Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

11. Place and Development
    of Channel Systems

Text © The McGraw−Hill

Companies, 2002

Place and Development of Channel Systems 323

Consider the different channels used by a company that publishes computer

books. See Exhibit 11-4. This publisher sells through a general book wholesaler who

in turn sells to Internet book retailers and independent book retailers. The pub-

lisher may have some direct sales of its best-selling books to a large chain or even

to consumers who order directly from its website. However, it might also sell through

a computer supplies wholesaler that serves electronics superstores like Best Buy. This

can cause problems because different wholesalers and retailers want different

markups. It also increases competition, including price competition. And the com-

petition among different middlemen may result in conflicts between the middlemen

and the publisher.

Dual distributionoccurs when a producer uses several competing channels to

reach the same target market—perhaps using several middlemen in addition to

selling directly. Dual distribution is becoming more common. Big retail chains

want to deal directly with producers. They want large quantities and low prices.

The producer sells directly to retail chains and relies on wholesalers to sell to

smaller accounts. Some established middlemen resent this because they don’t

appreciate anycompetition—especially price competition set up by their own

suppliers.

Other times, producers are forced to use dual

distribution because their present channels are

doing a poor job or aren’t reaching some potential

customers. For example, Reebok International had

been relying on local sporting goods stores to sell its shoes to high school and col-

lege athletic teams. But Reebok wasn’t getting much of the business. When it set

up its own team-sales department to sell directly to the schools, it got a 30,000-unit

increase in sales. Of course, some of the stores weren’t happy about their supplier

also selling to their potential customers. However, they did get the message that

Reebok wanted someone to reach that target market.^24

Exhibit 11-4 An Example of Dual Distribution by a Publisher of Computer Books

Publisher

of

computer

(specialty)

books

General book

wholesaler

(like Ingram)

Computer

supplies &

accessories

specialty

wholesaler

Final

consumers

(different

segments

may prefer

to buy from

different

channels)

Direct sales from

publisher's website

Note: Channel members may target different market segments; however, in some

cases they may compete for the same customers. And, the channels shown here

may also compete with channels for similar books by another publisher.

Internet book retailers

(like Amazon)

Book store chain (like

Barnes and Noble)

Electronics superstore

chain (like Best Buy)

Independent book

retailer (like campus

bookstore)

Dual distribution

systems may be

needed