Everything we buy requires a channel of distribution. The channel is the link between production and consumption of a product. There are both B2C and B2B distribution channels that operate slightly differently due the smaller number of end customers in the B2B model.
Intensive - Saturation coverage of product using all available outlets. Total sales are linked to number of outlets. If product is not available customer may buy a substitute. This distribution strategy works well for consumer durable and FMCG products. Example: Coca cola being available in many supermarkets, shops, bars, restaurants and tourist attractions. (If not, customer may buy Pepsi)
Selective - Limited number of outlets in area. Marketer selects most appropriate or best performing outlets. Eg: Fashion brands only available at their own stores / approved department stores. (Can't buy adidas / Converse at Primark)
Exclusive - Only one retailer / distributer in area. In exclusive distribution, the seller grants selling rights to a single retailer. The most obvious advantage of exclusive distribution is that when professionals focus all their energies on a concentrated area, they are likely to reap better results .Top examples include designer clothing brands, automobile companies and luxury watch brands such as Rolex. Common for luxury items eg: Ferrari cars only at their own dealerships. Marketer has full control over the marketing mix. Eg: product, price, promotion and place.
Everything we buy requires a channel of distribution. The channel is the link between production and consumption of a product. There are both B2C and B2B distribution channels that operate slightly differently due the smaller number of end customers in the B2B model.
Many large multi-national companies adopt more than one of these channels. Grocery companies such as Cadburys, Heinz, Kelloggs often use both wholesaler and retailer channels, but you wouldn't buy a grocery product directly from the supplier. Electronic brands such as Apple, Sony not only sell their products in retailers such as Currys & Argos, but have their own Apple stores & Sony centres (as well as their own online stores) where they sell direct to customer.
Producer - Wholesaler - Retailer - Consumer. Wholesalers buy in bulk from producers and sell in smaller quantities to retailers. For example Cadbury's - who produce chocolate - may sell their products to wholesalers who in turn sell that product to convenience stores and newsagents (who would require smaller order quantities due to factors including a limited retail space and short shelf life of product.) The retailer then sells the individual product, such as a chocolate bar to the consumer. The danger is that large retailers in that market (eg: Tesco express) can have the power to buy direct from the producer and cut out the wholesaler.
Producer - Agent - Wholesaler - Retailer - Consumer. Often used by companies entering foreign markets. A producer may delegate the task of finding new customers to an agent with expertise in that field who receives a commission on sale of the product. A good example of this channel are travel agents who sell a hotel and/or a flight from a producer to a customer and receive a commission. Thomas Cook, once an airline but now reemerged as an online travel agent sell a 'package' of a hotel + flight which could be from Ryanair, Easyjet etc. Existing airlines such as TUI & Jet2 supply the flight themselves but act as an agent for hotels in the many destinations they fly to. Hotels often partner with a particular airline who offer exclusive deals with them. This enables the hotel to have a much further reach than if a customer was only able to book directly with them.
Producer - Retailer - Consumer. This channel is when producers sell directly to retailers who sell on to the consumer. Large retailers such as supermarkets often cut out the wholesaler because of their enormous buying power. Tesco can easily buy tons of Cadbury's produce and distribute it across their 3000+ supermarkets and convenience stores. The likes of Samsung and Sony sell their products to retailers such as Currys, John Lewis and Amazon who then sell their products in store and online. Another example could be record labels/app creators selling their music on iTunes/App store.
wilko as a nationwide retailer also benefit from this type of distribution channel. wilko also sell large products online only which are fulfilled by the producer themselves. I recently bought a shed on wilko.com but Mercia Garden Products Ltd fulfilled the order/shipping. This helps the manufacturer reach a wider audience than if they only sold directly to customers from their own website.
Producer - Consumer (ie: Direct marketing). This is when the producer sell directly to the customer/end user with no chain in between. This cuts out distributer costs and can mean more profit to the supplier. An example of this is AVON who supply beauty and personal care products directly to the doorstep. Their salespeople or 'reps' are self-employed and use the AVON name and products in their 'business'.
Whilst producers in the B2C model may use more than one distribution channel, there is normally only 1 channel used in a B2B relationship.
Producer - business customer. Supplying business customers directly is common for expensive industrial products as there needs to be a close relationship and to solve technical problems. Usually the size of the order makes direct selling and distribution economical.
Producer - agent - business customer. a B2B goods company may use an agent who may sell a range of goods from several suppliers. This channel is attractive to business who may not have the resources to set up their own operation. An example of this channel are recruitment agencies who post job vacancies and seek candidates on behalf of the company for a commission. A disadvantage is that there's little control of the agent who is unlikely to devote the same amount of time on the job as an in-house team would.
