15-1 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. NickelsMcHughMcHugh Nickels Cover

15-2 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 1515 Distributing Products Quickly and Efficiently 15-2

15-3 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Channel of Distribution Marketing IntermediariesMarketing Intermediaries –Wholesaler –Retailer –Agents/Brokers Role of IntermediariesRole of Intermediaries –Create Efficiency –Value vs. Cost

15-4 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Utility Form Time Place Possession Information Service

15-5 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Wholesale Intermediaries Merchant WholesalersMerchant Wholesalers –Full-Service –Limited-Function –Rack Jobbers –Cash-and-Carry –Drop Shippers Business to Business (B2B)Business to Business (B2B)

15-6 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Percent of B2B Commerce from Internet *Excludes Service Industries Source: Source: Forrester Research Inc.

15-7 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. They All Started in 1962 Company 1 st Store Objective Wal-Mart Rogers, Ark. July 1962 Slash prices. Makeup difference in volume Target Roseville, MN May 1962 Discount retailer with strong sense of value Kmart Garden City, MI March 1962 Bring discount store concept to suburban malls Source: Business 2.0, June 2003, p. 38.

15-8 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Wal-Marts Top Selling Products Sales in Millions Source: Owen Thomas Lord of the Things, Business 2.0, March 2002, p. 32.

15-9 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Identify a Retailer in Your Area Supermarket Supermarket Convenience Store Convenience Store Discount Store Discount Store Department Store Department Store Category Killer Category Killer Specialty Store Specialty Store Factory Outlet Factory Outlet Superstores Superstores Catalog Showroom Catalog Showroom

15-10 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Is It Becoming a Wal-Mart World? *There are 3,400 stores in the U.S. Source: Source: Wal-Mart Annual Report 2003

15-11 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. The Wheel of Retailing PassageofTime 2. Retail Outlet 1. Retail Outlet Starts 3. Retail Outlet 4. New Outlet Enters Adds Service Adds Service Raises Prices Raises Prices Better Location Better Location Adds Service Adds Service Raises Prices Raises Prices Better Location Better Location Low Price Low Price Limited Service Limited Service Out-of-way Location Out-of-way Location Low Price Low Price Limited Service Limited Service Out-of-way Location Out-of-way Location Higher Prices Higher Prices Higher Status Higher Status Higher Prices Higher Prices Higher Status Higher Status Low Price Low Price Limited Service Limited Service Low Price Low Price Limited Service Limited Service

15-12 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Retail Store Distribution IntensiveIntensive Selective Selective Exclusive Exclusive

15-13 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Non-Store Distribution E-tailingE-tailing TelemarketingTelemarketing Vending Machines, Kiosks, CartsVending Machines, Kiosks, Carts Direct SellingDirect Selling Multilevel MarketingMultilevel Marketing Direct MarketingDirect Marketing

15-14 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Top Internet Shopping Sites Source: USA Today, Snapshots Site Hits in Millions Week Ending 12/1/02

15-15 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Why Buy Gifts Online? Source: Dreaming of a Green Christmas, Newsweek, November 11, 2002, p. E24

15-16 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Why People Dont Shop Online 1.It isnt secure 2.It will jeopardize my privacy 3.Usually must pay shipping charges 4.Not enough selection 5.Cant touch/try things first 6.No satisfaction guarantee 7.Returns are a hassle 8.Wont arrive on time 9.Hard to find things online 10.Enjoy getting out of house to shop Source: blink,

15-17 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Necessary Website Features Source: Dreaming of a Green Christmas, Newsweek, November 11, 2002, p. E24

15-18 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Channel Cooperation Corporate DistributionCorporate Distribution Contractual DistributionContractual Distribution Administered DistributionAdministered Distribution Supply Chain ManagementSupply Chain Management

15-19 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. The Supply Chain

15-20 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Logistics Physical Distribution Physical Distribution Inbound Inbound Materials Materials Outbound Outbound Reverse Reverse Information Information

15-21 McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Transportation & Storage Modes RailroadRailroad Motor VehiclesMotor Vehicles WaterWater PipelinePipeline AirAir IntermodalIntermodal WarehousingWarehousing –Storage –Distribution