Summary Marketing Channel Management Examples in consumer goods markets
The term “retailers” is used in business to consumers.
A slightly more complex channel is where a wholesaler
Lecture 1. Setting the scene is in between. The wholesaler normally buys more
products from one or different manufacturers and then
1.1 What is a marketing channel? sells it to the distributor. Wholesaler never sells
• A set of organizations directly to consumers. We are going to talk about how
• That work together channels are managed. There are different companies
• To make goods available involved and you have to ensure that they work to the
o FMCG/CPG (fast moving consumer goods, consumer packaged goods) same goal. The channels can be very complex, they are
o Consumer durables more complex in B2C than in B2B.
o Industrial products
o Services
1.2 Why is a channel course important?
• For end users Why marketing graduates should be knowledgeable about channel management
o Consumers • Channels are universal
o Business customers o Behind every product/service, one or more channels
• Channels are important in economic terms
A set of organizations so that means that it is not only one organization. They are o Total sales through channels, 1/3 of worldwide annual GDP
cooperating, join forces and cooperate to make goods available for end-users (that is the • Channels are an underutilized source of competitive advantage
purpose) and need other companies to obtain their goals. The end-users can be o Differentiation potential
consumers, but also business customers, which are other firms. FMCG can be sugar, o Creation of entry barriers
drinks, chocolate, almost everything you can buy in the supermarket. Consumer durables
are computers, smartphones, while industrial products are chemicals, electronic Differential potential becomes more important since products commoditize. This term
components. Services are the bank, fast food restaurants, and laundry services e.g. The means that products become more similar and it is more difficult to differentiate, e.g. PC’s
CPG industry is ahead with trends. Channels are pipelines to make products available. and laptops. If you cannot differentiate it on product characteristics, a channel can be the
The illustration is a channel in the simplest form. Intermediaries are differentiation. E.g. Dell sold their products online. It’s even a problem in the high-tech
any parties that are not the manufacturer and not the end-user. We industry. You can copy a product, so can you also copy a distribution channel? It takes
will talk about the relationship between the manufacturer and the more to develop and copy a distribution channel. Sometimes the distributor will even
intermediary (upstream), in the second part of the course we talk refuse to sell to competitors. Due to entry barriers, it is more difficult to enter the market
about the relation between intermediary and end-user (downstream). for new competitors. It takes a long time to set up a channel system since you need to
We move products form the manufactory to the end users. gain trust for example, and it isn’t easy to copy this quickly. That is precisely why these
Examples in B2B markets systems give such an advantage. Underutilized, many managers see channels as given.
In the first channel, there is just one intermediary. What is When it’s there, you don’t have to change them. Channels are taken as constant,
the difference between the first and the second one? Why promotion is a more popular factor to change. Be aware that channels are not given and if
is the box there higher up? The distributor purchases the you make changes in the right way that can led to very big advantages. Even more than
goods from the manufacturer and becomes owner of the promotions! Channels are everywhere behind products and services, they are not always
goods, if he doesn’t sell the goods, he has an extra stock. visible but are everywhere, you have to make channel management decisions. When
If the distributor is not able to sell all the good, the risk is thinking about gaining a competitor advantage, also think about the distribution channel.
for the distributor. An agent sells the manufacturer’s Channels are taken as given or a necessity.
products, but doesn’t own them, he doesn’t buy the
goods on forehand. Therefore, the risk is still for the
manufacturer if the agent does not sell all the products.
Made by Evita Schippers
,Why marketing graduates should be knowledgeable about retail management Growing retailer scale
• Power shift from manufacturers to retailers Internationalization
• Reasons • Carrefour in 2015, > 30 countries
o Growing retailer scale
o Growing retailer sophistication Companies operate in multiple
countries all over the world.
