products atwholesale

Some wholesale allied &supplementary products

purchased from other

manufacturers.

Manufacturers Sales Branches & OfficesManufacturers Sales Branches & Offices

Separated from manufacturing plants


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Major Trends in Wholesale StructureMajor Trends in Wholesale Structure

22Objective 4:

69.7% Manufacturers sales branches

& offices

60.8% Wholesale trade

57.8% Merchant wholesalers

50.0% Agents, brokers, & commission

merchants

19871997


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22Trends inTrends in SizeSize && ConcentrationConcentration

Measured by: Types of Wholesalers

Size of

wholesaler

Majority are small businesses

Sales volume Nearly 40% of all firms have annual sales ofless than $1 million

# of Employees per firm Almost 50% of firms had fewer than 5

employees

Economic concentrationin terms of % of total

sales

50 largest manufacturers sales branches &offices garnered nearly 53% of sales for this

type


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22

Merchant WholesalersMerchant Wholesalers SpecializeSpecialize inin

Performance Distribution TasksPerformance Distribution Tasks

Objective 5:

Operate at high levels of effectiveness and efficiency

Average cost curves lower than those for their

suppliers

Provide market coverage

Make sales contacts

Hold inventory Process orders

Gather market information

Offer customer support


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MerchantWholesalers DistributionMerchantWholesalers Distribution

Tasks Serve CustomersTasks Serve Customers

22

Assure product availability

Provide customer service Extend credit & financial

assistance

Offer assortment convenience

Break bulk

Help customers with advice &

technical support


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22Agent Wholesalers Distribution TasksAgent Wholesalers Distribution Tasks

Manufacturers

Agents

Market coverageSales contacts


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22Agent Wholesalers Distribution TasksAgent Wholesalers Distribution Tasks

Market coverage

Sales contacts

Order processing

Marketing

information

Product availability

Customer services

Selling agents


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22

Agent Wholesalers Distribution TasksAgent Wholesalers Distribution Tasks

Brokers

Market coverage

Sales contacts

Order processing

Marketing

information

Product availability

Customer services


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Agent Wholesalers Distribution TasksAgent Wholesalers Distribution Tasks22

Commission

Merchant

Market coverage

Sales contacts

Order processingBreaking bulk

Credit

Holding inventory


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Retail StructureRetail Structure22Objective 6:

By Ownership ofEstablishment

By Kind ofBusiness(Merchandise Handled)

By Size of Establishment

By Degree of Vertical

Integration By Type of Relationship with

otherBusiness Organizations

By Method of ConsumerContact

By Type of Location

By Type of Service Rendered

By Legal Form ofOrganization

By ManagementOrganizations or OperationalTechnique

Alternative Bases for Classifying Retailers


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KindKind--ofof--Business ClassificationsBusiness Classifications22

Retail Trade

Motor vehicle & parts dealers

Furniture & home furnishings

stores Electronics & appliance

stores

Building material & gardenequip. & supply dealers

Food & beverage stores

Health & personal carestores

Gasoline stations

Clothing & clothing

accessories stores Sporting goods, hobby, book,

& music stores

General merchandise stores

Miscellaneous store retailers Nonstore retailers


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11

Concentration in RetailingConcentration in Retailing

In 1997

4% of all retail firms

accounted for nearly 80%

of total sales!!


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Distribution Tasks Performed by RetailersDistribution Tasks Performed by Retailers

22

The role of the retailer in the distribution

channel, regardless of his size or type, is to

interpret the demands of his customers and tofind and stock the goods these customerswant, when they want them, and in the waythey want them. This adds up to having the

right assortments at the time customers are

ready to buy.

Charles Y. Lazarus

Objective 8:


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22

Distribution Tasks Performed by RetailersDistribution Tasks Performed by Retailers

Offer manpower & physical facilities close to

consumers residences

Provide personal assistance to help sell products Interpret and relay consumer demand

Divide large quantities into consumer-sized lots

Offer storage

Remove risk by ordering in advance of the season


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Retailers Growing Power in MarketingRetailers Growing Power in Marketing

ChannelsChannels

22Objective 9:

Increased size & buying

power

Becomepower retailers

&

categorykillers

Application of advanced

Technologies

Information technology &

the Internet; threetailing

Use of modern marketing

strategies

Modern techniques;

relationship marketing


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Facilitating Agencies in Marketing ChannelsFacilitating Agencies in Marketing Channels

Objective 10: 22

Transportation agencies

Storage agencies

Order processing agencies

Advertising agencies

Financial agencies

Insurance companies Marketing research firms

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