Module 1- Setting the scene
What does retail or channel mean?
➔ Words that may pop up thinking about retail or channel: Shopping, Amazon, connection, excitement,
sales skills & selling, assistance, black Friday and discounts, targeted ads, data, inventory, ready to use
goods, B2C, rapidly changing, sustainable growth? And overconsumption
In short ‘place’ refers to how a product gets from the manufacturer to the customer. The main goal is getting the
product to the consumers. This involves managing the relationships between brand manufacturers and retail
intermediaries (like stores and agents). This process is complicated and ever-changing, due to factors like new
technologies and shifts in consumer behavior. You have to rely on others to do it.
Retail= refers to the final step in the supply chain. It is the process of selling goods or services directly to the
public for their own use. This is what we commonly experience as shopping.
Amazon
Channel= refers to all the different ways or layers a brand can use to get its product to the consumer. A brand
might choose to sell directly through its own website, through a large retail chain, or through an online
marketplace like Amazon.
The simplest distribution channel
The figure visualizes the journey of a product from its origin to the end consumer.
- Manufacturer: this is the party that produces the goods or services. They are at the top of the chain,
initiating the flows of products.
- Middle men (reseller or agent): any channel member other than the manufacturer or consumer. It
facilitates the movement of the product.
• Reseller -> buy the products from the manufacturer and become
the owner of the inventory. Because they own the products and
can set their own prices.
• Agent -> do not buy the products. Their role is to facilitate the
sale for the manufacturer and they get a commission for each
sale they make. They don’t hold their own inventory.
- Consumer: uses or consumes these products or services. Final person who
buys.
The upstream part of the channel. is the link between manufacturers and the middlemen. The downstream is
the link between the middlemen and consumers.
What is a marketing channel?
Marketing channel/distribution channel= a set of organizations that work together to make goods available for
end users. It is the pipeline through which products are moves from the point of production to consumption.
- A set of organizations: a marketing channel is not limited to just one firm. It consists of several firms.
- That work together: they join forces, they cooperate
- To make the goods available
• FMCG/CPG (fast moving consumer goods): goods with short shelf life (shampoo/dog food)
• Consumer durables: products that last longer (cars, computers, or furniture)
• Industrial products (such as chemicals or electronic components)
• Services (such as fast food restaurants or banks)
- For end users
• Consumers
• Business consumers (other businesses)
, What is the largest firm in the world in terms of revenue?
Now retailers have massive turnovers (omzet), very large numbers of employees, and extensive store networks.
The world’s largest retailer, Walmart, achieves an annual turnover of almost $570 billion, which exceeds the
gross domestic product (BBP) of many smaller countries, and employs more than 2 million people. Amazon is
next. It has over 600 retail locations. 500 of those locations are whole foods stores and the remaining stores
include pop ups, convenience stores, bookstores, grocery stores and general merchandise stores.
What is the state of retailing? The good, the bad and the ugly?
The retail industry is in a state of dramatic and unpredictable change. While many traditional retailers are
struggling, others are finding surprising success.
The good
- Unexpected winners: some old-school retailers are not just surviving, but thriving. Dillard’s has trounced
(beat) Apple, Amazon and Tesla in stock growth. Traditional companies are finding a way to compete
and win.
- The comeback kids: the appeal of physical retail is not dead, and some businesses are successfully
attracting new customers. Recovery for companies like Barnes & Noble and the growing popularity of
warehouse clubs like Costco and Sam’s Club among younger shoppers.
- New threats to the giants: Walmart shows to be a serious contender to Amazon’s dominance. Its strong
performance indicates that the e-commerce giant is not invincible and faces significant competition
form brick-and-mortar powerhouses.
The bad
- Amazon’s challenges: even a market leader like Amazon is facing setbacks. There is a decline in customer
satisfaction and a series of negative headlines, including store closures, layoffs, and a halt on
construction projects. No company is immune to market pressures.
The retail apocalypse continues: many chains, from department stores to specialty shops, are failing to adapt
and are facing extinction. There is a massive onslaught going in the retail world. Retailers are struggling and
closing their B&M stores and more and more retailers are going bankrupt. This is what the industry calls the retail
apocalypse. It is happing across the board. Only the grocery industry seems to be spared.
What is causing all the retail apocalypse? Amazon is to blame for everything. It is the big bad wolf. It is not due
to the corona pandemic, but it started earlier. Retailers were already in trouble before the pandemic. Amazon
changed the rules of retail (extreme price competition and unmatched convenience; shop from home).
