COMPLETE SUMMARY
MARKETING CHANNEL MANAGEMENT
Lecture 1 – Setting the Scene..................................................................................................................................................2
Readings lecture 1…………………………………………………………………………………………...……..3
Lecture 2 – Channel Design...................................................................................................................................................6
Readings lecture 2……………………………………………..……………………………………………...…..11
Lecture 3 – Interactive lecture (Channel Design).................................................................................................................15
Lecture 4 – Partnerships......................................................................................................................................................17
Readings lecture 4………………………………………………………………………………………….……..22
Lecture 5 – Interactive lecture (Partnerships).....................................................................................................................27
Lecture 6 – Assortment & Promotions..................................................................................................................................32
Readings lecture 6………………………………………………………………………………………….……..44
Lecture 7 – Interactive Lecture (Assortment & Promotion)................................................................................................52
Lecture 8 – Private Labels…............................................................................................................................. ...................57
Readings lecture 8……………………………………………………………………….………………………..60
Lecture 9 – Interactive Lecture (Private Labels)..................................................................................................................63
Lecture 10 – Value Disruptors.............................................................................................................................................69
Readings lecture 10…………………………………………………………………………………..…….……..72
Lecture 11 – Interactive Lecture – Value Disrupter + Course Wrap-up...............................................................................74
EXAM
- Papers: Data and method do not have to be studied. No exam questions in articles that has not been
covered in class, just to get to know the stuff from lectures better.
- Computer exam in test vision: A number of true false statements, have to explain why or why not
- Mini case studies with newspaper clippings
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,LECTURE 1 – SETTING THE SCENE
What is marketing channel?
- A set of organizations that work together to make goods available for end users
Goods available
o FMCG/ CPG (fast moving consumer goods/ Consumer packaged goods).
E.g., products in supermarket with short shelve life
o Consumer durables
o Industrial products
o Services
For end users:
o Consumers
o Business consumers
Need to work together to keep the customer happy and get both profits
*cautionary note: Customer = retailer in CPG jargon (retailers are customer from brand manufacturers)
Why marketing graduates should be knowledgeable about channel management
- Channels are universal, so are channel decisions (Behind every product/service: one or more channels)
- Channels are important in economic terms (Total sales through channels: 1/3 of worldwide annual GDP)
- Channels can be a source of competitive advantage (creation of entry barriers, difficult to copy channel in
short-term)
What is the single largest company in the world? – Walmart
Power shift from manufacturers to retailers in the last years. 1970-2000-now
Which forces fuel rising retailer power? Why are retailers so powerful?
- Mergers
- Multi- channel operations: combining all kinds of channels
- Retailers becoming brands: private labels- competing with manufacturers which make them more
powerful and have a better negotiate position
- Access to consumer data: gateway to consumers, how you shop/what/how much. Analytics departments
to analyze the consumer data as real knowledge, become more powerful
However, the outlook is not all rosy. Some shifts are giving retailers a hard time
- The retail apocalypse: see that brick and mortal retailers are suffering, stores are closing.
Do you know.. what is causing the retail apocalypse?
- The great recession
- The shift to online
- The shift to experience
- The COVID- 19 pandemic
All are contributing, but the true cause is the shift to online the others are reinforcing it.
And the culprit is.. the incredible retail disruptor is amazon. The cause of death of many brick and mortal
stores
Do you know.. what is the % of retail sales occurring online? (% of sales through e- commerce)
in 2021
- 19.6%
So, is this really causing this massive onslaught?
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,Amazon
The % of goods that is sold is not the problem but their business model. The business model of Amazon:
The major thing is Selection: give the customer a huge selection of products (have
everything) → good customer experience → a lot of consumers (a lot of traffic, due to
good experience) → attract more sellers (as there are more sellers) → even more
products → have a lower cost structure (due to scales of economies) → lower prices …
and this goes on and on…
This is the cause of the retail apocalypse, not the fact that they buy online, but consumer
are getting used to this model, with a lot of choice, low prices, quick delivery and no
service cost
Disruption: lower prices, keeps lower their prices. They scanning
the prices of their competitors and lower their prices in order to
stay the cheapest ones.
Consumers want everything, right here, right now, at the lowest
cost and zero willingness to pay
➔ Fueled by COVID- 19 (has accelerated the process)
Readings Lecture 1
Paper 1: Retailer Power in the Grocery Industry
Retailing has become big business. Indeed, retailers now rank among the biggest corporations in the world,
often dwarfing their largest suppliers.
Through their sheer size, retailers have become the gatekeepers to shoppers, the end users of consumer packaged
goods (CPG) products. A relative handful of retailers now controls access to enormous numbers of consumers.