Retail is very dynamic, constantly changing. Most important is the power Retailers used to operate in one
shift. The big picture is that in the 1970’s brand manufacturers were country, but they are becoming
deep powerful parties in the market, e.g. Unilever, P&G. Brand more international. Carrefour is
manufacturers were calling the shots. Retailers in that time were just the most international retailer in
small local stores and not the big chains we know nowadays. The the world, they operate in more
manufacturers determined almost everything for the retailers, but this than 30 countries. They have enriched their scale and power. Not
changed. This changed over the years, around 2000, the retailers have only Carrefour is internationalizing, but also Walmart, Schwartz.
become more powerful and they are calling the shots. Now we see that the Mergers and acquisitions
retailers are the heavy weights and have more to say in the market than the More and more retailers are merging to gain power.
manufacturer. They tell the manufacturers they want a sales promotion or In the 70’s retailers were small chain stores, but over
don’t want to sell the new introduction. Reasons? Retailers have become the years they started merging and acquiring other
big companies, and sophistication, they have become smart companies. chains. Therefore, they became really large. Metro
Did you know … bought 85 Walmart stores in Germany and this made
• What is the single largest company in the world? Metro grew by 25%. ASDA bought stores from the
o Walmart retailer Netto, and became much more powerful.
Also, the merge of Delhaize and Albert Heijn made this chain very powerful. In the media
Walmart has 11.695 stores, 2.3 million employees and an annual turnover of 482 billion it even is called ‘a new big beast emerges’. The fastest growing retailer in the world is
euros (in comparison with GDP Sweden which is 445 billion). Jumbo since they did so many mergers (C1000, Super de Boer).
Buying groups
Growing retailer scale
Buying groups are alliances where
Schwarz is the group behind Lidl stores. The
retailers work together to jointly
projection is that Amazon will be moving
purchase their products. AMS is a
upward in the upcoming years. It might
buying group which represents
become the second biggest retailer in 2019.
retailers as Hagar, Ahold, Morissons.
Which forces fuel rising retailer power? They bundle their purchase volumes
• Growing retailer scale and buy the products together. The
o Internationalization purchase volume is much bigger and
o Mergers and acquisitions therefore they can ask for better
o Buying groups quantity discounts. They are putting
• Growing retailer sophistication more pressure on manufacturers for
o Multichannel operations better prices. Mostly there are
o Retailers becoming brands, private labels retailers from all over the world in the
buying group, no direct competitors. Even big retailers do this. They jointly purchase
How do the retailers grow so big? There are multiple reasons including internalization, products. They can raise volumes than separately. Because they buy so much they can ask
mergers and acquisitions, and buying groups. for lower prices. AMS is the buying group of Ahold. They work together and collectively
cover the part of Europe that has been colored in blue.
Made by Evita Schippers
,Growing retailer sophistication Better availability of consumer data
Multichannel operations • Consumer data will be the biggest differentiator in the next two
• Jumbo lets shoppers order groceries online and designate a pick-up time to three years. Whoever unlocks the reams of data and uses it
• Fnac is opening a pop-up store for three months in the strategically will win
popular ski resort area of Albertville. Shoppers will be able to
collect online orders at the pop-up or request home delivery In the past retailers were not very sophisticated. Retailers are close to their consumers
• Walmart is installing collection lockers in its stores and is and have all these data, but didn’t know what to do with all the data. At Dellhaize it was
crowdsourcing deliveries by using customers to deliver even worse since they worked with different datasets and they were unable to merge the
internet order on their way home in exchange for a discount datasets. This is changing. Retailers know how to use the data. Data is not the same as
• Shoppers waiting for their flight in Gatwick Airport’s departure having knowledge. You have to do something with it! 9AH Bonus, ICI Paris card). Retailers
zone can order basic groceries for delivery when they arrive have more access to consumers data because of loyalty cards. They have gigantic data
back from their trip sets. They used to collect them but not use them. Nowadays, they analyze the data and
they get extra insight in how consumers react. Retailers are increasingly using this data.
Because retailers become smarter, they become more powerful. And the winner is …
Retailers becoming brands, private labels The winners are in the end the supermarkets.
Nowadays retailers use multiple channels, and becoming The supermarkets are winning and squeezing the manufacturers.
brands themselves. They do not only distribute the brand But it is not that simple. On the other hand, if you read newspapers
products, but also compete with the brands. You nowadays about the retailers, the retailers have some big difficulties to make
see private labels everywhere, they make the retailers more a profit in comparison with the international brands.
powerful. They can leverage the brand manufacturer they
won’t sell their products because they can also sell their • However, the outlook is not all rosy. Some shifts are giving
own products (private labels). In the past, these private labels were seen as generics, but retailers a hard time
nowadays retailers see these products as true brands. Retailers want to increase the
brand equity of their private labels since they are not per se lower quality or lower priced. This is because of two reasons.
