Channel Strategy and Design

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 Content
• Introduction
• Channel design and planning process
• Evaluation of Major alternatives

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 Introduction
• Factors that determine the nature of the
distribution channel
– Nature of the product or service
– Location and nature of the customers
– Nature of competition and distribution systems
– Intensity of distribution required
– Nature of the markets being targeted

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 Channel design and planning process
1. Channel Stages in channel planning
– Segmentation stage
• Pharma company segments: Doctors/ Chemists/
Hospitals and nursing homes
M1 M2 M3
– Positioning stage
P1
• Service objectives at each channel element. Each
segment has different expectation
– Focus stage
P2
• Doctors in all A cat towns
• Chemists located in the main markets of A towns
• Only big govt and private hospitals P3
– Developing the right channel alternative
• Modifications required to make it an ideal
channel

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Channel design and planning process
2. Defining the customer needs
– Lot size
• Toothpaste pack sizes, Wheat flour packs, Motor with horse
power
– Waiting time
• Difference of “Desire to purchase”
– Choice to the consumer
• Variety and assortments
– Place utility
– Service support
• Sales support for maintenance and repair
• Installation and training
• Credit
• Home delivery
• Regular service follow ups

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Channel design and planning process
• Designing channel objectives
– Industrial products require direct-marketing by the company
– Consumer products should be available in large no of outlets
– Frozen desert and ice-cream products need cold storage
facilities
– Seeds selling will need rural distribution
– Multi level marketing will require their distributors to appoint
further distributors

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Channel design and planning process

• Channel Alternatives study

– Business intermediaries currently available
– The no and type of intermediaries required
– Any new member to be specially developed
– Roles of each channel member

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Channel design and planning process

• Cost of channel system

– Margins of the channel partners
– Cost of transportation of goods between the co and the
end user
– Cost of order booking and execution
– Cost of stock returns/ date expired stocks taken back
– Cost of reverse logistics required (getting empties back)

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Channel design and planning process
• Current intermediaries
– Ready channel partners may be already available. These
can be further utilized
• Distributors or redistribution: stockiest of some other companies
• C&F agents: can be further utilized for collections and other work
• Logistics service providers: will undertake distribution activities.
• Manufacturer’s agents, stockiest, guarantors provide financial
support
• Financial agencies can be used to finance your customers.

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Channel design and planning process
• Number of intermediaries
– Should be adequate for expected coverage of the
target markets at the same time should not be
too much to dilute the effort and add to the costs.
– Its not easy to get rid of channel members

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 Evaluation of Major alternatives
• Cost:
– Every channel will have different costs associated with
• Ability to manage and control
– Considering coverage, frequency, productivity,
inventory, credit, merchandising, distribution,
promotions, after-sales-service, pre-sales-sales,
channel salespeople, stock points
• Adaptability
– Sensitivity of channel to addition, elimination of
products, additional service, new territory coverage,
generating leads, handling price change, stock
rationing
• Range and volume to be handled
– Ability to handle large range of products and volumes.

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Distribution
Strategy of

By
 Introduction

• Number of Indian customers who were using

internet on a regular basis to get information
were increasing rapidly in 2012
• Flipkart, an Indian e-commerce company had
started off as an online book seller
• Amazon, the worldwide leader in e-
commercelaunched Junglee.com
• In early June 2013, Amazon launched
their AmazonIndia marketplace
without any marketing campaigns
Products and
Services
 Types of
Products
• Amazon Device Accessories
• Musical Instruments • Baby Products (excluding
• Office Accessories apparel)
• Office Products Supplies, • Books
Furniture, Printers,
Calculators • Cameras, Camcorders, Telescopes
• Personal Computers • Cell Phones
• Software & Computer Games • Consumer Electronics
• Tools & Home Improvement • Electronics Accessories
• Toys & Games • Home Appliances
• Video Games & Video • Music CDs, Cassettes, Vinyl, and
Game Consoles other sound recordings
 Services offered by
Amazon

Selling on Amazon:

• All types of Businesses can sell products and

services on Amazon and it is one of the
fastest ways to start selling online
• Businesses can access a new sales channel
• It helps in Building brand recognition
• The platform provided by amazon is trusted
and secured
 Services offered by
Amazon
Fulfilment by Amazon:

