Assortment group width
Each nation has a certain model of the width of the assortment groups with which wholesale and retail traders work. The sales system of some countries is characterized by the presence of intermediaries selling and buying all kinds of goods. In other countries, each intermediary is a specialist working only with very narrow assortment groups. In the United States, where the most capacious market, specialization increases with the growth of the size of the firm, in other countries there is an inverse relationship.
In some countries, the government imposes restrictions on the breadth of the range of products sold by intermediaries. In Norway, special licensing requirements for intermediaries have been introduced. In Italy, there is a municipal division of product groups of goods sold.
Costs and trade markups
The size of costs and trade margins in each country and depend on the level of competition, production efficiency, geographical factors associated with the size of the market, the purchasing power of the population, traditions, etc. For example, in India, due to strong competition in large cities, costs and trade margins have decreased, but in rural areas, a lack of capital has allowed several rich traders to establish a monopoly, which led to higher prices and increased trade margins. In most developing countries, producers are exempt from marketing cargo and such functions as lending, warehousing, transportation, market development, marketing research, are transferred to distribution channels.
Sales channel length
You can find some relationship between the stage of economic development and the length of marketing channels. It is obvious that in any country the channels for marketing industrial and expensive consumer goods are shorter than cheap products. You can say that there is an inverse relationship between the length of the channel and the size of the purchase. Even Korea and Japan, countries known for the length of their distribution channels, concluded that market development leads to a reduction in the length of distribution channels, a reduction in the number of intermediaries and a reduction in trade margins. In the end, the consumer gains from the great efficiency created by the increase in markets.
Combination "wholesale-retailer or semi-wholesaler exists in many countries, adding one or two links to the distribution chain. For example, sales channels in the US are shorter than in most countries, because of the scale of production.
Often, when researching the selected distribution channels, marketers are faced with channel blocking. This phenomenon may be the result of the sale of competitors' products, the closure of some channels by trade associations or cartels, the operation of marketing models that prevent the penetration of new intermediaries. However, the main reason for blocking sales channels is the policy.
The competition of several intermediaries makes it difficult to enter many markets of the world for the sale of goods. In international business, blocking is used more actively, as the number of intermediaries is small, and the number of potential suppliers in most countries is directly proportional to the size of the market. For a long period, companies have to be content with random sales of goods, because they can not enter the market through existing sales channels and do not have the means to create new ones. Sometimes the way to European markets is closed, since all intermediaries who could theoretically sell the company's products are tied to their competitors by their obligations and long-term business relationships.
Competition among distributors is sometimes so intense that there are trade associations, cartels and other groups that divide the market in order to reduce competition. Associations of intermediaries sometimes limit the manufacturer in the choice of distributors. Pharmacists in many countries prevent the spread of a wide range of products through any retail outlets, except pharmacies, and the pharmacy supplies a relatively small number of wholesalers who have long established relationships with suppliers. With such activity of associations and competition, the producer is completely held out of the market.
You can open the blocked channels. For example, a company can buy a stake in an intermediary firm and thus guarantee entry to the market. The company United Fruit has found the only way to achieve a satisfactory level of sales in Europe - to buy intermediary firms. A blocked company may also "buy" sales channels, offering intermediaries high trade margins, commission interest or other forms of monetary compensation.
The sales system in Japan has long been considered the most effective non-tariff barrier to penetration of the Japanese market; this is the embodiment of the blocking of sales channels. Such a distribution system, unlike the American or European, gives an advantage to national producers.
The Japanese sales system can be characterized as follows:
1) the prevailing set of small wholesalers working with small retailers;
2) unique trading traditions;
3) the philosophy formed by a unique culture.
For ordinary consumer goods, it is typical to pass through three or four intermediaries before they reach the final consumer: from the producer to the first, second, regional and local wholesaler, then to the retailer and consumer.
High level of specialization does not allow the manufacturer to directly go to the consumer and forces him to rely on intermediaries. Since most retailers have limited access to capital, sales are usually made by consignment with loans for several months. To facilitate financing and fully tie retailers to wholesalers, a discount system has been developed that has approximately 500 options. These and other features of the Japanese system of distribution of goods made Japan one of the most expensive countries in the world. In addition, producers use promissory notes with a maturity of six months to finance wholesalers and retailers. Possibilities for warehousing stock are limited, which increases the frequency of supplies and reduces the size of orders. Intermediaries are shown advertising, educational management programs and other assistance is provided that strengthens relations with dealers.
In addition to the close ties created by the traditions of trade and the long structure of sales channels, the system of commodity distribution in Japan is distinguished by a unique philosophy based on devotion, harmony and friendship.
Thus, long-term trade relations between dealers and suppliers are difficult to change, as it is beneficial for both sides to cooperate. In this case, the advantage belongs to the traditional internal partner. This does not mean that foreign firms can not enter the Japanese market through blocked channels. The key to success is understanding the environment in seeking support within the country. One of the advantages of creating a joint venture with a Japanese company is immediate access to the Japanese sales system.
Expensive loans, inflation risk, lack of capital and other factors make intermediaries in many countries create inadequate inventories, which is why they lose to competitors. Delay in the sale of goods exacerbates the problem, so in many cases the manufacturer must ensure the warehousing of goods on the spot or provide the intermediary with a loan for storing large inventory. It will take resourcefulness, support and perhaps pressure to make intermediaries work with adequate or even minimal inventory.
The services that the producer would like to receive may differ significantly from those that intermediaries are able to provide.
As intermediaries often can not provide credit to their customers, a trading company can take on the burden of credit.
Ability to use new marketing ideas
In many countries it is almost impossible to cover the market using simple sales channels, because there are no suitable sales channels or only some parts of the sales system can be accessed. To get into different segments of the market, you need to build several sales systems. However, those distribution channels that work successfully in the urban environment rarely work well in rural areas.
Often, for successful sales of products, companies have to deviate from the usual distribution patterns.
For example, Procter & amp; Gamble, famous for its "mass trade" in the US, and the first in mass sales in Europe, the Philippines and other developing countries, sold soap, using agent-sellers, working by the "door-to-door" method.
Japanese and American marketers have shown their ingenuity when for the joint venture Bristol-Myers have developed a unique program combining the sale of "door-to-door" and consignment. The Japanese homeowner is urged to accept a consignment box with a set of medicines. Every six months, the agent returns to refill the collection and raise money for the medicines used.
There are other marketing ideas that will create new distribution channels.
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