Distribution and Retailing

Distribution and Retailing

In a distribution, channel conflicts in distribution may occur when manufacturers or intermediate partners in the distribution channel misbehave such as selling products direct to consumers. In a distribution channel, all partners should be involved in the distribution channel. Other than the manufacturers, other partners such as distributors, retailers, sales representatives, and dealers need to be involved fairly in the distribution channel. The aspect of some basic partners such as the manufacturers and distributors selling direct to various consumers in the general marketing processes creates a condition that can be interpreted as conflict. Direct sales by manufacturers or other partners that should not have a direct link to customers can be done in the general marketing process of through other methods like the internet and e-Commerce.

Katie Collins, the managing director of the Fashion Wholesalers ensures supply of the wholesalers to 120 small and independent clothing Retailers for women. The managers ensure that the business supplies are targeted to women of the age group ranging from 35 years to 60 years. The suppliers mainly have homemakers as the top targets who mainly consist of unemployed women. This fashion show wholesaler had developed to become an agent based in the United Kingdom serving thirty German and Scandinavian producers as the key producers. These thirty producers are well accepted in the niche market. The opportunistic aspect of Katie is that she creates reliance of her stock by majority of her customers with 50 per cent of their stock coming from Fashion Wholesalers. These wholesalers ensures that there are buyers making four trips to each of the suppliers with an attempt of ordering clothes for various seasons with an agreement on a delivery schedule such as monthly deliveries. From the deliveries, buyers from various stores can then order the items for sale to their customers. Conflict in this case could arise from the aspect that some suppliers want their products to be get the highest superiority in the market. At the same time, stock is staying for too long in the show room before the buyers from their stores to order. The distribution channel is characterized by the balance of power. The characteristics of the distribution channel are mainly shaped by the way or method of exercising power by the partners within the channel (Marmorstein, Rossomme, & Sarel, 2003). The balance of power could lie within the producers or manufacturers or could lie within the intermediaries. In a case where the power slips from the partner supposed to have it, this could result to conflict. This same aspect may become the centre of conflict in the case of Fashion Wholesalers and their distribution channels. In this distribution channel, the power lies within the Fashion Wholesalers as part of the intermediaries. They about 50 per cent of customers rely on Katie stocks, an aspect that indicates power in the distribution channel.

The conflict may come from a point where the producers want to have power. The producers are known and trusted for their products but they again rely on Fashion Wholesalers for their distribution or production. Almost all that the 30 producers produce is taken to the wholesalers for distribution. Some of partners hardly define their roles and right. Even in situations where the partners know what they should do or not do, they are likely to create a situation of conflict by breaking some of the key rights and their expectations form other partners (Kaplan & Sawnhey, 2000). In many cases, suppliers are required to take the responsibility of taking stocks to intermediaries like wholesalers. The case of Katie is different since she has taken the responsibility of strictly supplying stock to retail stores that are mainly within the stated 120-retail store. Conflict would arise in a situation whereby the Fashion Wholesalers decide to offer direct sales to customers (Markides & Charitou, 2004). This would impose pressure on the profitability of the retailers because the wholesalers can sell their product and a unit price of less than the price offered by the retailers.

Distribution conflict could as well arise from the existence of incompatible goals within the channel of distribution. In the case of Fashion Wholesalers, the target market is homemakers. The factor means that their purchase power is less than other women with employment are and direct source of income are. These women are the final consumers and it implies that all partners in the channel should produce with goals that target these women. Any partner deviating from the core goal would lead to a conflict within the distribution channel. Deviations from the common goals of the channel could arise from the perspective of one of the partners willing to target other markets where prices are attractive. The producers may also stop the distribution to the wholesalers and therefore lead to scarcity of the products thereby contributing to price increase (Chiang, Chhajed, D., & Hess, 2002). This price increase would be a burden to the final consumer and may fail to purchase the previously purchased quantity. This problem would also arise if players in the channel have differences in their perceptions. The conflict would arise if different players have varying views towards the customers, and what the market wants.

Conflicts within the distribution channels can arise when some products are sold at a price below the marginal cost to act as the basis of attracting customers (Rosson, 1974). This practice most by manufactures and distributors would lead to a margin dilution among retailers. It would be impossible to maintain the same price consistently since the prices set by intermediaries keep on changing. One of the retailers may also receive a new and complex product to compete the existing product. This practice would be considered a breach of the market agreement and expectation s and would definitely lead to distribution channel conflict. The conflict would result when some of the customers for the earlier products are converted to the new product. The problem would be worse if the price of the new product from a different producer, other than the earlier 30 producers, would be lower, making the producers and intermediaries less profitable (Rosson, 1974).

