1. Distribution Chapter 13

2. What is distribution? Determining the best methods and procedures so that prospective customers can locate, obtain, and use a business’s products and services

3. Free Enterprise Is based on the matching of production and consumption decisions. Is based on matching supply and demand between consumer and producer.

4. Utilities affected by Distribution Economic utility – amount of satisfaction a consumer receives from using a product or service –Time utility: makes sure that the product is available when needed –Place utility: makes sure that the product is available at the right place to be sold to customer

5. Channel of distribution All the organizations and individuals who participate in the movement of goods from producer to consumer

6. Distribution adjusts the following differences Differences in quantity Differences in assortment (products from many different manufacturers Differences in location (customers typically do not live next to the producer) Differences in timing of production and consumption by consumer

7. How does distribution save time and $$$$ Consumers do not have to spend time locating products Cost to have products shipped to you Through marketing distribution there are experts getting the best prices to keep costs down

8. Types of distribution channels Direct – the producer sells the product directly to the customer Example: Farmer to customer Used when: 1. Small number of consumers 2. Consumers in a small geographic area 3. Product is complex – meet specific needs

9. Indirect distribution There are other businesses (intermediaries) between the producer and the customer Example: Levis Manufacturing to Warehouse to Retailer to Customer

10. Wholesalers Are companies who assist with distribution activities between businesses. –Used to help producers with marketing tasks to keep costs down –Main activities are: Buying Selling Transporting Storing

11. Rack Jobbers and Drop Shippers Rack jobbers manage inventory and merchandising for retailers by counting stock, filling it when needed, and maintaining store displays –Example: Pepsi, Frito Lay Drop shippers own the goods they sell but do not physically handle them –Example: Coal, lumber, chemicals

12. Retailers Sell typically to the consumer directly for profit Buy their goods from manufacturer or wholesaler Display their products so customers can evaluate them Do promotions for their products/services

13. Types of retailers Brick and Mortar retailers – sell goods to the customers from their own physical stores Examples:

14. Types of retailers Automatic retailers – Vending machines Direct mail and catalog retailers

15. Retailers (Cont.) TV home shopping – Online Retailing – Value of sales (million dollars) E-commerce as percent of total sales Percent distribution TotalE-commerceTotalE-commerce 234,667112,79148.1100.0 6,8245,21476.42.94.6 26,04719,50774.911.117.3 22,08811,02649.99.49.8 5,6083,09255.12.42.7 71,3295,9948.430.45.3 17,68414,21180.47.512.6 3,6672,24461.21.62.0 13,1589,89475.25.68.8 6,3965,35183.72.74.7 7,9535,73672.13.45.1 7,0304,82068.63.04.3 5,9263,60460.82.53.2 29,16714,09648.312.412.5 11,7908,00267.95.07.1

16. How is retailing changing? More retail stores offering on-line shopping Many retail stores have catalogs to order from Speed and convenience in retail stores is important Customer service is very important

17. Agents Do not own the goods they sell Act as intermediaries by bringing buyer and seller together –Real Estate Agents –Food Brokers

18. Factors that affect distribution decisions. Multiple channels – Selling to both industrial and consumer users –Selling cookies at Kroger (consumer) and to airlines (industrial) for customers on plane –Control vs. cost – Determining the control they want to keep over the distribution process and the costs and profitablity

19. Exclusive Distribution Protected territories for distribution of products in a given geographic location Automobile dealers Franchises (McDonalds)

20. Selective Distribution A limited number of outlets in a geographic area are used to sell the product –Maintain the image of the product Ralph Lauren – Top department stores (Macy’s) Liz Claiborne – Top department stores

21. Intensive Distribution The use of all suitable outlets to sell a product - Wal-Mart, Kroger, drugstores, etc. –Hanes socks –Household products –Types of foods

22. Distribution factors (continued) E-Commerce – using the Internet to sell products to customers and industrial buyers Foreign Markets – Look at cultural distributions in other countries to sell how are different –GM sells automobiles through franchised retail outlets in US –In Taiwan, they own their own retail outlets.

23. Physical Distribution Includes transporting, storing and stock handling of products. –Trucking is the most frequently used transportation Advantages: Convenient, can deliver to door, reduces packaging cost, rapid delivery of goods Disadvantages: Traffic jams, equipment breakdowns, traffic accidents, size and weight restrictions

24. Rail transportation Move heavy and bulky freight such as coal, steel, and lumber Fishyback – shipping loaded truck trailers on a ship Piggyback – shipping loaded truck trailers on railroad flatcars

25. Railroads Advantages – relatively low cost, can ship large quantities, seldom stopped by bad weather Disadvantages – Lack of flexibility, cannot reach as many places

26. Water transportation Oldest method of travel –Advantages: Lowest cost –Disadvantages: slowest, hard to get to port location

27. Pipelines Used to transport oil and natural gas (200,000 miles of pipeline in U.S.) Advantages: operation costs are small, products move slowly and continuously, not affected by weather Disadvantages: High initial expense to build

28. Air Transportation The fastest mode of transportation Advantages: Speed of delivery, reduces inventory and storage costs Disadvantages: Very expensive, mechanical breakdowns, delays caused by bad weather

29. Transportation service companies U.S. Postal Service – run by government, small packages by parcel post or fourth- class mail

30. Express Carriers Deliver small, lightweight packages up to 150 pounds, offer overnight and regular delivery. Faster the delivery time = more expensive –UPS –FED Ex

31. Inventory Storage Private warehouses – designed to meet the specific needs of the customer (TTAI having a warehouse to store their parts) Public Warehouse – offer storage and handling to individuals and companies (boat storage, residential, commercial) Example: A to Z Self Storage

32. Distribution center Speeds delivery of goods and minimizes storage costs. Example: Wal-Mart Distribution Center in London