• Amazon has helped the business enterprises to

sell online globally
• Reaching Prime customers available on Amazon
• Amazon Offers fast and free shipping to
customers
• Trusted customer service and after sales return
 Services offered by
Amazon

Advertise on Amazon:

• Reach millions of Amazon shoppers

• Amazon helps to drive traffic to your site
• Amazon helps the business enterprise
advertise online and across screens
Industry Eco-System
 Industry Eco-System

A run of the ecommerce exchange has a heap of

distinctive players included. They can incorporate
one or the greater parts:

• Hosting Provider
• Shopping Cart
• Internet Marketplace
• Payment Gateway
• Merchant Processor
• Shipping Processor
• Business Automation Tools
Channel Analysis of
Amazon
 Market Structure of
Amazon
• Large number of firms leads to competition in the e-
commerce
• Amazon faces a monopolistic competition in India
• Consumer has a lot of choice in buying anyproduct
• Chooses the most profitable deal for its purchase
• Companies are differentiated through selling costs
• Selling costs constitute a substantial part of the total cost
under monopolistic competition
 Levels of
Channels
Online Channel: Physical Channel: Half
Significant cost benefit million square feet
over other traditional storage capacity in
distribution channels distribution centres
• Amazon’s Next-
• Kindle Day and Same-
Day Guaranteed
• AmazonMP3 & Cloud delivery services
Player • 34 fulfilment centres
• Amazon Cloud drive with more than 61
million cubic feet of
storage capacity
Strategic
Partners
 Strategic
Partners
• Formal alliance between 2 commercial
enterprises
• Usually formalized by a business agreement
• Why is it formed?
Generally 2 companies form strategic
partnership/alliance when each one of
them possesses some business strengths that may help
the other
 Partnership with Procter
& Gamble
• Amazon partnered with P&G so that it can use
P&G’s warehouses for faster and economical
product distribution
• P&G moves their products everyday from their
facility to another location from where workers
of Amazon ships them
• Finances in favor of both the companies
 Partnership with Procter
& Gamble
How they benefit?
• For Amazon:
• It results in reduction of cost as cumbersome
products don’t have to go extra way
• Also uses the extra space in their distribution
centers to store more
profitable items
• For P&G
• By cutting their transportation costs and by taking
Amazon’s help in
spurring its online sales
 Other Strategic
Partners
• Future Group: Sells retail group's offerings
online
40 brands are exclusively retailed online
through Amazon

• SBI: Recently signed an MoU

To develop better commerce solutions
and smooth & trusted ` payments for
small businesses and end customers
 How Amazon attracts
customers
• Sponsored search
• Associates program
• Email marketing campaigns
• Portal advertising
• Other initiatives include outdoor, radio and TV
advertising
• View free shipping offers as effective
worldwide marketing tools
 How Amazon attracts
customers
• Amazon acquired companies vigorously to
expand the customer base and sales channels
• Planning to use its in-house logistics service in
order to handle the delivery of all products that
its sellers sell through its e-commerce
marketplace in India
• Amazon has adopted a hybrid logistics model
Incentive Plan
and Channel
Distribution
 Incentive
Plan
• India - Amazon’s third emerging market investment after Brazil and
China
• Disagreement about the rate of commission may arise, hence
relationship of the agent is
important to maintain good delivery process.
• Comparative higher supply chain profits since distributor’s profit
margin is the smallest.
• Third-party sites that help drive customers to the e-commerce
platform for a fee
• Offers its logistics network, online seller registration, high-margin
advertisement services
for sellers and brands
• Also offers positioning for a fee and display ads, across its mobile and
desktop platforms, to build loyalty with sellers and boost sales.
 Distribution
Channel-Digital

Distribution
Channel-Digital
 Digital
Channel
• E-Books-Kindle reader
• AmazonMP3 & Cloud Player
• Instant Video
• AppStore for android
• Amazon Cloud drive
• Amazon Game Studios & Softwares