As a result, these retailers can confront suppliers with various demands – such as lower pricing, accelerated
delivery times, more tailored promotional programs, and more sustainable products and processes – and may
temporarily stop selling certain products if a manufacturer does not comply with their demands.
This paper provides an overview sources of retailer power. It distinguishes between two sources of retailer
power:
1. Growing retailer scale: Retailers have grown in scale through
- internationalization
- a consolidating wave of mergers and acquisitions
- buying group membership
2. Growing retailer sophistication: However, the playing field is tilted further in favor of large retailers than
indicated by their sheer size. Retailers have grown into sophisticated businesses, that are growing
organically through multi-channel operations and that have become competitors to their suppliers by selling
private labels.
- Format diversification
- Private labels
1. Sources of Retailer Power: Growing Retailer Scale
Larger firms tend to have more market power, as they enjoy economies of scale. Retailers have achieved
economies of scale through setting up international operations, engaging in mergers and acquisitions, and
entering into buying groups.
- Internationalization: Retailing companies that were formerly characterized by a local or national
orientation have increasingly developed into global players with worldwide operation.
o As shown by Gielens and Dekimpe (2001), those players who entered early, with substantial
scale, using greenfield investment, and offering a store format that was at the same time new to
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, the host market and familiar to the parent company fared best, both in terms of long-term sales
performance and in terms of efficiency (sales per square meter). All top 10 retailers, such as
Walmart and Carrefour, are targeting Africa and the Middle East. It is as yet unclear whether
the effects of the strategic entry decisions studied by Gielens and Dekimpe (2001, 2007) for
Eastern-Europe still hold when entering these new economies. Indeed, firms entering emerging
markets may need to rethink their strategies instead of using their developed world wisdom as
a default option.
o Interestingly, in addition to entries, also exits have become more common. The fact that retailers
are starting to focus on certain regions and withdrawing from others may be a signal that they
cannot be leading players everywhere around the world, although they can be very powerful on
a more limited regional basis.
- Mergers and acquisitions: When entering through greenfield expansion, being early is critical to
success. Indeed, being able to preempt the most attractive store sites may substantially increase the sales
potential of the retailer’s new stores in the country. Firms considering an entry in countries where many
retailers are already active, should realize that the most attractive positions have been taken for some
time. This issue is less important when opting for a merger and acquisition as the retailer may acquire
or merge with an earlier entrant that occupies the better locations.
o Van Lin and Gijsbrechts (2014) find that consumers exhibit outlet loyalty after a store changes
ownership. Moreover, acquiring outlets with a clientele in place leads to higher store traffic
levels than the acquiring retailer could reach by opening new outlets, which implies that
acquisitions increase retailer power more than organic growth does
o As such, one merger or acquisition sparks others in a chain reaction, further contributing to the
overall increase in retailer power.
- Buying groups: Buying groups are horizontal, typically cross-border collaborations through which
retailers purchase from suppliers. By pooling volume and using their power, larger buying groups can
keep suppliers “on their toes” and extract better buy-in prices than might be achieved through individual
negotiation. Lower buy-in prices may result in higher margins but also enable retailers to (selectively)
reduce retail prices, which in turn may increase retailer sales
o Buying groups are the most powerful participants in the market
o However, bigger is not always better. Retailers benefit less from buying group scale when the
group is more heterogeneous in terms of member size. Moreover, relatively smaller members
win the least, presumably because they have to agree with the whims and wishes of their larger
counterparts. As such, when buying groups are on the lookout for new members, they should
try to attract similarly sized retailers. Similarly, retailers that want to join a buying group should
prioritize groups that are made up of similarly sized firms, and avoid riding the coattail of larger
retailers, a strategy that is much less desirable than it may appear at first sight.
o A high degree of geographic-market overlap between the members should be avoided. If
geographic overlap is high, advantages of buying group participation are also available to one’s
direct competitors.
o While a wider geographic market scope of a buying group increases retailers’ power, a wider
product-market scope (i.e., the number of different store formats represented in the buying
group) does not. The narrower the product-market scope of the buying group, the larger the
beneficial effect of the group’s scale on its members’ performance. Because retail formats differ
greatly in terms of product assortments and the consumer segments to which they cater
o There is further pressure on suppliers as also buying group executives are frequently switching
between groups, leveraging insider knowledge of each other’s terms, and making buying groups
even more powerful sources to reckon with.
2. Sources of Retailer Power: Growing Retailer Sophistication
What was once a simple way of doing business has been transformed into a highly sophisticated form of
management and marketing. In particular, the better availability of customer data is contributing to retailers’
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