Samenvatting Marketing Channel
Management
Table of Contents
Module 1 – Setting the Scene.............................................................................................2
Module 2 – Channel Design................................................................................................4
Module 4 – Partnerships...................................................................................................11
Module 6 – Assortment & Promotions..............................................................................15
Module 8 – Private Labels................................................................................................26
Module 10 – Value Disruptors..........................................................................................30
1
,Module 1 – Setting the Scene
What does retail/channel management mean? Place (= getting the product to consumers)
- Involves relations between (brand) manufacturers and (retail) intermediaries
- But, it’s ‘complicated’… and ever changing…
Marketing channel = path to the consumer
- A set of organizations that work together
- To make goods available
o FMCG / CPG
o Consumer durables
o Industrial products
o Services
- For end users
o Consumers
o Business consumers
Modus Operandi
Access to consumers = POWER Power shift from manufacturers to retailers
More and more stores are shut down from retail to e-commerce
- Price
o Pricing algorithm compares the lowest prices across the retail sector for particular
products – including those retailers selling in bulk and where membership costs are
needed (such as Costco)
o Moving towards individual pricing
- Fulfillment
o Network of Distribution Centers (DCs)
o Prime Subscription guarantees free 2-day delivery (or used to…)
The end-result: Consumer 2.0 consumers want everything, right there, right now, at the lowest
cost and zero willingness to pay.
Unsustainable cost structure: consumers want everything simple, frictionless and fast delivery
and fulfillment is leading to unsustainable costs Fulfillment & Delivery = Online’s Achilles heel
The store to the rescue… cutting cost & adding convenience (e.g. Walmart sees its store estate as
key for successful e-commerce fulfillment)
Networks of stores to act as (mini) DCs need for new traffic drivers
- Store personnel pulls from assortment
- Allows for faster delivery
- Allows for instore pick up & returns
BUT… rethinking the drivers of store traffic customers
– especially young ones – say that they actually prefer
physical stores for browsing and experiencing products.
The retail renaissance part II: from online to offline
“Consumers want that choice – they don’t want
companies’ operational complexity thrust upon them
pushing them to only one way to do business.”
“E-commerce hasn’t killed physical retail. It’s made it more important than ever.”
2
,Control of the Shelf: SKU rationalization is a key priority for the world’s leading retailers almost all
retailers are trying to reduce #SKUs, since often, a small amount of the SKUs are responsible for a
large amount of the total sales.
- Control of the digital shelf: invisibility
How do you ‘bribe’ your way to the consumer? Price, price, price
3
, Module 2 – Channel Design
Indirect channels
- Independent/third parties
o Buy & own products
o Hold inventory
o Set consumer price (since the retailer owns the product, it is entitled to determine
the price)
- Physical B&M (Brick & Mortar) or digital
Direct channels
- Company-owned
o Manufacturer holds inventory
o Manufacturer sets consumer price
- B&M (Brick & Mortar) or web store
Why go direct?
- Higher (gross) profit margin for manufacturer
o Even at a lower consumer price, higher (gross) profit margin is possible
o COGS (costs of goods sold)
So, why do not all manufacturers go direct?
- Higher gross profits do not automatically mean higher net total profit
Why go indirect?
- Middlemen may add value impact on sales
o Bulk breaking: allow buying in small lots
o Assortment convenience: offer a wide variety of goods
Manufacturers often produce a limited assortment, whereas consumers
wish and expect a larger assortment
o Time convenience: reduce waiting time
Middlemen hold inventory, so the consumer can buy a product at any point
in time without waiting
- Distribution costs: number of contact lines impact on costs
o Without middlemen, each manufacturer needs to come in contact with
every consumer. A middleman reduces these contact lines
o Non-routine transaction = more costly than routine transaction
Sending and invoicing to one middleman is more convenient and
cheaper than doing this for every individual consumer
Why use middlemen at all? You can do away with the middleman, but you can’t do away with the
middleman’s function (don’t just look at the benefits, but also at the cost side).