Producer - distributor - business customer. For frequent, less expensive B2B transactions, distributors are used. A distributor would have a support team who deal with orders and a sales team whose job is to maintain relationships and find new customers. I previously worked for a CCTV distributor System Q who provided CCTV products to electricians who would then go on to install these products in the end users homes or offices. The benefit to the tradesmen is they have a trusted supplier for their CCTV needs and they can buy the quantity they need for the job in hand with regular sales and support. The distributor has repeat custom (unless the relationship breaks.) and has a regular supply in bulk from the far-east producers.
A franchise is where a business grants an independent entrepreneur permission to trade using that business' brand. This is handy for when a business wants to grow and increase its market share at low cost, as much of the running costs are handled by the franchisee. The entrepreneur must maintain the standards and uphold the integrity of the brand.
"A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes and trademarks, thus allowing the franchisee to sell a product or service under the franchisor's business name. In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual license fees." source
An example of a franchise is Mcdonalds whose 1200+ restaurants are actually owned by various franchisees or independent businesspeople. who pay a licensing fee to be able to open a restaurant and use the Mcdonalds branding. Mcdonalds provide funding to help set up the business, and provide marketing and training, so staff can prepare food to the standards that customers expect from Mcdonalds. A franchisee would be expected to offer any promotions as marketed by the franchiser. (such as the limited edition Big Tasty burger) but are usually able to set their own prices relative to demand/how affluent the local population is - unless the promotion is at a set price.
Subway, Costa and KFC are more examples of franchises. It's a popular business model for restaurants/take aways. Car forecourts are often franchised as the manufacturer (such as Ford) get sales and repair space without the outlay needed for land ownership (a manufacturer - retailer channel). Soft drinks manufacturers Coca-Cola & Pepsi grant wholesalers the right to bottle their product in line with the recipe and distribute it in a defined geographical area. (manufacturer - wholesaler channel) . The franchise model often allows the business to penetrate the market in areas which it wouldn't otherwise reach. Eg: An airport operator may specifically want Mcdonalds as a choice of food outlet in its departure lounge, therefore will seek to gain a licence.
It is not usually a model that supermarkets and high street stores such as wilko adopt. List of top franchises in UK
wilko's position in the marketing landscape has changed over the past 50 years. Kristin Brown - Brand manager for wilko says (from 13mins) that a generation ago, wilko would be the place to go for their hardware needs. Customers could buy their tools, paint from wilko and be at the forefront of customers minds for niche products such as radiator keys and drill bits. That's part of wilko's heritage, which the older customer ie: our empty nesters grew up knowing wilko as the destination for hardware products. A younger customer would associate wilko as being a generic value retailer you can get lots of stuff from, similar to B&M and Home Bargains. (wilko did some market research on this)
Wilko have expanded into so many categories over a period of time that its now lost its identity as a hardware store and has now become captured in the discount market as a general value retailer. So wilko becomes a choice in amongst the likes B&M, and Home Bargains NOT B&Q or Wickes and Homebase.
wilko wants to return to its roots as a hardware store, where customers would think of wilko as their first choice for paint, wallpaper and garden products - not just because they can get a basket of cheap products. To do this, wilko want to - whilst not plaster their logo all over everything, make their logo dominant on their products in their heritage categories.
"We want to be loud and proud with our logo. Establish a very consistent look and feel across all of those categories that we want to be famous for. So it is very easy to see that they are all part of the same brand. And that will start to re establish the wilko brand in the eye of the consumer." - Kristin Brown (16 mins)
Apprenticeship Teams Call-20210628_130121-Meeting Recording.mp4
KIN brands LTD is a sister company to wilko (name derived from WilKINson) whose purpose is to "develop brands and design sustainable products as a better way to get jobs done in the home and garden" Not only do KIN want to establish brands that are associated with wilko (in the same way No.7 and Soap&Glory are well known Boots own brands) KIN aim to sell these products in other channels.
The channel strategy identifies where are all the different places a business could sell their products. There are different groups such as:
Wholesalers - highly important as wilko don't sell to wholesalers
Distributers
Garden centres
Retailers - Boots, B&Q, Homebase Wickes
Online market places - Amazon, Ebay, Wayfair
Kristin explains (at 38:30) they would not sell KIN products to direct competitors such as B&M and Home Bargains, as they would never want to put the wilko business at threat. However B&Q or Wickes - whilst still a competitor for wilko, are not a direct threat to wilko - therefore KIN & wilko may benefit from products being sold in those places due to the endorsement and credibility it gives the product. Customers may remember seeing that product in other credible retailers but will actually purchase at wilko whilst they pick up their paint or other hardware from wilko.
KIN are open about their association with wilko. Kristin explains (from 37:00 mins) part of the planning stage of the business it was discussed whether KIN would operate independently, covertly endorsed or openly associated. It was decided that it would be very important to have the backing of a major retail business, else KIN would be "just another little start up in a sea of start up companies" where there is no credibility, trust or financial backing. These are the reasons they believe that other businesses would be more likely to work with KIN.