“On-line channel has

significant cost benefit”
Distribution Channel-
Physical
 Physical
Channel
• Centralized distribution centers
• Faster response time
• Lower transportation cost
• Use a hybrid approach in
stocking and pricing
• Pricing varies for delivery options
• Supply Chain Strategy
• Pure pull
• Pure push
• Push-pull
 Amazon's Have an
goal is to holding
collaborate inventory
with of 15 days
suppliers to and an
increase inventory
efficiencies turnover of
and 26.
improve And also a
inventory credit
turnover period of 45
 WHOLESALER

INFORMAT PRODU
ION CT

INFORMATION
PRODUCT

CUSTOMER
 Large quantity of
small parcels and
WHOLESALER packages are
involved in e-
INFORMAT PRODU
commerce
ION CT related
merchandise

Variety of
delivery
PRODU
INFORMAT
ION CT
options,
including
overnight and
CUSTOMER
various
international
shipping
 Direct
Purchases
PUBLISH
WHOLESA ER/
SUPPLI
LER ER
PRODU
INFORMAT CT INFORMAT
ION ION

INFORMAT PRODU
ION CT

CUSTOMER
 Gets paid before paying the
distributor

PUBLISH
WHOLESA ER/
LER SUPPLI
ER
PRODU
INFORMAT CT INFORMAT
ION ION

INFORMAT PRODU
ION CT

CUSTOMER
 Distributer/
manufacturer

INFORMAT
ION

PRODU
CT

INFORMAT
ION

CUSTO
MER
 PUBLISH
WHOLESA ER/
SUPPLI
LER
ER
PRODU
INFORMAT CT INFORMAT
ION ION
SELLE
RS
CENT
AL
Other
Sellers

INFORMAT PRODU
ION CT
INFORMAT
ION

CUSTOMER
 Credit Policy
& ROI
• The whole distribution channel works on the
system of commission and credit policy.
• Credit policy depends on the distributor and
their geographical area.
• Distributors will get commission not only for
delivering customers but also for other
retailers.
• Credit policy of distributors depends on the type
of good sale.
Promotions and Visual
Merchandising
 ATL Promotions

• Launched an advertising galore in the year 2014

with a budget of INR
100-150 crores
• INR 20-25 crores was allotted for TVCs; One of the
largest TV advertisers in IPL 2014
• Print media was used to advertise numerous
promotional offers
• Online advertisements mainly focused on the wide
range of products
 ATL Promotions -
#AurDikhao
• #AurDikhao Campaign
launched in IPL 2015
• Conceptualized by Leo Burnett
India
• Captured real life instances in
Indian scenario, emphasizing on
the fact that Indians love to have
a long list of options before the
purchase decision
• Established Amazon India as a
brand form which Indian
masses would love to shop with
ATL Promotions - The Great Indian
Summer Sale
 Cat fight between
Flipkart vs Snapdeal vs
Amazon
 Cat fight between
Flipkart vs Snapdeal vs
Amazon

Snapdeal sensed an opportunity to The hoardings came into action

take a dig at
as well and it was a huge
Flipkart and here is what they came
trolling of Flipkart by Snapdeal
up with
 Cat fight between
Flipkart vs Snapdeal vs
Amazon

And as the age old proverb says, in the fight

between the two cats, it’s the monkey who
took the cake, it was Amazon India which
won in the end!
 Visual
Merchandising
• Virtual Store; Visual Merchandising is done at the
POS,the website
• In terms of the look and feel of website
• The background and the theme is changed
• According to the festive occasions in India
• According to the ongoing sale or ad campaign
Evaluation and
Conclusion
 Evaluation of the
Channel Strategies

• Value proposition of next day or same day

delivery
• Has been using a hybrid model of delivery system
• Evaluation of this model is not an easy job as it
does have its share of benefits and limitations
• Amazon has lower control over their
outbound transportation capacity
• The In-store logistic arm is doing a
significant work in helping Amazon offer
next day or same day delivery
 Conclusion

• Amazon India’s decision to build a fully grown in house

logistic arm in two years
• Plans to dramatically multiply its headcount in
logistics and conveyance space in seven months
• Amazon's more extensive method of reinforcing its
'Easy Ship' offering
• Top e-business players Amazon, Flipkart and
Snapdeal are all reinforcing their transportation
benefits