4
Management
Table of Contents
Module 1 – Setting the Scene.............................................................................................2
Module 2 – Channel Design................................................................................................4
Module 4 – Partnerships...................................................................................................11
Module 6 – Assortment & Promotions..............................................................................15
Module 8 – Private Labels................................................................................................26
Module 10 – Value Disruptors..........................................................................................30
1
,Module 1 – Setting the Scene
What does retail/channel management mean? Place (= getting the product to consumers)
- Involves relations between (brand) manufacturers and (retail) intermediaries
- But, it’s ‘complicated’… and ever changing…
Marketing channel = path to the consumer
- A set of organizations that work together
- To make goods available
o FMCG / CPG
o Consumer durables
o Industrial products
o Services
- For end users
o Consumers
o Business consumers
Modus Operandi
Access to consumers = POWER Power shift from manufacturers to retailers
More and more stores are shut down from retail to e-commerce
- Price
o Pricing algorithm compares the lowest prices across the retail sector for particular
products – including those retailers selling in bulk and where membership costs are
needed (such as Costco)
o Moving towards individual pricing
- Fulfillment
o Network of Distribution Centers (DCs)
o Prime Subscription guarantees free 2-day delivery (or used to…)
The end-result: Consumer 2.0 consumers want everything, right there, right now, at the lowest
cost and zero willingness to pay.
Unsustainable cost structure: consumers want everything simple, frictionless and fast delivery
and fulfillment is leading to unsustainable costs Fulfillment & Delivery = Online’s Achilles heel
The store to the rescue… cutting cost & adding convenience (e.g. Walmart sees its store estate as
key for successful e-commerce fulfillment)
Networks of stores to act as (mini) DCs need for new traffic drivers
- Store personnel pulls from assortment
- Allows for faster delivery
- Allows for instore pick up & returns
BUT… rethinking the drivers of store traffic customers
– especially young ones – say that they actually prefer
physical stores for browsing and experiencing products.
The retail renaissance part II: from online to offline
“Consumers want that choice – they don’t want
companies’ operational complexity thrust upon them
pushing them to only one way to do business.”
“E-commerce hasn’t killed physical retail. It’s made it more important than ever.”
2
,Control of the Shelf: SKU rationalization is a key priority for the world’s leading retailers almost all
retailers are trying to reduce #SKUs, since often, a small amount of the SKUs are responsible for a
large amount of the total sales.
- Control of the digital shelf: invisibility
How do you ‘bribe’ your way to the consumer? Price, price, price
3
, Module 2 – Channel Design
Indirect channels
- Independent/third parties
o Buy & own products
o Hold inventory
o Set consumer price (since the retailer owns the product, it is entitled to determine
the price)
- Physical B&M (Brick & Mortar) or digital
Direct channels
- Company-owned
o Manufacturer holds inventory
o Manufacturer sets consumer price
- B&M (Brick & Mortar) or web store
Why go direct?
- Higher (gross) profit margin for manufacturer
o Even at a lower consumer price, higher (gross) profit margin is possible
o COGS (costs of goods sold)
So, why do not all manufacturers go direct?
- Higher gross profits do not automatically mean higher net total profit
Why go indirect?
- Middlemen may add value impact on sales
o Bulk breaking: allow buying in small lots
o Assortment convenience: offer a wide variety of goods
Manufacturers often produce a limited assortment, whereas consumers
wish and expect a larger assortment
o Time convenience: reduce waiting time
Middlemen hold inventory, so the consumer can buy a product at any point
in time without waiting
- Distribution costs: number of contact lines impact on costs
o Without middlemen, each manufacturer needs to come in contact with
every consumer. A middleman reduces these contact lines
o Non-routine transaction = more costly than routine transaction
Sending and invoicing to one middleman is more convenient and
cheaper than doing this for every individual consumer
Why use middlemen at all? You can do away with the middleman, but you can’t do away with the
middleman’s function (don’t just look at the benefits, but also at the cost side).
4
