Introduction The objective of this paper is two-fold: (a) To review and examine the various possible methods or channels

through which products are currently distributed from producers to consumers in the Malaysian marketing scene. (b) To highlight certain changes and development which are currently taking place in product distribution. Here, special attention will be drawn to the impact of direct selling and direct selling organisations. The distribution function in marketing, as we all know, is concerned with the flow of products and services from the producer to the ultimate consumer. The objective is to make our products available to consumers at the right place and at the right time, in the right quantity and at a price acceptable to the target consumer. Current practices in product distribution The various possibilities of distributing products currently adopted by Malaysian companies fall very much along the lines of various basic channel patterns. They are as follows: a) M-A-W-R-C b) M-W-R-C c) M-A-R-C d) M-R-C e) M-A-C f) M-C g) M-Direct Selling Organisation-C M-Manufacturer; A-Agent; W-Wholesaler; R-Retailer; C-Consurner. Products can be channelled direct from producer to the ultimate consumer (Pattern f). On the other hand, a lengthy channel may be adopted (Pattern a). In between, a combination of various possibilities of having agent, wholesalers and retailers may be used. Various factors govern the choice of appropriate

channels. They include: - type of products - experience of the company - marketing facilities available within the company - availability of middlemen - finance and cost. In this paper, I would like to particularly elaborate on one important determinant, that is, the type of products. Here, we can distinguish three categories of products: - Consumer goods - Industrial goods - Capital goods Consumer goods These can be classified according to three groups: i) Convenience Goods These are used more or less regularly by large number of consumers e.g. detergents, soap, soft drinks and many other household items. Manufacturers usually adopt an intensive and extensive distribution strategy using Pattern a or b. Examples of Pattern a: Richardson Merrell-Harpers-Ws-Rs-Cs (Vicks, Oil of Ulan & Clearasil) Cerebos-Eastern Agencies-Ws -- Rs-Cs (Brand Essence of Chicken) Examples of Pattern b: These companies have their own marketing team and facilities to distribute to wholesalers and retailers without requiring the services of a national agent. Example are Beecham, Lam Soon, Lever Brothers and F&N It should be noted that the patterns of distribution are not strictly rigid but highly flexible, depending on the nature and requirements of the trade. For instance, many manufacturers distribute their products not only to wholesalers but also to retailers on a selective basis.

ii) Shopping Goods These are purchased not so regularly as convenience goods, therefore, fewer retail outlets are necessary e.g. cosmetics, shoes, watches and electrical goods like TV, refrigerators, fans etc. The manufacturer usually adopts a selective distribution strategy, that is, by selecting only a limited number of retail outlets in each area (Pattern d). Examples of Pattern d: Matsushita (through Matsushita Sales & Service) --Rs-- Cs Toshiba (through Toshiba Sales & Service)-Rs-Cs Note: Both Matsushita Sales & Service and Toshiba Sales & Service can perhaps be considered theoretically as the Marketing Divisions of Matsushita and Toshiba respectively. iii) Specialty Goods These items are very infrequently purchased. The manufacturer may appoint an exclusive agent in each territory or town to sell to consumers. (Pattern e). Examples of Pattern e: Assembly Services Sdn. Bhd. -Borneo Motors-Cs (Toyota cars) Industrial goods These products are not for household use but for industrial consumption. There are 3 main groups as follows: - Raw materials e.g. chemicals, plastics - Semi-manufactured goods e.g. canvas, leather - Accessory materials required in production e.g. bottles, cans, packaging materials. Generally, most local manufacturers of the above categories of products sell direct to the industrial consumer (Pattern f). Examples of Pattern f: Metal Box sells tubes to tooth-paste manufacturers. KL Glass sells bottles direct to soft-drinks manufacturers. Times Packaging supplies boxes direct to cigarettes manufacturers.