Conflict in the distribution channel can be avoided greatly although some of the conflicts can be inevitable. As the product matures, conflict among different organizations within the distribution channel become inevitable. Sometimes these organizations need to maintain their level of conflict or mitigate it depending with the level of inevitability. Some philosophies can be applied by organization to mitigate conflicts of prevent the existing conflicts from becoming worse. In mitigating conflicts within their distribution channels, organizations can adopt perceptive based on the long run from which they can refrain by optimist initiatives jeopardized channel relationships. This practice should be done for a purpose especially for the sake of the transient gains that are short-run in scope but potential. All organizations should understand that motivation of partners would create an aspect of motivation to each other by acting fairly (Simons & Bouwman, 2006).

Each partner should therefore in a way that ensures that there is a fair financial gain of all partners within the channel. This practice would be realized if channels practice fair competition and practice only the activities required of all partners within the distribution channel. There should adequate respect for the economic system governing the distribution channel (Slater, 1979). All partners or players within the distribution channel can decide to stay open as well as being flexible. Stay open and flexible can be achieved by avoiding long-run agreements whose structure is restrictive. The partners should maintain agreements that allow freedom of adopting changes within markets (Slater, 1979). Fixed agreements especially in the long run would be a subject of conflict since organizations goes a system of changes in the long run and the changes in the organizations would as well result to a change in the market structure.  

 Practically, managing market conflict would come about if companies or organizations within the channel of distribution avoid incidents of premature distribution especially through margin-crunching channels. Partners are sometimes found to have alluring potentials in satisfying their thrill of volume. This form of excitement should be controlled to avoid the use of wrong channels of distribution or deviating from the provided responsibilities. All participants in the distribution channels should be delineate specific and clear rules to ensure territorial coverage and defined rights in order to ensure that competing channels such as manufacturers’ direct channels do not fight over the same customers (Chiang, Chhajed, D., & Hess, 2002). There should be distinctive customers with the distinctions created by the set rules, collectively by all participants. Participants should collectively build and maintain clear boundaries from which can operate without generating incidents of conflicts. This can be done through marketing of different brands or products to different intermediaries if the conflict is associated with marketing. In the same case, companies within a distribution channel can offer derivative models, which are similar although different in characteristics, from the base product matching different channels’ needs. More on generating a good system of distribution channel without major conflicts, distribution channel participants should be organized towards a similar goal and give room for restructuring of some of the participants (Chiang, Chhajed, D., & Hess, 2002). There should be some understanding that the long run period is characterized by changing environment, which should be extended to individual firms.

Answer to Question 2

The retail mix for a start-up retail dealer of men’s clothing whose target market is 40 years of age and above can be recommended to be for both A and B social grades. This case can be set to have specialty stores and departmental stores to be the main competitors. Bespoke tailors if included as part of the channel competitors would bring competition from the aspect of their ability to offer customers what they need. Given that the retail business would operate in this kind of environment selling goods but hardly making suits for particular individuals, the business is likely to go through hard time due to high competition. Assuming that the two social groups, A and B are differentiated by income level, the business offering the best type of product mix would win most of the retail mix customers at some point (Birtwistle and Shearer 2003). To be successful given the existing competitors, there should be a clear plan on how to handle the completion by following the right channel. The competitors would also respond to the action of the start-up retail shop since it takes away some of their customers. Assuming that both the specialty retail store and the departmental store are well established, and that they would respond in a way to fight competition from the new market entrant, the start-up retail dealer should create strategies that would increase its competitive edge immediately after venturing the market (Chiang, et al. 2003). It would be recommended that the retailer deal in men’s clothing with a competing aspect to both the specialty retailer and the departmental store.

The mix should be established from the nature of the two stores so that the start-up business store would be in a better competitive position given the two main competitors. The start-up retailer will not be dealing in the production of clothes for individuals but can specialize some of its sales to meet the demands of the customers. Assuming that the retail storeowner has conducted adequate research on the market structure, he would be in a position to understand the needs of customers better than any other organization, which is newly established (Ibrahim and Chua 2010). There would the need to understand the structure of both its competitors.