Own private label of Amazon phone is Fire Phone, Aldi has an own laptop Medion. It also
Did you know …
makes them more powerful, an alternative to the international brand and it becomes
• What caused Ahold’s stock price to plummet with last weekend?
more difficult to get a place in the shelve. Retailer can choose to put private labels on
shelve. Retailers know the cost structure very well and can use this in his negotiations to
Ahold’s stock price plummet because
reduce the prices of the manufacturer.
Amazon bought whole foods market for
13.7 billion dollars. Who increased
• Walmart’s private label business is more than twice as P&G’s total business
power? Amazon is purchasing whole
foods and they are becoming even
bigger. Investors have reacted in
multiple ways. Not only Ahold’s stock prices plummet, but also those from other retailers.
The reason what that Amazon announced they were going to decrease the prices in whole
foods. What will happen? Very likely that another price war is starting. That’s a
consequence where the market margins are razor thin. Despite the fact they are so big,
they feel the competition. Brand manufacturers’ stock prices dropped. Reason, retailer
power via brand manufacturers increased. Why did they drop? You see a powerful retailer
getting more powerful. We see a more concentration going on in the field. If the retail is
getting more concentrated they are forced to offer lower prices etc.
Made by Evita Schippers
, Some shifts giving retailers a hard time
• Price price price
• Digitalization
o Perfect price transparency
o Added ‘free’ service
Retailers are dropping their prices and engage in
price wars what even reduce their margins and
profit. They suffer more from online retailers.
Showrooming, go to brick and mortar retailers
and sales person explains all the details and using
his time and expertise but do not buy there you check on your cellphone and buy it there
because it is cheaper and you already received the information about the product. But still
the retailer gives the ‘free service’. Because of digitalization there is perfect price
transparency.
And the winner is …
Retailers have become more
powerful, but they are also
struggling... But not only retailers
are winning, manufacturers are
trying to fight back. It is a very
exciting industry because a lot can
change over time.
Made by Evita Schippers
The term “retailers” is used in business to consumers.
A slightly more complex channel is where a wholesaler
Lecture 1. Setting the scene is in between. The wholesaler normally buys more
products from one or different manufacturers and then
1.1 What is a marketing channel? sells it to the distributor. Wholesaler never sells
• A set of organizations directly to consumers. We are going to talk about how
• That work together channels are managed. There are different companies
• To make goods available involved and you have to ensure that they work to the
o FMCG/CPG (fast moving consumer goods, consumer packaged goods) same goal. The channels can be very complex, they are
o Consumer durables more complex in B2C than in B2B.
o Industrial products
o Services
1.2 Why is a channel course important?
• For end users Why marketing graduates should be knowledgeable about channel management
o Consumers • Channels are universal
o Business customers o Behind every product/service, one or more channels
• Channels are important in economic terms
A set of organizations so that means that it is not only one organization. They are o Total sales through channels, 1/3 of worldwide annual GDP
cooperating, join forces and cooperate to make goods available for end-users (that is the • Channels are an underutilized source of competitive advantage
purpose) and need other companies to obtain their goals. The end-users can be o Differentiation potential
consumers, but also business customers, which are other firms. FMCG can be sugar, o Creation of entry barriers
drinks, chocolate, almost everything you can buy in the supermarket. Consumer durables
are computers, smartphones, while industrial products are chemicals, electronic Differential potential becomes more important since products commoditize. This term
components. Services are the bank, fast food restaurants, and laundry services e.g. The means that products become more similar and it is more difficult to differentiate, e.g. PC’s
CPG industry is ahead with trends. Channels are pipelines to make products available. and laptops. If you cannot differentiate it on product characteristics, a channel can be the
The illustration is a channel in the simplest form. Intermediaries are differentiation. E.g. Dell sold their products online. It’s even a problem in the high-tech
any parties that are not the manufacturer and not the end-user. We industry. You can copy a product, so can you also copy a distribution channel? It takes
will talk about the relationship between the manufacturer and the more to develop and copy a distribution channel. Sometimes the distributor will even
intermediary (upstream), in the second part of the course we talk refuse to sell to competitors. Due to entry barriers, it is more difficult to enter the market
about the relation between intermediary and end-user (downstream). for new competitors. It takes a long time to set up a channel system since you need to
We move products form the manufactory to the end users. gain trust for example, and it isn’t easy to copy this quickly. That is precisely why these
Examples in B2B markets systems give such an advantage. Underutilized, many managers see channels as given.
