Online Distribution

Ramesh Chalise
LGIC
 Syllabus
• Components of a distribution system
• Characterization of online distribution
• Hybrid distribution networks
• Model for electronic software
distribution.
 Distribution
• Simply, Distribution is the transfer of merchandise to
customers.

• Many manufacturers do not sell their products and

services directly to the end customer but are instead
connected to a multitude of partners in the distribution
system. Wholesale and retail dealers buy a product
from the manufacturer and resell them.

• Other distributors such as brokers or agents simply

acquire customers on behalf of the manufacturer and
carry out sales negotiations.
Online Distribution
• The distribution of a digital product or a digital
service with the use of a communication network
(e.g. Internet) is called online Distribution.

• The online Distribution Support the omnipresence of

the economy.

• The distribution is independent from time and place.

 Distribution Channel Overview
• Distribution determines how the customer receives a product
or service which determines brand image.
• Marketers set strategies for availability, access, and
distribution service.
• Distribution channel : group of interdependent firms that
work together to transfer product and information from the
supplier to the consumer are composed of:
– Producers, manufacturers, or originators of the product or
service,
– Intermediaries—the firms that match buyers and sellers
and mediate the transactions among them,
– Consumers, customers, or buyers who consume or use the
product or service.
 Types of Intermediaries

Channel intermediaries include:

1. Wholesalers: buy products from the manufacturer + resell them to retailers.

2. Retailers (brick-and-mortar & online): buy products from wholesalers + sell them
to consumers.

3. Brokers: Brokers bring buyers and sellers together while assisting in negotiation.
They are paid by the party who hired them, rarely become involved in financing or
assuming risk, and are not long- term representatives of buyers or sellers. The
most familiar examples are real-estate brokers, insurance brokers, and security
brokers.

4. Agents: It is an intermediary who acts on behalf of a service principal (such as a

brokerage firm or a popular sports figure) and is authorized to make agreements
between customers and those principals. It has long-term relationships with
buyers, evaluating and making information to clients as well as obtaining the best
services and prices available
 Distribution Channel Length and Functions

• The length = number of intermediaries between

supplier and consumer:
– Direct distribution channel
• No intermediaries,
• The manufacturer deals directly with the consumer,
• sells directly to customers (Door to door sale, direct online
selling)
– Indirect channel
• Incorporate one or more intermediaries,
• Suppliers, a manufacturer, wholesalers, retailers, end
consumers,
• Intermediaries help to perform important functions.
Direct Distribution
Indirect Distribution
• What is online distribution ?
• How does it differ from offline distribution?
• What kind of opportunities and risks are
associated with online or offline distribution?
• What technical conditions do these
distribution options require?
 Online Distribution
• eDistribution or online distribution is the distribution of a digital
product or service with the aid of an electronic communications
network or the Internet.

Online distribution can play a role in both the direct and indirect outlet
channels, considering the respective distribution logistics and service
quality.

• In a direct outlet channel, the manufacturer is directly connected

to the end Characterizing online distribution customer by an
electronic means of communication.

• In the indirect outlet channel, one or all intermediate steps can be

organized online with the manufacturer, intermediary, and buyer.
Pros of Online Distribution
• Can buy at any time ,Convenient and Quick
• Possess Direct customer contact.
• Price and cost advantages due to appropriate
production, storage, and distribution costs
• Easy legal reproduction.
• Instant and comfortable delivery of digital
goods.
Cons of Online Distribution
• Chances of digital products be copied and
distributed illegally.
• Customers may lack the access to
communication system, connections might be
too slow/weak or may not secure enough.
• Lack of Social and interpersonal contact
• Compromise in Quality (Data Compression)
• Technophobia
 Offline Distribution
• In offline distribution the provider is not
electronically connected with the customer in
the distribution channel.
• In between them are a physical warehouse
and a transportation system (a courier, truck,
railway, ship, airplane, etc.) as well as a
physical outlet location.
• Digital products are not necessarily distributed
over online channels; they may reach the end
customer offline or through hybrid
distribution structures.
• Nonmaterial goods are stored on digital data
carriers such as CDs, DVDs or other storage
media, and distributed via suitable means of
transport
 Pros & Cons
Pros
• Quality of the products can be
maintained.
• Easy to ensure the digital copyright.
• Other related data or information
can be stored over the storage media
Cons
• Difficult to replace and repair the defective
data in product.
• Compatibility issues( different formats of
equipment)
• Distribution of material digital goods might be
time consuming and costly as well
 Hybrid Distribution
• Combination of online and offline distribution
• Using a hybrid distribution structure, the
advantages of both online and offline
distributions can be combined
• Thus flexible solutions for customer segments
with different demands in terms of technical
infrastructure, willingness to pay, time
requirements, or security standards are
possible.
 Contd..
• For example: The distribution of software can
be conducted with fast Internet connection
can obtain software packages or new releases
directly online, while small customers or
customers without Internet access can acquire
the appropriate software parts on CD through
the affiliated mail order company
(infomediary).
Electronic Software Distribution (ESD)
• Electronic software distribution (ESD) is the
distribution of software or data to users
electronically.
• The approach is quite opposite to the practice of
delivering software through physical media.
• Electronic software distribution can make use of
download or streaming.
• Electronic software distribution has many
advantages compared to distribution on physical
media, for both vendors and customers
Source; Ecommerce and ebusiness ( prof.dr andreas and dr henrik)
Architecture of an ESD system for online brokers
Standard Components of Software shopping system
• The software supplier or producer creates
different versions of his software packages
and allows them to be converted by the
packer software.
• The packer software has an interface that
allows the software manufacturer to register
his products and store the payment modalities
in the clearinghouse. This software also
generates a unique product identification
number per software product
• After successful registration, the manufacturer
makes his products available with appropriate
marketing information from the BOB farm.
• The BOB farm functions as a digital
warehouse for the different distributors.
• The online dealer concludes a contract
with the software house and can obtain the
desired products from the BOB farm. It
advertises the software products in his
shopping system and supplements it with
suitable marketing information and
explanatory aids. As well as acting as a
software distributor, he also offers consulting
and support services.
• The clearing house registers the software
packages based on their unique product
identification numbers. It administers the
assignment of keys and acts as gateway for the
payment streams between the customer and
the financial institute.
Security issues for Electronic Software
Distribution system
• Corruption: The contents of software items could
be altered or replaced.
• Injection: The target device's configuration could
be affected by invalid software items created by
the attacker and installed on the target device.
• Diversion: Software items could be diverted to an
unsuitable destination, e.g. by disturbing the
execution of other software at that destination
• Wrong version: A mismatch between the target’s
intended and actual configuration could be
caused by replaying outdated versions or by
forging version numbers
• Disclosure: The attacker can get hold of the
software item contents without having a
license, or reengineer functionality in order to
help manipulating software.
 Security Objectives for ESD
• Authenticity; Every software item accepted
must originate from a genuine supplier.
• Integrity; For every software item accepted at
a target, its identity and contents must not
have been altered on the way—it must be
exactly the same as at the supplier.
• Confidentiality; If required, software items
must be kept secret from the entry point of
the SDS (at the supplier) until reaching the
target device.
• Correct Destination; A target device must
accept and receive only software items for
which it is the true destination intended by
the target operator.

• Correct Version; A target device must accept

software items only in the latest version
approved by the target operator.
Infrastructure for web based SCM
Traditional vs. web based SCM
Any Questions?