Homework
Substantially EXCEED minimum 400 word initial post and you will typically far exceed this minimum to adequately respond to the problems asked of you.
One of your major focuses is on distribution channels and understanding the advantages and disadvantages of the different channel choices that a company can make. To get a deeper appreciation for the importance of channel choices, you are going to look at three different retailers and discuss the distribution channels that they have chosen to use. As a result, you will first research the following companies and determine the major distribution channels they use based on the types of channels outlined in your Reading:Types of channels You will have your choice of a range of channels.
These choices include:
1. Selling direct. This is where you directly "touch" the customer by selling a product or delivering a service, either yourself or through a sales force, mail order, the telephone, or over the Internet. When using a direct sales channel, nothing stands between you and the people who buy your product or service for their own use.
2. Using an agent. An agent is an individual who sells directly to others, usually end-users, on your behalf. For example, agents are typically used in the financial services and insurance industries. Chances are good, for instance, that you buy your insurance from an agent, who in turn represents one or more insurance companies. Yet agents are also common in a wide range of industries, including the arts. Agents typically mark up products to higher prices than consumers would pay if they were purchasing directly from the company.
3. Brick and mortar retailers. These are businesses that sell products or services directly to the end-user from a fixed location, like a store. The business model here is straightforward: The retailer buys the product (or service) from the producer, or from a wholesaler or distributor, and then sells it to the end-user. A brick and mortar retailer is responsible for maintaining and merchandising inventory, advertising and attracting customers, convincing end-users to make a purchase, and collecting payment.
4. Online sales. Otherwise known as bricks and clicks. Many businesses sell directly to end-users from their own or others' websites. They can sell merchandise they have produced themselves or that has been made by others. Online retailers may take actual possession of inventory and do fulfillment, or they may have "drop ship" arrangements with manufacturers or distributors, so they don't have the responsibility and cost of owning inventory. Online retailing isn't mutually exclusive with other channels. Many manufacturers or wholesalers have websites where retailers can go to purchase large lots of goods, or where, in fact, consumers can buy products directly from the manufacturer. Many businesses use a combination of both brick-and-mortar and online sales channels.
5. Licensing. Under a licensing agreement, you grant someone else the right to sell something whose intellectual property rights you own. For instance, you may have great designs for T-shirts, which you make and sell in the United States, and decide that you'd like to expand your market globally. By licensing your T-shirt designs to international clothing manufacturers, you could expand your reach and income with little investment. Perhaps you've developed a software program that can be embedded in a number of other programs or in hardware-you could license your software to be included by other producers. Photographers license images to be sold as art or for use in textiles, while engineering firms license their designs or specifications to other businesses, even competitors.
6. Wholesalers and distributors. Rather than having to reach and serve customers yourself, using a wholesaler or distributor saves you the need and cost of building a large sales force and fulfilling orders, especially small ones. Wholesalers and distributors sell to others, typically to those who, in turn, sell to end-users (such as retailers). Wholesalers and distributors are often dismissed as the classic "middleman"-the person (or business) that stands between you and your end-user. Yet they serve a valuable function. Many large retailers-think "big-box stores"-simply won't deal with small suppliers; they use distributors to reduce the number of vendors they have to interact with. For your part, you may not be able, or willing, to deal with all the fulfillment requirements of your many retailers, let alone have the wherewithal to sell to them. Distributors and wholesalers take a percentage of the sales price, but they save you the cost and hassle of finding and servicing retail customers yourself.
References
Abrams, R. (2012). Entrepreneurship: A Real-World Approach. Palo Alto: PlanningShop. ( this is for the above info)
One of your major focuses is on distribution channels and understanding the advantages and disadvantages of the different channel choices that a company can make. To get a deeper appreciation for the importance of channel choices, you are going to look at three different retailers and discuss the distribution channels that they have chosen to use. As a result, you will first research the following companies and determine the major distribution channels they use based on the types of channels outlined in your Reading:
Amazon
Wal-Mart
Costco
After you have researched the distribution channels leveraged by the above companies, answer the following:
What distribution channel or channels does each company leverage to sell their products?
What are the advantages and disadvantages of the various channels that each company has chosen to take advantage of?
Are there any channels that each respective company could take advantage of to increase sales and that they are not currently using? If so,
how could they begin to leverage the additional distribution channel(s)?
AdvAntAgeS And dISAdvAntAgeS OF vArIOUS ChAnneLS chAnnel type ADvAntAges DisADvAntAges
Direct; ADV. You keep more of your money because there's no middleman involved. You know who your customers are and "own" them, so you can contact them for future sales or get direct feedback from them on how to improve your products or services. You're in a position to sell the customer additional prod- ucts and services. DISA .You're entirely responsible for reaching and servicing the customer. You have to do the marketing, make the sale, and provide post- sale support. You're also responsible for bill- ing and bad debts.
Agent; ADV. Agents go out and market your goods or services, so you have more time to spend on your creative and business endeavors. they negotiate for you, often getting you a better deal than you could get for yourself. they handle contracts and other business and legal details, and provide you with advice and guidance. DISA. They take a percentage of your income- usually 15% or 20%. Because it's usually an exclusive relationship, if they underperform, you're precluded from going elsewhere. their reputation in the industry is your reputation, so if you have a less-than-good one, your cre- ative and business endeavors will suffer.
Bricks and Mortar retailers; ADV. Retailers deal with customers. they maintain the retail space and are responsible for its costs, merchandising, marketing, and cus- tomer service. they purchase your goods, usually on a nonreturnable basis. If you have a good retailer, they can sell your products into markets you wouldn't have been able to enter on your own. DISA.You sell to them at a deep discount, typi- cally 50%, and they often also demand good payment terms (such as 90 days). they can be extremely demanding, and they own the customer. You have no quality control over the environment. If you're dependent on just a few retailers, their economic well-being can make or break your company.
Licensing; ADV. An additional revenue stream with little or no up-front expense on your part. Licensors allow you to extend your brand to other product lines. DISA. Quality control is always a concern. You run the risk of diluting your brand or hurting your brand image if your licensing partners have different ideas or quality standards than you do. the potential for intellectual property theft is greater.
Online sales; ADV. A low-overhead way to reach and service cus- tomers. You gain worldwide reach. You're in direct touch with the customer, and can try to sell to them again. You can track your custom- ers' preferences and behaviors precisely. DISA. Can be difficult to service customers from all over the world. Can eat up time responding to queries and requests for help. You must build and maintain a marketing-oriented website. You must fulfill orders yourself.
Wholesalers and Distributors; ADV. Distributors act as your sales force and can be a highly efficient way to reach a large mar- ket. they perform billing and collections and handle paperwork. Frequently, they manage warehousing and storage as well. they service the demands of large accounts. they give you the ability to concentrate on aspects of your business other than selling and distribution. DISA. They take a percentage of your sales income, and they own the customer relationship. If they represent too many companies, your products or services might not be well repre- sented.