Alternative channels

Channel:
Physical distribution channel is the term used
to describe the method and means by which a
product or a group of products are physically
transferred, or distributed, from their point of
production to the point at which they are made
available to the final customer.

Alternative:
5km 7km
20km
8km 8 km
3km
3km 4km
8km
A
B
F
C
D
E

Identifying channels
alternative:
Company can choose from a wide
variety of channels from reaching
customers.
Most companies use a mix of
channels. So that the product reaches
a different segment of buyers.

A channel alternative is
described by three elements:
1. Type of intermediaries
2. No. of intermediaries
 Exclusive distribution
 Selective distribution
 Intensive distribution

3. Terms and responsibilities of
channels members:
 Price policy
 Condition of sale
 Mutual services and responsibilities

Evaluating alternatives:
 Economic criteria
 Control criteria
 Adaptive criteria

Economic criteria:
Firms tries to align customer and
channels to maximise demand at the
lowest overall cost.

Rs .10 Rs.14
Rs.5
Rs.8
Rs.6 Rs. 9 Rs.6
Rs.10
C
B
A
F
E
D

Control Criteria :
Firm tend to achieve proper control over
the channel.
Adaptive Criteria :
In rapidly changing , volatile or
uncertain product markets, the producer
needs channel structures and policies
that provide high adaptability.

Chain of Distribution
Channels:

Alternative Channel Systems
for Consumer Products

Manufacturer Direct To Retail
Store.
The manufacturer or supplier delivers
direct from the production point to the
retail store. As a general rule, this
channel is only used when full vehicle
loads are being delivered.

Advantages :
 Loyalty, pride in company/product
 Control brand image, positioning
Disadvantage :
● Limited coverage
● Cannot call on large customer
base

Manufacturer Via Retailer
Distribution Centre to Retail
Store.
Manufacturers supplying their
products to National Distribution
Centers (NDCs), which are sites run
by the retail organizations. The
retailers then deliver full vehicle loads
of all the different manufacturers
products to their own stores. Most
retailers now use third parties to run
these final delivery operations.

Advantage :
 Focused customer base
 Assume financial and inventory risk
Disadvantage :
 Carry competitive products, less loyal
 Unmanageable; have own agenda

Manufacturer to Wholesaler to
Retail Shop.
Wholesalers acted as the
intermediaries in distribution chains,
providing the link between the
manufacturer and the small retailers'
shops.
Ex. Biscuit, grocery items.

Advantage :
● Good relationships with customers
● Minimal distribution costs.
Disadvantage :
 Expensive commissions
 If they leave, you lose the customer

Mail order.
Goods are ordered by
catalogue, and delivered to
the home by post or
parcels carrier. The
physical distribution
channel is thus from
manufacturer to mail order
house as a conventional
trucking operation, and
then to the consumer's
home by post or parcels
carrier, bypassing the retail
store.

Advantage:
 Relatively inexpensive
 Can reach a large customer in lesser
time .
Disadvantage:
 Postage costs rising
 Catalog shopping is fun

Internet and shopping from
home.Initial physical distribution
channels were similar to those
used by mail order operations - by
post and parcels carrier. The
move to internet shopping for
grocery products has led to the
introduction of specialist home
delivery distribution operations.
These are almost all run by third-
party companies. In addition, it is
now possible to distribute some
products, such as music, software
and films, directly, computer to
computer.

Advantage:
 Instantly global if desired, wide
exposure
 Open 24/7/365, access growing
wireless
Disadvantage:
 Limited audience (not everyone has it
or will use it for shopping)
 Lack of one-to-one interaction,
impersonal

Factory direct to home.
It can occur by direct selling methods,
often as a result of newspaper
advertising. It is also commonly used
for one-off products that are specially
made and do not need to be stocked
in a warehouse to provide a particular
level of service to the customer.

Some other specific channels:
 Manufacturer via broker to retail shop.
 Manufacturer via small parcels carrier
to retail shop.
 Manufacturer via third-party
distribution service to retail shop.
 Manufacturer to cash-and-carry
wholesaler to retail shop

Alternative Channel Systems
for Industrial Products

Factory to factory/business to
business.
The factory-to-factory or business-to-
business channel is an extremely
important one, as it includes all of the
movement of industrial products, of
which there are very many. This may
cover raw materials, components,
part-assembled products, etc. Options
vary according to the type and size of
product and order, may range from full
loads to small parcels, and may be
undertaken by the manufacturers
themselves or by a third party.

Alternative channels

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