Capital goods Examples of capital goods are buildings, machineries and equipment. Usually, close contact between the manufacturer and consumer is necessary. Therefore, there is no need to have any intermediary except perhaps a manufacturer's, agent (Pattern e or f). For example, Lindeteves Jacoberg handles a range of wood-working machines and equipment and sell direct to the industrial consumers, including the Government, sawmills and timber companies. Recent development in product distribution One of the significant developments in product distribution in recent years is the growth of the direct selling industry. This is indicated by the large number of direct selling companies which came up in the last couple of years. Many of these companies confine their activities to certain localities while a few have grown and expanded their business nation-wide. The direct selling companies sell products ranging from shopping and specialty goods to fast-moving and regularly consumed convenience items. They source such products either locally or from overseas. Some well-established ones make use of contract manufacturers to manufacture various items under their own brand names. At the same time, many manufacturers are already scouting for reputable and well-managed direct selling companies to handle their products. What is direct selling? The best way to define or explain direct selling is to compare it with the conventional trade selling or selling through the trade. While trade selling involves distributing products through retail outlets (shops, emporiums etc), direct selling means the products are sold to consumers by means of personal approach or personal selling. A well-established direct selling organisation typically has a large network of thousands of distributors (some companies call them agents, dealers etc) who reach out to the ultimate consumers at large. These distributors are but private individuals who operate the business independently either on a part-time or full time basis (somewhat like insurance agents). They are people from all walks of life, and strictly speaking, they are not employees of the company. They can be looked upon as 'mobile retailers' who sell the products to their friends, relatives, colleagues, neighbours etc.

Many hold party meetings regularly with the objective to demonstrate and promote the products. Many even go door-to-door although reputable direct selling companies do not encourage their distributors to do so for image reasons. The rationale for direct selling of consumer goods There are several merits for selling consumer goods through direct selling instead of selling through the trade. They include the following: 1. Saving of Advertising Cost: Selling through the trade requires intensive advertising by mass media to 'pull' customers to the retail outlets. Direct selling involves basically personal efforts to create the 'push' effect of promotion. Advertising cost saved can benefit the consumers in the form of lower price. It also makes the products more competitive. 2. Savings of Mark-ups and related Distribution Costs: Trade selling involves a series of mark-ups through several intermediaries. By direct selling, these are saved and the company can afford to give attractive incentive to its distributors. 3. Finance: Trade selling is traditionally linked with long term credit terms, which means much capital is necessary to finance the trade. Direct selling, on the other hand, is based on cash terms. 4. Personalised Service: By direct selling, consumers can enjoy more personalised type of service from distributors. Consumers can enjoy even the convenience of 'shopping in their own home'. 5. Consumer Education: Because of the nature of direct selling which is based upon personal approach, consumers have a chance to know more about the features and benefits of the products that they pay for. 6. Shelf Space: With increasing competition and with limited shelf space in the shops and emporiums to display a host of competitive brands, your brand may be 'drowned' among others. This problem does not arise in direct

selling. Direct selling organisations Direct selling organisations can perhaps be broadly classified under 3 main categories as follows: A) Those specialised in 1 or 2 shopping or specialty items: Examples are: Electrolux; Singer; Tupperware; Renaware. B) Those selling cosmetic and beauty products: Examples are: Avon; Nutrimetics; Yardley International. According to a recent study made by a well-known international cosmetic company, 20% of cosmetics is sold by direct selling in Malaysia. This is to increase to 46% by 1984. Currently, already 9()% of cosmetics is sold by direct selling in Korea. In Japan, direct selling of cosmetics is also fast catching up. C) Those selling chiefly fast-moving consumer products: Examples are: Newton; Amway; Fortiss. How direct selling of consumer goods works According to conventional marketing logic, consumer goods, especially those convenience items which are widely and frequently consumed, should be sold through retail outlets. In direct selling, however, these items are sold by means of person-to-person approach. This is made possible chiefly because of a feature in direct selling known as 'sponsoring'. Sponsoring means recruiting. A distributor can recruit others to become distributors and earn attractive commissions on their sales. An individual can, therefore, build up a big network of distributors under him. The result of this sponsoring feature is the creation of numerous networks of distributors, each having a multi-level pattern as shown in Figure I. It should be noted that each distributor can sell the company's products as well as to 'sponsor' or 'recruit' others to become his downline distributors, as illustrated in Figure I. This

differs from the conventional product distribution through the trade where only retailers have direct access toe the ultimate consumers as shown in Figure II. Challenges faced by direct selling organisations Inherent to the nature of the business, direct selling organisations have to continuously meet certain conditions in order to survive and grow. Some of these are: a) High quality and attractively packed products which are sold at competitive prices to ensure repeat purchases. b) Efficient stock distribution system to ensure continuous availability of products to service a wide network of distributors. c) Attractive profits, incentives and benefits package for distributors. Continuous promotional campaigns, as well as training and motivational programmes to maintain the interest and commitment of distributors, most of whom are operating only on a part-time basis. Continuous campaigns to recruit distributors to replace the high fall out rate. A wide range of products and continuous introduction of new ones. g) An aggressive management which is dedicated to managing the organisation along ethical and professional lines. Inability to fulfil the above conditions, shortsightedness and immaturity of management as well as lack of commitment towards long term objectives have accounted for the failure of many direct selling companies.

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