The departmental store is an establishment whose building is open to the public and offers a wide range of goods to consumers. In this product line, a departmental store would sell both specialized clothes for men as well as men’s clothes targeting all kinds of groups. Other than offering clothing products for the two social groups, A and B, it would also sell clothes to other populations especially people of different genders and all age groups. The departmental store is established in a way of offering different merchandise line (Megicks 2007). The departmental store also offers different prices for different products or it would differentiate its products to suit different customers.

The competitiveness of the departmental store would be lowered as far as the clothes industry is concerned since it would concentrate on the sale of other products outside the clothes industry. Assuming that the department store is licensed to deal in specific products, there would be limitations in making adjustment and this aspect could be a point of advantage to the start-up retailer (Rosenbloom 2006). The new retailer should understand its strength before starting it venture as clothes dealer targeting the specified population. From the aspect of the department store as a competitor, the start-up retailer can specialize in selling all its clothe products sold by the department store that are specifically targeting the two social groups as well as offering products to a better extreme. The department store hardly specializes since its products are open to the public. This means that the sale of its products is hardly planned to target a specific population but the general population (Zhang, et al. 2010). Offering specific products targeting the two social groups would be more advantageous than dealing in products that target a broader range of social groups.

In the case of a specialty store, the retailer deals in specific and specialized men’s clothes. The specialty store would be specialized in selling clothes in general. The specialty store has no target population but only specializes on what it offers to the public. This is a weak point from which the start-up retailer can take over and target a specific population. Targeting a specific population would imply that the products offered are by the retailer a specialized in accordance with the demands of the consumers. The start-up retailer can be structured in a way that offers specific clothes to each of the two social groups taking note of the demand factors generated by age differences. In becoming successful, there should be improved communication such that the demand of each of the members from the target group is considered as an individual. Considering the needs of the customers from a personal perspective would be an added advantage to the retailer (Judd, Lewis and Nance 2004).

Communication would be a significant tool in achieving a clear understanding of customer needs. Communication can be improved from a generalized communication such as use of advertisement as a way of communicating brand and product availability to a more specified method of communication like the use of emails, newsletters, and business cards. This communication would be done to the specified group of consumers who feel more involved to the business than in any other similar business in the market. The retailer can be more concerned on what the customers need and order stock for men’s clothes as per the request of the customers. Supplying quality clothes while operating under the needs of the customers would definitely improve the quality position of the retailer. Given a situation whereby some of the members of the target group relied on products from other retailers especially the main competitors (Rosenbloom 2006).

The retail mix could be wide in scope to allow a wide variety of customer need. The target group could be seen as a small group but customers would always have varying needs and demands as far as fashionable clothes are concerned. Despite the specified target, the retailer could offer products that are different in fashion such that men would choose their favourite fashions. The business can establish a system of customer spending pattern follow-ups and fashion consideration in terms of the latest fashions among the targeted age group as well as in each of the two different social groups. Customers can best understand what is offered through well-displayed clothes. The retailer can come up with a good designed display that would act as part of the display. A serious and successful advertisement should be initiated to provide the customers with clear information about the retail business. Information that can be provided through advertisement includes the business location, the products offered, any services available, and any cases of after sale services (Yiu and Xu 2012). The location of the retail business needs to be strategic enough to get rid of any challenges that a customer may face in trying to locate the business. Customers are always sensitive to locations and some would hardly visit a business due to its poor location despite all other factors. A poor location would imply a location where the business is not readily accessible or where customers can hardly find it with certainty.

Other than location and advertisement efforts, pricing strategies should be in a way that does not compromise the customers’ decision in making choice based on price or quality. Quality is mainly prioritized but pricing should be considered as well. Consumers of clothes would wish find a clear compensation in their spending. Compensation can only come from good pricing where prices are set according to the quality of products sold by the retailer (Shockley, Roth and Fredendall 2011). While prices can be set according to the quality of the products provided, consideration of the average market price and the pricing strategies applied by the competitors would be of significant importance. The retailer should not incur loss by selling below its cost of operation but should not set prices above all other competitors. Setting prices above its competitors may lead to decreased demand and immediate closure. Prices should be fair and parallel to those of competitors but the degree of profitability would be established through increased sales volume. The main aim should be to increase sales and build customer trust that would assist in the growth of the start-up retailer (Markides and Charitou 2004). Customers would feel valued when the retailer offers customized products at a fair price or at a price almost equal to that of other clothe products by competitors. In the long-run, the retailer may adjust prices above all competitors depending on the level of customer trust.

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