Flashcards in Industrial Sales & Distribution Deck (10)
Explain direct dristribution
Model used by organizations to move products from production to buyer without the use of wholesalers and retailers. It is usually shorter and less costly. An organization using direct distribution must sell and distribute that product using their own warehouse and sale staff.
Explain indirect distribution
Firms need intermediaries to do the work - wholesale distribution. It forces the firms to trust others to care for their products and interact with their customers. This model removes start up costs and is simpler to manage
What is a multi-channel distribution system?
It involves abusiness using more than one distribution channel. This is getting more common. By using retailers and e-commerce. Ex: Apple - 450+ retail stores in over 15 countries, online stores, multiple retail partners
What are the drawback of Multi-Channel Distribution?
- Potentail for channel "conflict" (competing with retailers by also selling direct)
- Can be complex to manage
- Danger that the pricing strategy becomes confused (for the customer)
What are the benefits of Multi-Channel Distribution?
- Allows more target market segments to be reached
- Customers increasingly expect products to be available through more than one channel
- Enables higher revenues (e.g. Retailers have no sock, but it can be bought online)
What decisions does the firm have to make regarding distribution?
- Assessing nu., size and geographic concentration of customers
- Evaluating how product characteristics should influence distribution channel structure
- In case of new products - still use the same channel or change?
- Evaluating economic condition, legal restrictions and other specific features of the region
- Deciding the degree of market exposure for the product
- Selecting realiable ordering system
- Choosing appropriate delivery system for transporting products
What are the disadvantages with direct channels?
- Manufacturer needs to spend time on activities in which it does not have expertise instead of focusing on main tasks
- Limited product choice for consumers
- Less costumers can be reached
What are the advantages of direct distribution channels?
- Manufacturers interact directly with consumers
- Intermediaries are eliminated, leading to better price for consumers
- More control regarding distribution
What are the advantages for indirect distribution channels?
- Producers are able to focus on their field of expertise
- Better coverage
- Less complicated and cheaper