Amazon’s business model: the flywheel/Napkin model/modus Operandi
Selection: the larger the product offering, the more customers visit the site.
Amazon has a much larger assortment than a traditional grocery store or a
competitor.
Lower prices: the large volumes and efficiency of the model lead to lower
costs, allowing Amazon to offer lower prices.
Growth and customer experience: more customers lead to more sellers on
the platform, which further expands the selection and strengthens the
circle. Customers want everything to be as simple and fast as possible.
However, the biggest bottleneck in this model is fulfillment and
delivery. So, the endless aisles. The modern consumers wants
everything, right here, right now, at the lowest cost, and with
zero willingness to pay. Consumers have become impatient and
demanding, which is creating costly problems for e-commerce
companies like Amazon.
,Many traditional retailers are reinvesting in their physical presence. The physical store is still crucial for growth
and competition. Physical stores are no longer just places to shop. They are now a crucial part of the digital
strategy:
- The stores as mini-distribution centers: this allows to offer faster and cheaper delivery and reduces the
pressures on the expensive e-commerce logistics
infrastructure. Customers can order online and pick up
in-store, which also generates extra foot traffic.
- New reasons for store visits: the traditional reasons for
visiting a store (range, price and proximity) are giving
way to new drivers. Consumers, especially younger ones,
are coming to stores for the experience, social
interaction and a curated selection. They browse and are
experiencing goods. Retailers have to rethink their B&M
stores. It is needed as a digital asset. Tons of investment
is needed because people still have to like to come back.
So, the key is not the competition between online and physical stores, but the combination of them. This is why
a lot of retailers are opening B&M stores but in another concept.
Are retailers more powerful than brands?
Retailers are becoming more powerful than the suppliers. Whoever controls access to the consumer, holds
power. Retailers have to control the routes to consumers. The different channels, from D2C (direct to consumers
to omni-channel (no difference in channels it is all) and quick commerce. The omni-channel has added
complexities. The complex journey for consumers, from discovery to fulfillment. By managing the entire process,
retailers gain invaluable data and a deeper relationship with the consumer, putting them in a dominant position.
In the online world, visibility is everything (digital shelf). A tiny fraction of products account for a massive share
of sales. If a brand’s products is not in the top tier, it’s virtually invisible for consumers. This gives the platform
(the retailer) immense control over a brand’s successes.
This battle is also happening in B&M world. Retailers are dedicating more and more shelf space to their own PL’s,
which often have higher profit margins, further squeezing branded products and giving the retailer more
leverage.
The way to bribe your wat to the customer is the price. Nobody wants to pay the full price.
➔ So, retailers are more powerful than brands. And Nestle is the largest.
, Module 2- Channel design
2.1 Why go (in)direct
How to get you product to the consumer -> you can go through two different channels, namely direct channels
and indirect channels. On the one hand, you can decide to sell your products to the consumer directly. That is
yourself. You don't use any other parties. Sell your products to consumers indirectly through independent
companies that are specialized in retailing.
Middlemen= can be brick and mortar retailers, physical retailers, shops in the street, or they can be online
retailers, digital retailers. The middlemen are independent firms. The fact that they are independent means that
they are not owned by the manufacturer. The manufacturer does not have ownership control over these
middlemen.
Indirect channel= you sell your products to one or more middlemen
(intermediaries, resellers or retailers) who will then move your
products to the consumer. These middlemen buy a certain number of
products from the manufacturer,
- and as soon as they do so, they own these products.
- They also hold these products in inventory.
- They set the consumer price for these products. It's not the
manufacturer who can determine the consumer price. It is
the retailer that determines the consumer price.
Direct channel= The manufacturer sells its products directly to
consumers and guts out the middleman completely.
- The manufacturer remains the owner of the products and it's
also
- the manufacturer that holds the inventory that is needed to
satisfy consumers. A job that otherwise the middlemen
would have performed.
- And finally, it is the manufacturer that now sets the
consumer price.
Example Apple:
Apple sells its products through direct as well as indirect channels. Apple’s indirect channels consist of third-party
brick-and-mortar retailers, such as Media Market, and online retailers, such as Coolblue. Both are independent
parties that buy from Apple, hold these products in inventory, and sell them to consumers at a price that they set.
Apple also has its own direct channels, namely its own brick-and-mortar Apple stores and its own website. An
important fact is that Apple realises about 70% of its sales through its indirect channels and 30% through its direct
channels.
