MAR3023 Exam 3 Material Live Lecture April 1st 2014 Part 1 and 2 Channels and Retailing Now Focusing on PLACE How do we get the product to the consumer Coke Overall Market Share 43 Pepsi Overall Market Share 31 Coke Fountain Channel Non Fountain Channel 70 36 Pepsi Fountain Channel Non Fountain Channel 20 35 Pepsi needs to focus on PLACE where the consumer can buy it Outline Channels and channel strategy o Direct and indirect channels o Channel members and functions o Channel conflict Retailing o Retail types and functions o Retail productivity measures o Non store retailing Channels and Channel Strategy Why are channels important to consider If you think about what you are doing and how products and services get to the right place at the right time then you can understand the entire process and make it run the most efficient way What do we mean by channel o A set of interdependent organizations involved in making a product or service available for use or consumption everyone involved in making the shipment happen Channel Strategy Channels provide an efficient means of getting your products to your customers and your customers to your products Where will the consumers find the product How will it get there How will the consumer get there Store online etc Producer and consumer are part of every channel What Type of Channel Direct From producer to consumer no one else have most control good because no risk of having a middleman bad because it requires a lot of resources Indirect Good because customer can get your product easily one stop shopping bad because less control because of the middleman o Typical indirect channel o Manufacturer wholesaler retailer consumer Why use intermediaries at all Transaction efficiency If the consumer can go through a retailer it reduces the number of transactions for the consumer and producer Channel Members Intermediaries middleman Wholesalers who buys from the manufacturer and sells to the retailer o Merchant wholesalers 80 of wholesalers buy inventory take ownership then sell to retailer o Agents don t take ownership sell on behalf of manufacturer make the deal and get paid for it o Manufacturer s sales branch vs sales office owned by manufacturer o Sales Branch takes possession is owned by the manufacturer act likes a wholesaler carries inventory o Sales Office NO possession is owner by manufacturer don t hold the inventory still makes the sale Retailers more on this later o Sales physical entities o Non store online shopping catalog shopping How do channel members help your firm Logistics functions o Assorting where to put products o Transporting move the product Transactional functions o Selling o Risk taking they buy your product expecting to sell it Facilitating functions o Financing o Market research what is selling and what is not Assign functions to the channel member who can most efficiently and effectively perform them How do channel members help your customers Information provide info on a complex product so customer understands what it is and how to use it Lot size customers want smaller quantities most of the time Assortment retailer provides a broad range of products Pens After sales service consumer might need help with repairs or with paper installation Logistics makes it easier for the customer to get the product Time utility convenience speed Place Utility convenience prestige being at a luxurious store Make decisions about channel with these considerations in mind Channel Conflict Horizontal conflict between all different entities all trying to get the same product to the consumer Movie Studio sends a movie to different theatres Netflix cable etc all of these compete with each other to sell the movie to the consumer Vertical conflict between different levels within the channel Movie Theatre is angry at the studio for giving the movie to Netflix too soon Example of two Starbucks next to each other Part 2 PRICE RETAILING What is Retailing All activities involved in selling renting and providing goods and Retailers Wholesalers services to ultimate consumers use sell primarily to final customers for personal use sell primarily to other forms for resale or business Scope of Retailing Annual sales 4 9 Trillion in sales Number of stores 3 million retail stores Number of employees 26 million Percentage of US workforce 10 17 How do retailers ADD value Providing assortments offer a variety of products Breaking bulk allows consumer to buy smaller amounts Holding inventory have it for you when you run out Providing services repair preparation etc Types of General Merchandise Retailers Discount stores o Wal Mart Target o Very low price low service o Broad shallow selection Department stores o Macy s JC Penney Belk o Moderate high price service o Broad average to deep selection Specialty stores o Gap Limited Foot Locker o Generally high price service o Narrow average to deep selection Power retailers Category Killers o Best Buy Home Depot Office Depot o Low price service varies o Narrow very deep selection Convenience stores o 7 Eleven Circle K o Higher prices than discount stores low service o Limited selection of high turnover products Trends in the prevalence of these stores Retail Locations Types of Locations Lifestyle center open air not a strip mall storefronts face each other smaller than a traditional mall provides a nicer shopping experience Regional mall multiple anchor stores specialty stores food court sales are slowing because it s less convenient to get there Power Center Mix of all big stores Strip center small stores by each other Central business district downtown Stand alone store single store Retail Productivity Measures New Sales Per Square Foot o Used to compare departments or stores o Net sales Total sales minus returns o Net sales per square foot example o Total Sales 350 000 o Returns 50 000 o Net Sales 350 000 50 000 300 000 o Size of store 600 square feet o Net Sales per square food 300 000 600 square foot 500 square foot Stockturn Rate SR Used to compare products or brands with one store how quickly you turnover your stock o SR Cost of Goods Sold COGS Average Inventory AI at cost o Average Inventory AI Beginning Inventory BI Ending Inventory EI 2 o Example BI 34 000 EI 38 000 COGS 234 000 AI 34 000 38 000 2 36 000 SR 234 000 36 000 6 5 turns per year Same Store Sales Growth o Basic measure of retail performance o Adjusts for expansion in number of stores o 2010 Sales New Store Sales 2009 Sales 2009 Sales o 50