McLane created unique packaging and products featuring movie themes, college football themes, and other special occasion branding that were designed to appeal to impulse buyers. They also shifted the transportation and delivery strategy to get the right products in front of consumers at the time they were most likely to buy.
Its convenience store customers are seeing sales growth, as is the wholesaler. As distribution channels have evolved, some retailers, such as Walmart and Target, have grown so large that they have taken over aspects of the wholesale function. Still, it is unlikely that wholesalers will ever go away. Most retailers rely on wholesalers to fulfill the functions that we have discussed, and they simply do not have the capability or expertise to manage the full distribution process.
Plus, many of the functions that wholesalers fill are performed most efficiently at scale. Wholesalers are able to focus on creating efficiencies for their retail channel partners that are very difficult to replicate on a small scale.
Skip to main content. Module Place: Distribution Channels. Search for:. Reading: The Role of Intermediaries Introduction While the retail channel is most familiar to students, wholesalers play an important role as intermediaries. Purchasing Wholesalers purchase very large quantities of goods directly from producers or from other wholesalers. In response, Regal formed Fandango in partnership with United Artists and Hoyts, other large theater chains.
In six large chains founded a search service called Room Key. Hotels may buy advertising from Room Key to obtain more-prominent placement, but its costs remain lower than those of other distribution channels, and Room Key says that hotels pass the savings on to consumers through greater flexibility as well as loyalty program benefits. The big risk in this kind of initiative, of course, is that moving to a new platform may mean leaving users behind on the established one.
The main hotel chains are still using established platforms to retain access to their long-standing customers, which means those users need not switch to Room Key.
Successfully launching a new platform probably requires a deeper—and riskier—commitment than this. The danger of losing customers is not the only serious challenge. Joining forces with competitors inevitably raises antitrust issues, and all the well-known challenges of joint venturing are exacerbated when your partners are also your competitors.
With the right incentives and some investment, a direct channel can displace the platform provider for at least some consumers and make it less likely to exploit its position. Consider a customer who is ordering food for takeout or delivery. These days many restaurants allow online orders through portals such as Foodler, GrubHub, and Seamless. If the customer wants the convenience and accuracy of online ordering, these portals are often the only options.
In effect, a successful restaurant on an ordering portal is handing its e-mail list to its competitors. All this might be easier to bear if portals delivered lots of new customers, but the fact is that customers who are using them have often already chosen their restaurant. The required functions—viewing a menu, choosing items, sending the order to the restaurant by e-mail or fax, and processing payment—are well within the IT capabilities of even a small company.
And some software-as-a-service firms provide those functions on a stand-alone basis, which lets a restaurant offer the convenience of online ordering at a much lower price. But if a restaurant wants to shift away from an ordering portal, it should offer lower prices on its own site. Portals try to prevent this by requiring that the prices shown on them match what restaurants charge for direct ordering—but restaurants can get around that with coupons, freebies, and other special benefits for those who order directly.
Platforms rarely roll over when companies seek to shift the balance of power. Here are some of the ways they defend their turf:. Search engines show ads for myriad retailers. If one complains, a natural response is to demote its ads or remove them altogether. And some platforms have successfully argued that they have the right to remove unwanted listings for any reason or for no reason.
Because Yelp depended on Google search traffic to reach users, it acceded. If companies sign extended agreements with an intermediary, its immediate future is secure. And by structuring contracts to avoid any single day of reckoning, the intermediary can prevent a group of companies from recognizing their mutual interest in finding a cheaper alternative.
If one airline threatened to leave a system that charged high fees, it knew others could soon follow. The systems later adjusted contract lengths to separate renewals and avoid this vulnerability.
Many platforms require sellers to charge the same prices whether customers buy through the platform or directly.
There is a lot involved in bringing products to the market. This goes far beyond packaging and shipping, which often requires high volumes to get the best rates.
It also includes having the networks across the distribution channels to ensure products are presented to the customer. This is why, as MMC Learning points out, hiring market intermediaries for distribution activities is often far less expensive than if the companies were to perform those activities on their own. The result is higher profit on the end product and less cost spent on advertising or promotion. We also use third-party cookies that help us analyze and understand how you use this website.
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