What does retail or channel mean?
➔ Words that may pop up thinking about retail or channel: Shopping, Amazon, connection, excitement,
sales skills & selling, assistance, black Friday and discounts, targeted ads, data, inventory, ready to use
goods, B2C, rapidly changing, sustainable growth? And overconsumption
In short ‘place’ refers to how a product gets from the manufacturer to the customer. The main goal is getting the
product to the consumers. This involves managing the relationships between brand manufacturers and retail
intermediaries (like stores and agents). This process is complicated and ever-changing, due to factors like new
technologies and shifts in consumer behavior. You have to rely on others to do it.
Retail= refers to the final step in the supply chain. It is the process of selling goods or services directly to the
public for their own use. This is what we commonly experience as shopping.
Amazon
Channel= refers to all the different ways or layers a brand can use to get its product to the consumer. A brand
might choose to sell directly through its own website, through a large retail chain, or through an online
marketplace like Amazon.
The simplest distribution channel
The figure visualizes the journey of a product from its origin to the end consumer.
- Manufacturer: this is the party that produces the goods or services. They are at the top of the chain,
initiating the flows of products.
- Middle men (reseller or agent): any channel member other than the manufacturer or consumer. It
facilitates the movement of the product.
• Reseller -> buy the products from the manufacturer and become
the owner of the inventory. Because they own the products and
can set their own prices.
• Agent -> do not buy the products. Their role is to facilitate the
sale for the manufacturer and they get a commission for each
sale they make. They don’t hold their own inventory.
- Consumer: uses or consumes these products or services. Final person who
buys.
The upstream part of the channel. is the link between manufacturers and the middlemen. The downstream is
the link between the middlemen and consumers.
What is a marketing channel?
Marketing channel/distribution channel= a set of organizations that work together to make goods available for
end users. It is the pipeline through which products are moves from the point of production to consumption.
- A set of organizations: a marketing channel is not limited to just one firm. It consists of several firms.
- That work together: they join forces, they cooperate
- To make the goods available
• FMCG/CPG (fast moving consumer goods): goods with short shelf life (shampoo/dog food)
• Consumer durables: products that last longer (cars, computers, or furniture)
• Industrial products (such as chemicals or electronic components)
• Services (such as fast food restaurants or banks)
- For end users
• Consumers
• Business consumers (other businesses)
, What is the largest firm in the world in terms of revenue?
Now retailers have massive turnovers (omzet), very large numbers of employees, and extensive store networks.
The world’s largest retailer, Walmart, achieves an annual turnover of almost $570 billion, which exceeds the
gross domestic product (BBP) of many smaller countries, and employs more than 2 million people. Amazon is
next. It has over 600 retail locations. 500 of those locations are whole foods stores and the remaining stores
include pop ups, convenience stores, bookstores, grocery stores and general merchandise stores.
What is the state of retailing? The good, the bad and the ugly?
The retail industry is in a state of dramatic and unpredictable change. While many traditional retailers are
struggling, others are finding surprising success.
The good
- Unexpected winners: some old-school retailers are not just surviving, but thriving. Dillard’s has trounced
(beat) Apple, Amazon and Tesla in stock growth. Traditional companies are finding a way to compete
and win.
- The comeback kids: the appeal of physical retail is not dead, and some businesses are successfully
attracting new customers. Recovery for companies like Barnes & Noble and the growing popularity of
warehouse clubs like Costco and Sam’s Club among younger shoppers.
- New threats to the giants: Walmart shows to be a serious contender to Amazon’s dominance. Its strong
performance indicates that the e-commerce giant is not invincible and faces significant competition
form brick-and-mortar powerhouses.
The bad
- Amazon’s challenges: even a market leader like Amazon is facing setbacks. There is a decline in customer
satisfaction and a series of negative headlines, including store closures, layoffs, and a halt on
construction projects. No company is immune to market pressures.
The retail apocalypse continues: many chains, from department stores to specialty shops, are failing to adapt
and are facing extinction. There is a massive onslaught going in the retail world. Retailers are struggling and
closing their B&M stores and more and more retailers are going bankrupt. This is what the industry calls the retail
apocalypse. It is happing across the board. Only the grocery industry seems to be spared.
What is causing all the retail apocalypse? Amazon is to blame for everything. It is the big bad wolf. It is not due
to the corona pandemic, but it started earlier. Retailers were already in trouble before the pandemic. Amazon
changed the rules of retail (extreme price competition and unmatched convenience; shop from home).