In the first channel, there is just one intermediary. What is When it’s there, you don’t have to change them. Channels are taken as constant,
the difference between the first and the second one? Why promotion is a more popular factor to change. Be aware that channels are not given and if
is the box there higher up? The distributor purchases the you make changes in the right way that can led to very big advantages. Even more than
goods from the manufacturer and becomes owner of the promotions! Channels are everywhere behind products and services, they are not always
goods, if he doesn’t sell the goods, he has an extra stock. visible but are everywhere, you have to make channel management decisions. When
If the distributor is not able to sell all the good, the risk is thinking about gaining a competitor advantage, also think about the distribution channel.
for the distributor. An agent sells the manufacturer’s Channels are taken as given or a necessity.
products, but doesn’t own them, he doesn’t buy the
goods on forehand. Therefore, the risk is still for the
manufacturer if the agent does not sell all the products.
Made by Evita Schippers
,Why marketing graduates should be knowledgeable about retail management Growing retailer scale
• Power shift from manufacturers to retailers Internationalization
• Reasons • Carrefour in 2015, > 30 countries
o Growing retailer scale
o Growing retailer sophistication Companies operate in multiple
countries all over the world.
Retail is very dynamic, constantly changing. Most important is the power Retailers used to operate in one
shift. The big picture is that in the 1970’s brand manufacturers were country, but they are becoming
deep powerful parties in the market, e.g. Unilever, P&G. Brand more international. Carrefour is
manufacturers were calling the shots. Retailers in that time were just the most international retailer in
small local stores and not the big chains we know nowadays. The the world, they operate in more
manufacturers determined almost everything for the retailers, but this than 30 countries. They have enriched their scale and power. Not
changed. This changed over the years, around 2000, the retailers have only Carrefour is internationalizing, but also Walmart, Schwartz.
become more powerful and they are calling the shots. Now we see that the Mergers and acquisitions
retailers are the heavy weights and have more to say in the market than the More and more retailers are merging to gain power.
manufacturer. They tell the manufacturers they want a sales promotion or In the 70’s retailers were small chain stores, but over
don’t want to sell the new introduction. Reasons? Retailers have become the years they started merging and acquiring other
big companies, and sophistication, they have become smart companies. chains. Therefore, they became really large. Metro
Did you know … bought 85 Walmart stores in Germany and this made
• What is the single largest company in the world? Metro grew by 25%. ASDA bought stores from the
o Walmart retailer Netto, and became much more powerful.
Also, the merge of Delhaize and Albert Heijn made this chain very powerful. In the media
Walmart has 11.695 stores, 2.3 million employees and an annual turnover of 482 billion it even is called ‘a new big beast emerges’. The fastest growing retailer in the world is
euros (in comparison with GDP Sweden which is 445 billion). Jumbo since they did so many mergers (C1000, Super de Boer).
Buying groups
Growing retailer scale
Buying groups are alliances where
Schwarz is the group behind Lidl stores. The
retailers work together to jointly
projection is that Amazon will be moving
purchase their products. AMS is a
upward in the upcoming years. It might
buying group which represents
become the second biggest retailer in 2019.
retailers as Hagar, Ahold, Morissons.
Which forces fuel rising retailer power? They bundle their purchase volumes
• Growing retailer scale and buy the products together. The
o Internationalization purchase volume is much bigger and
o Mergers and acquisitions therefore they can ask for better
o Buying groups quantity discounts. They are putting
• Growing retailer sophistication more pressure on manufacturers for
o Multichannel operations better prices. Mostly there are
o Retailers becoming brands, private labels retailers from all over the world in the
buying group, no direct competitors. Even big retailers do this. They jointly purchase
How do the retailers grow so big? There are multiple reasons including internalization, products. They can raise volumes than separately. Because they buy so much they can ask
mergers and acquisitions, and buying groups. for lower prices. AMS is the buying group of Ahold. They work together and collectively
cover the part of Europe that has been colored in blue.
