Distribution Network


Business development and Marketing departments would create market of the product. But, the customer wants to have look and feel of the product before taking purchase decision, which is possible by visiting the nearby store, physically see the product and evaluate its features OR at other places like online stores on the internet. But, the product must reach to customer in his / her local market after marketing campaign to make product successful.

The distribution network is essential so that customers have availability of products all the time.

Options available for organisation for distributing the product

    • Physical stores can be shops in the market OR in the super store OR shopping mall
        • owned by the organisation spread in different location OR factory outlets;
        • under franchise arrangement;
        • under super stockist or wholesaler for particular state and that super stockist managing further retail network;
        • with large number of retailers → very few organisations get into interactivity with large number of retailers directly since it demands very efficient logistics support;
    • Online stores on the internet
        • backed up by efficient delivery of goods to the customers;
        • exclusive website marketing organisation’s products only; or
        • marketing the products through other online stores → advantage → these stores work as online super stores managing professionally.

Deliverables (i.e. expectations from the Network)

      • Availability of product when customer needs the product to see and evaluate;
      • Give the feedback from customers to organisation so that the same can be incorporated in future products.

Important developments in the Distribution Network

    • Internet
        • Internet has changed the entire strategy of wide distribution network;
        • Large number of online stores opening with
            • large range of products;
            • price comparison across other online stores;
            • 360 degree view of products → virtual tours;
            • 100% refund policy with no question asked;
            • Many promotion schemes which are not available at local physical stores.
        • Benefits to manufacturers with online stores
            • Cutting down entire distribution network of wholesalers and retailers;
            • Cutting down cost
                • on commission to distribution network;
                • on logistics (transporter, handling cost, etc.);
                • on inventory (raw material, WIP, finished goods) since production only as per orders received on online stores.
            • Realising money faster (no more credit period to distribution network) → better cash inflow;
            • Courier becoming more acceptable way of transportation → facility of tracking the consignment on website or mobile.
        • No need to visit local physical store → but, some customers do visit
            • to have look and feel of the product;
            • to cross-check the price of products vis-a-vis online stores.
        • The above has facilitated in reaching the products to far-off places (villages, overseas market) without keeping physical stores at those places;
        • Customers with less time in hand due to increased office timings (+) increased commutation time from / to office in metro cities → opting for online stores with aforesaid options available
    • Super Markets and Shopping Malls
        • Spread across large area with shops of all popular brands and products of daily need;
        • Offers experience of air-conditioned single-roof with multiple shops with large range of products;
        • Large operational cost for operating from these stores;
        • Customers need not sweat around looking for products in various local markets;
        • Customers can spend time alone or with family, etc. shopping, dining or entertainment, etc. alongwith shopping the products;
        • Spreading across to small cities / villages giving a new experience to customers;
        • Organisations need to make their products available at these stores so as to reach this class of customers.

Traditional / Normal ways of working in Distribution network

    • Appointment of wholesalers in the different markets → wholesaler appointing further retailers.

Conflicts (Inter-departmental) / Challenges with Distribution network

    • Organisation needs to manage large number of available options → large floating inventory with various stores;
    • Eatables have expiry dates; apparels need to be regularly updated with current trends → result → rejection of inventory → unsold inventory reaching to organisation over a large period of time → blow on the margin;
    • Logistics need to be efficient to feed the market to take advantage of demand build-up (+) sale of unsold inventory at the best price available;
    • Online stores would take some more time in catching up → small cities are yet to accept the concept.

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