Amazon’s business model: the flywheel/Napkin model/modus Operandi
Selection: the larger the product offering, the more customers visit the site.
Amazon has a much larger assortment than a traditional grocery store or a
competitor.
Lower prices: the large volumes and efficiency of the model lead to lower
costs, allowing Amazon to offer lower prices.
Growth and customer experience: more customers lead to more sellers on
the platform, which further expands the selection and strengthens the
circle. Customers want everything to be as simple and fast as possible.
However, the biggest bottleneck in this model is fulfillment and
delivery. So, the endless aisles. The modern consumers wants
everything, right here, right now, at the lowest cost, and with
zero willingness to pay. Consumers have become impatient and
demanding, which is creating costly problems for e-commerce
companies like Amazon.
,Many traditional retailers are reinvesting in their physical presence. The physical store is still crucial for growth
and competition. Physical stores are no longer just places to shop. They are now a crucial part of the digital
strategy:
- The stores as mini-distribution centers: this allows to offer faster and cheaper delivery and reduces the
pressures on the expensive e-commerce logistics
infrastructure. Customers can order online and pick up
in-store, which also generates extra foot traffic.
- New reasons for store visits: the traditional reasons for
visiting a store (range, price and proximity) are giving
way to new drivers. Consumers, especially younger ones,
are coming to stores for the experience, social
interaction and a curated selection. They browse and are
experiencing goods. Retailers have to rethink their B&M
stores. It is needed as a digital asset. Tons of investment
is needed because people still have to like to come back.
So, the key is not the competition between online and physical stores, but the combination of them. This is why
a lot of retailers are opening B&M stores but in another concept.
Are retailers more powerful than brands?
Retailers are becoming more powerful than the suppliers. Whoever controls access to the consumer, holds
power. Retailers have to control the routes to consumers. The different channels, from D2C (direct to consumers
to omni-channel (no difference in channels it is all) and quick commerce. The omni-channel has added
complexities. The complex journey for consumers, from discovery to fulfillment. By managing the entire process,
retailers gain invaluable data and a deeper relationship with the consumer, putting them in a dominant position.
In the online world, visibility is everything (digital shelf). A tiny fraction of products account for a massive share
of sales. If a brand’s products is not in the top tier, it’s virtually invisible for consumers. This gives the platform
(the retailer) immense control over a brand’s successes.
This battle is also happening in B&M world. Retailers are dedicating more and more shelf space to their own PL’s,
which often have higher profit margins, further squeezing branded products and giving the retailer more
leverage.
The way to bribe your wat to the customer is the price. Nobody wants to pay the full price.
➔ So, retailers are more powerful than brands. And Nestle is the largest.
, Module 2- Channel design
2.1 Why go (in)direct
How to get you product to the consumer -> you can go through two different channels, namely direct channels
and indirect channels. On the one hand, you can decide to sell your products to the consumer directly. That is
yourself. You don't use any other parties. Sell your products to consumers indirectly through independent
companies that are specialized in retailing.
Middlemen= can be brick and mortar retailers, physical retailers, shops in the street, or they can be online
retailers, digital retailers. The middlemen are independent firms. The fact that they are independent means that
they are not owned by the manufacturer. The manufacturer does not have ownership control over these
middlemen.
Indirect channel= you sell your products to one or more middlemen
(intermediaries, resellers or retailers) who will then move your
products to the consumer. These middlemen buy a certain number of
products from the manufacturer,
- and as soon as they do so, they own these products.
- They also hold these products in inventory.
- They set the consumer price for these products. It's not the
manufacturer who can determine the consumer price. It is
the retailer that determines the consumer price.
Direct channel= The manufacturer sells its products directly to
consumers and guts out the middleman completely.
- The manufacturer remains the owner of the products and it's
also
- the manufacturer that holds the inventory that is needed to
satisfy consumers. A job that otherwise the middlemen
would have performed.
- And finally, it is the manufacturer that now sets the
consumer price.
Example Apple:
Apple sells its products through direct as well as indirect channels. Apple’s indirect channels consist of third-party
brick-and-mortar retailers, such as Media Market, and online retailers, such as Coolblue. Both are independent
parties that buy from Apple, hold these products in inventory, and sell them to consumers at a price that they set.
Apple also has its own direct channels, namely its own brick-and-mortar Apple stores and its own website. An
important fact is that Apple realises about 70% of its sales through its indirect channels and 30% through its direct
channels.
