FACTORS TO BE CONSIDERED WHEN SELECTING A DISTRIBUTION CHANNEL
- Customer characteristics-this include type of customer, geographic dispersion of buyers ie location to manufacturers, customer buying habits and the outlets they purchase from.
- Product characteristics-this includes perishability, product usage(industrial-direct or household-indirect).
- Company characteristics-this includes a company objectives, financial status ,past channel experiences and the desired degree of channel control.
- Middle men characteristics-this includes financial status, storage capacity, availability and the services they offer.
- Competitive characteristics-for some products, it is preferable to use the channels that are used by other competitors e.g. fast moving consumer goods.
- Environmental characteristics-this includes economic, political, legal, social, cultural and technological factors that may affect the channel selection.
- Nature of the goods ie heavy, bulky etc
- The number of terminals
- Transportation cost
- The distance to be covered ie water and air are mainly used for long distance products.
- Speed and urgency of the goods.
- The packaging requirements
- Availability of the channel
- Flexibility of the channel to be used ie can it be used in the interior regions?.
RETAILING.
This refers to all activities involved in selling goods or services directly to final consumers for their personal, non-business use.
Retailer-Business whose sales come primarily from retailing
- Check-out scanning systems.
- Online transaction processing.
- Electronic fund transfer.
- Electronic data interchange.
- In-store television
- Improved merchandise-handling systems
- Rfid
- Wireless transactions.
This roles are mainly classified into three main scopes; consumers, wholesalers and manufactures. They include.
- Bringing easy access to goods.
- Offers a wide variety of goods.
- Stocks goods for consumers
- Bulk breaking large stocks for consumers as well as wholesalers and manufacturers.
- Offers after sale services.
- Ensures regular supply of goods
- Offers credit facilities.
- Offers outlet for goods.
- Offers storage facilities
- Offers financial services by buying from the wholesalers and manufacturer.
- They usually necessitate or conduct product promotion for goods.
- Offers financial advice to product response by consumers.
Wholesaler refer to a firm engaged primarily in whole sailing activity, while whole sailing refers to all the activities involved in selling goods and services to those buying for resale/business use.
Selling and promoting
Buying and assortment( a group of similar things having different sizes, colour and quality) building
Bulk-breaking
Warehousing(storage).
Price stability –This is possible mainly due to storage that happens .During low production seasons, stored goods are released in the market and stabilize supply in the market.
Transportation
Financing
Risk bearing
Market information(advice)due to contact with manufacturers
Management services and advice
FUNCTIONS OF MIDDLEMEN/INTERMEDIARIES.
- Contacting function-this involves being link between the producer and the consumer.
- Market feed back(communication)-they relay information to consumers about the product and collect feedback from the customers to the manufactures.
- Breaking the bulk-this is in smaller quantities that customers can afford.
- Physical distribution-this is transportation of prducts from producer to the consumer.
- Demand stimulation function-through advertising, personal selling and sales promotion.
- Advancing credit to their clients
- Storage function-warehousing goods on behalf of the producers.
ROLE OF IT/E- COMMERCE IN DISTRIBUTION.
E-commerce /It has improved distribution system and enhanced communication among members.it involves use of computers, mobile phones, internet, electronic payments e.g. Mpesa etc.
1.Use of mobile phones and emails helps channel members to communicate in fast manner on issues regarding distribution of products.
2.Helps in monitoring and branding movement of goods.
3.Use of EDI among channel members helps them to always to be in touch to each other.
4.Marketing may also be carried out by channel members through internet.
5.Use of computerized system in storage helps channel members to store their goods in modern way which is more effective.
6.Use of electronic payments among channel members helps to pick transaction and is also cheap compared to traditional methods e.g. ATMS,MPESA etc.
7.Use of modern ways of ordering goods e.g. making online orders and use of emails assists in saving costs and continuity in production processes.
8.Use of e-sourcing in locating suppliers.
INTENSITIES OF DISTRIBUTION.
Intensities of distribution involve determining the number of intermediaries that will be used at each level and includes:
- I) Intensive Distribution
This is the strategy whereby a product is distributed by as many outlets as possible. This is used for products, which the consumer requires a great deal of location convenience e.g cigarettes, Newspapers milk, bread, Scratch cards,soft drinks etc.
- II) Selective distribution
Manufacturers select only a few distributors for a new product and is especially. For speciality and shopping goods e.g. Appliance like fridge, cookers.
Advantage of selective Distribution
- a) It enables the produce to gain adequate market coverage
- b) Easy to control the channel
- c) Less costly compared to intensive distribution strategy.
III) Exclusive distribution This is getting into an agreement with a particular middle man where the manufacturer gives exclusive rights to the marketer to distribute the product. This severely limits the numbers of intermediate or channel members. Used when the producer wants to maintain the control of the service levels. Also here, the middleman in return agrees not to carry any merchandise of the competition e.g. Bata, Simba Telecom (Safaricom Dealer),Marshall,-exclusive distributor of electronics and DT Dobie for Mercedes.
Advantages of exclusive distribution
- a) The rational behind this strategy is that the specialization in one line may greatly increase sales and profits particularly the premium price obtained through exclusive distribution
- b) Certain service level is maintained.
- c) Control by the manufacturer
- d) Standardized price
Disadvantages
- a) Requires greater partnership between the seller and re –sellers e.g. Bamburi.
- b) Training of channel members thus costly.
LOGISTIC MANAGEMENT FUNCTIONS.
This are activities that support the physical distribution of goods and they include;
- Warehousing-this is performance of administrative and physical functions associated with storage of goods and materials. the functions include receiving-identification-inspection-storage of goods for issue to production process-retrieving goods.
- Transportation-this is the movement of finished goods from production operation to consumer using various modes of transportation e.g. road, air ,water and rail.
- Order processing-this is the efficient receipt of orders, processing the orders, ensuring efficient delivering and preparation of invoices for payment.
- Stock/inventory control-this is maintaining of stocks in sufficient levels to avoid overstocking and running out of stocks before the next delivering.
- Clearing and forwarding-clearing and forwarding agents are service providers who assist importer/exporter to arrange for transport, documentation and customs clearance for international shipment.