Made by Evita Schippers
,Growing retailer sophistication Better availability of consumer data
Multichannel operations • Consumer data will be the biggest differentiator in the next two
• Jumbo lets shoppers order groceries online and designate a pick-up time to three years. Whoever unlocks the reams of data and uses it
• Fnac is opening a pop-up store for three months in the strategically will win
popular ski resort area of Albertville. Shoppers will be able to
collect online orders at the pop-up or request home delivery In the past retailers were not very sophisticated. Retailers are close to their consumers
• Walmart is installing collection lockers in its stores and is and have all these data, but didn’t know what to do with all the data. At Dellhaize it was
crowdsourcing deliveries by using customers to deliver even worse since they worked with different datasets and they were unable to merge the
internet order on their way home in exchange for a discount datasets. This is changing. Retailers know how to use the data. Data is not the same as
• Shoppers waiting for their flight in Gatwick Airport’s departure having knowledge. You have to do something with it! 9AH Bonus, ICI Paris card). Retailers
zone can order basic groceries for delivery when they arrive have more access to consumers data because of loyalty cards. They have gigantic data
back from their trip sets. They used to collect them but not use them. Nowadays, they analyze the data and
they get extra insight in how consumers react. Retailers are increasingly using this data.
Because retailers become smarter, they become more powerful. And the winner is …
Retailers becoming brands, private labels The winners are in the end the supermarkets.
Nowadays retailers use multiple channels, and becoming The supermarkets are winning and squeezing the manufacturers.
brands themselves. They do not only distribute the brand But it is not that simple. On the other hand, if you read newspapers
products, but also compete with the brands. You nowadays about the retailers, the retailers have some big difficulties to make
see private labels everywhere, they make the retailers more a profit in comparison with the international brands.
powerful. They can leverage the brand manufacturer they
won’t sell their products because they can also sell their • However, the outlook is not all rosy. Some shifts are giving
own products (private labels). In the past, these private labels were seen as generics, but retailers a hard time
nowadays retailers see these products as true brands. Retailers want to increase the
brand equity of their private labels since they are not per se lower quality or lower priced. This is because of two reasons.
Own private label of Amazon phone is Fire Phone, Aldi has an own laptop Medion. It also
Did you know …
makes them more powerful, an alternative to the international brand and it becomes
• What caused Ahold’s stock price to plummet with last weekend?
more difficult to get a place in the shelve. Retailer can choose to put private labels on
shelve. Retailers know the cost structure very well and can use this in his negotiations to
Ahold’s stock price plummet because
reduce the prices of the manufacturer.
Amazon bought whole foods market for
13.7 billion dollars. Who increased
• Walmart’s private label business is more than twice as P&G’s total business
power? Amazon is purchasing whole
foods and they are becoming even
bigger. Investors have reacted in
multiple ways. Not only Ahold’s stock prices plummet, but also those from other retailers.
The reason what that Amazon announced they were going to decrease the prices in whole
foods. What will happen? Very likely that another price war is starting. That’s a
consequence where the market margins are razor thin. Despite the fact they are so big,
they feel the competition. Brand manufacturers’ stock prices dropped. Reason, retailer
power via brand manufacturers increased. Why did they drop? You see a powerful retailer
getting more powerful. We see a more concentration going on in the field. If the retail is
getting more concentrated they are forced to offer lower prices etc.
Made by Evita Schippers
, Some shifts giving retailers a hard time
• Price price price
• Digitalization
o Perfect price transparency
o Added ‘free’ service
Retailers are dropping their prices and engage in
price wars what even reduce their margins and
profit. They suffer more from online retailers.
Showrooming, go to brick and mortar retailers
and sales person explains all the details and using
his time and expertise but do not buy there you check on your cellphone and buy it there
because it is cheaper and you already received the information about the product. But still
the retailer gives the ‘free service’. Because of digitalization there is perfect price
transparency.
And the winner is …
Retailers have become more
powerful, but they are also
struggling... But not only retailers
are winning, manufacturers are
trying to fight back. It is a very
exciting industry because a lot can
change over time.
Made by Evita Schippers
