Class notes Marketing Channel Management (328244-M-6)
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Course
Marketing Channel Management (328244M6)
Institution
Tilburg University (UVT)
Providing an in-depth summary of the class notes of Marketing Channel Management, including all the answers to the interactive lectures and additional notes to the clips. Good luck studying, this is all the information you need to have!
Marketing Channel Management 328244-M-6
Lecture 1: Setting The Scene
What does “Retail” or a “Channel” mean to you?
What does Retail/Channel Management mean to me?
Everything you have to do to get the product to the consumer. Marketing Mix 4 P’s: Place =
important in this course.
PLACE = getting the product to the consumer
• Involves relations between (brand) manufacturers and (retail) intermediaries
• But, “it’s complicated”
• And, ever changing…
What is a Marketing Channel? = Path to the consumer
• A set of organizations
• That work together
• To make goods available
- FMCG / CPG (“Fast Moving Consumer Goods”, “Consumer Packaged Goods”)
- Consumer durables
- Industrial products
- Services
• For end users
- Consumers
- Business consumers
,The simplest distribution channel
The MIDDLE MEN (Resellers or agents) is
what makes it complicated. The interests are
not aligned: Reseller will play with the
price. The price = value! (If you sell it to the
retailers, they will own the products then, so
they can decide the price).
If you buy products from Nike, Nike wants
to keep the price high, but there are more
sellers that sell Nike. They want them to
buy at their store: competitions means
discounts! Brands don’t like this, it reduces
the brand value.
It is difficult to built this in your marketing
plans.
Do you know … What is the single largest company in the world (in terms of sales)?
It is Walmart. Many of the big sales companies
are retailers and resellers.
Access to Consumers = POWER
Power is that the consumers know you!
Power shift from manufacturers to retailers
The brand always pays. Price promo’s → The brand will pay. Power shifts from
manufacturers to retailers. Retailers have become the gatekeepers to shoppers, through their
sheer size. A relative handful of retailers now controls access to enormous numbers of
consumers.
What is the state of retailing? The Good, the Bad, the Ugly?
• What is your general impression?
• Some examples of retailers doing well, not so well, really bad?
There is a lot of competition, lower price → lower margins. Shops are closing, something
goes wrong. “The Great American spending binge is turning into a retail hangover”
Store networks have been “rightsized” at pace
• More than 50.000 (5.7%) stores in the US are forecast to close by 2026
• More than a dozen major retailers are expected to close at least 800 US stores in 2023
• Bath & Body Works, Macy’s Walmart, and Big Lots are among the chains shutting
down stores
Something (unexpected) bad is happening in the retail world. Even Amazon is struggling.
,Confusing (retail) times? When you see someone is struggling: Opportunity for cooperation
if you help them out first.
The back story: The retail apocalypse. The internet is the cause of all problems! The
pandemic made it even worse.
Do you know… What is the % of retail sales occurring online? (% of sales through e-
commerce): In China it’s 47%, they lead the world by far. It is +/- 19% worldwide. Is this
really causing this onslaught? Cheaper to get the product to the person! Cost lower, price
lower.
Modus Operandi
What is the crucial element of the business model?
Selection is the crucial element.
Assortment size: You don’t have to
put in any effort to find what you are
exactly looking for. The bigger the
assortment, the harder it is to
compete with you.
You see this especially in the book
market. The consumer can find the
book it’s looking for within seconds.
Illustration: Assortment size in shampoo
Amazon has 8x more SKU’s: Stock Keeping
Units. SKU = an unique code that a seller
assigns to every type of item it sells.
Modus Operandi:
• Price
- 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).
- Moving towards individual pricing
• Fulfilment:
- Network of Distribution Centres (DCs)
- Prime subscription guarantees free 2-day delivery (or used to…)
The End-Result: Consumer 2.0
Consumer want everything, right here, right now, at the lowest cost and zero willingness to
pay. It completely changes the way consumers think.
, The End-Result: Unsustainable Cost Structure
Fulfilment is Amazon’s fastest growing expense area
Shipping is way more expensive than the product itself. Resellers make it cheaper for brands.
Last mile = the most expensive. In the last mile you will loose all scaling benefits.
Is Etail Unsustainable?
So wait…
• Consumers: Want everything simple, frictionless, and fast. Do they get that?
• Cost: Delivery & Fulfilment is leading to unsustainable costs
Fulfilment & Delivery = Online’s Achilles heel
The Store to the Rescue… Cutting Cost & Adding Convenience
Walmart sees its store estate as key for successful e-commerce fulfilment
“It’s time to leverage our size and global footprint to take advantage of this evolving
customer trend.”
Network of stores to act as “Distribution Centres” (DCs)
• Store personnel pulls from assortment
• Allows for faster delivery
• Allows for Instore pick-up and Returns
Stores as a strategic asset: Mini “DCs” for online orders
Need new traffic drivers!
Rethinking the drivers of store traffic
Use the store space to bring people
together. Customers – especially younger
ones – say they actually prefer physical
stores for browsing and experiencing
products
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