This article continues theme of retailing and wholesaling in the form of distribution. Distribution is the logistics required to get the product to the customer.
In the manufacturer’s view, the degree of directness is the way in which the product is distributed to the consumer. This depends on the nature of the product, market, and characteristics of the manufacturers. The nature of the product is how technically complex the product is and how long or short the channel of distribution should be to educate the consumer about the product – eg. push or pull strategy. There are also service requirements which dictates that the greater the service needs, the shorter the channel utilized with educated sales people. The more bulk the item is, the shorter the channel should be to reduce transport to the consumer. The nature of the market depends on the extent of demand. The more demand, the shorter the channel to directly supply the consumer. There must be a ratio between geographical dispersion towards concentration of demand. More dispersed products favors longer channels to reach areas of demand; meanwhile, the more concentrated of demand favors shorter channels to target concentrated areas. Last but not least, the characteristics of manufacturers plays a role in distribution. The bigger the manufacturer, the shorter the channel by in house middlemen functions. If the breadth of the product mix is wider than a shorter channel must be used to meet mixed line middlemen and if the product mix is narrower than a longer channel must be used towards single line wholesalers.
There is also a selectivity of distribution in which the manufacturer must determine how many middlemen should be used of each type. This depends on the market exposure or how the product meets demand. If there is a surplus of inventory then the costs are risky for using too many middlemen. There are typically three degrees of distribution, intensive, selective, and exclusive. Intensive distribution applies most towards convenience goods where there is a routine buying behavior for consumers such as chewing gum. These products are essentially relatively inexpensive to imply impulse decisions by the consumer. Selective distribution applies mainly towards only the best kinds of goods like specialty goods which are similar to convenience goods except the goods usually hold a recognized brand and shopping goods which require purchase through extensive decision making. Exclusive distribution is typically given a geographic area with exclusive middlemen. This is used for specialty or shopping goods and provides more channel control, greater promotion, and minimizes cannibalization.
Like all business, distribution encounters competition which is known as distribution conflict. There is horizontal competition which is competition between companies of the same type and in the same level of distribution – eg. Osh vs Ace Hardware. Another is intertype competition which is competition between organizations of different types but same level of distribution – eg. Osh vs Safeway. This example may sound absurd but isn’t due to scrambled merchandising which means stores like Safeway stocks goods like light bulbs, locks, and measuring tape which are irrelevant to grocery goods but are commonly needed. The vertical conflict thus occurs when there is conflict within different levels of distribution channels. The distribution theory of the Wheel of Retailing may also take place in which retailing starts as low status stores with little atmosphere, customer service, and low prices. Then the retailer expands its atmosphere and breadth of product mix via the aforementioned scrambled merchandising to increase prices and profit. Then the retailer becomes vulnerable to low status stores with little atmosphere and low prices which creates the Wheel of Retailing.
Distribution is a bit unknown in the perspective of manufacturers. I hope this article broadens your mindset as a consumer or marketer of the decisions that must be made in order to distribute your favorite goods to stores to reach us consumers.
[image-credits]
