Distribution Channel Strategies Research Articles

Retailers' distribution channel strategies with cross-channel effect in a competitive market

The development of e-commerce has motivated many traditional brick-and-mortar retailers to redesign their distribution strategies by adding a new online channel to supplement their retail channels. This online-and-offline channel (OOC) strategy is widely acknowledged as a promising strategy. However, when considering the cross-channel effect, i.e., online channel may have different impacts on the sales of the offline channel in different industries, retailers may not always prefer the OOC strategy even if the fixed cost of developing the online channel is negligible. In this paper, we investigate the impacts of cross-channel effect on the two competing traditional retailers' distribution channel strategies. By a two-period game-theoretic model, we show that the retailers may give up the OOC strategy when the cross-channel effect is significant negative. By contrast, when the cross-channel effect is insignificant negative or positive, both retailers prefer the OOC strategy even if they may be involved into the prisoners' dilemma. That is, although the Pareto equilibrium is to forego the OOC strategy, the optimal choice is to implement it. We later relax the assumption of simultaneous price game by allowing one retailer move first to determine its price. We find that our main results still hold but the prisoners' dilemma is more likely to avoid under the sequential price game than under the simultaneous price game.

Does innovation propensity influence wineries’ distribution channel decisions?

PurposeThe aim of this paper is to analyze the relationships between distribution strategies and the level of innovation propensity in the winemaking industry. It intends to identify the existence of patterns around the way wineries innovate and the way distribution channels are used. These determinants can support or constrain wineries’ behaviors in their strategic choices related to distribution channels.Design/methodology/approachThe sample comprised 191 Italian small- to medium-sized enterprises in the wine industry. First, a two-step cluster analysis was used to identify patterns in the level of innovation propensity and differences in distribution channel strategies. Second, the research question was tested using multinomial logit regression.FindingsFive clusters of innovation propensity were identified, varying from “no propensity to innovate” to “propensity for radical innovation”, and three clusters of distribution channel strategies were found. A significant negative relationship between innovation propensity and distribution channel strategies was revealed. This means that the greater the propensity to innovate, the smaller the need for a wholesale distribution option.Research limitations/implicationsAs with most research, there are limitations to this study. First, the sample is from only one country. A second limitation is the sample size (191 Italian firms). A sample including large firms can be used to further validate the findings. Linked to the sample, another possible limitation is that all respondents were small- and medium-sized enterprises from a single industry.Practical implicationsThis study contributes to the current innovation research by showing the existence of a negative relationship between innovation propensity and the choice of distribution channel in the wine industry. This knowledge is precious to entrepreneurs and managers in the wine sector, allowing them to better consider not only the type of strategies related to distribution channels but also the importance of building the firm’s propensity to innovate into the strategic decision-making process. Furthermore, the paper provides an opportunity for practitioners to reflect upon the fact that changing the distribution channel is more than just changing the outlet for their product; it might also require a revision in their innovation propensity to better facilitate the process.Social implicationsThere are also social implications, in particular providing an advantage for consumers. The major advantage is based on the fact that consumers are now aware that the level of innovation propensity in a wine industry is directly linked to the type of distribution channel adopted. Therefore, wines with low-innovation propensity are most likely found to adopt wholesale distribution strategy, while the more innovative wineries adopt the wine expert and direct distribution channels.Originality/valueFor the first time, a cluster analysis approach was used to review different typologies of Italian wineries based on their propensity toward to innovation and subsequent distribution strategies. This study further explains the direct relationship between innovation propensity and the strategic choice toward between long or short distribution channels.

Optimal Distribution Strategy for Enterprise Software: Retail, SaaS, or Dual Channel?

While the optimal distribution channel strategy of physical goods has been extensively studied, there is a lack of research for that of enterprise software as a digital good. This research analyzes the optimal distribution strategy of enterprise software by taking into account the distinct features of enterprise software for both the short‐run problem, in which the software quality is fixed, and the long‐run problem, in which the software quality becomes part of the strategic decisions. Our results indicate that in the presence of high unfit cost relative to the customization cost, the dual channel strategy exists and generates the highest profit for the firm and the highest social welfare. When the unfit cost is low relative to the customization cost, the SaaS channel strategy becomes the best strategy for both the firm in terms of profitability and society in terms of social welfare. This key finding is robust in that it holds for both the short‐run problem and the long‐run problem.

Antecedents and consequences of electronic distribution channel strategies in the U.S. lodging industry : operator's perspectives

Antecedents and consequences of electronic distribution channel strategies in the U.S. lodging industry : operator's perspectives

Distribution Channel Strategies and Retailer Collusion in a Supply Chain with Multiple Retailers

Previous literature suggests that without regulations firms have incentives to collude by fixing price or reducing quantity. This paper sets up an infinitely repeated game to examine the interplay between the manufacturer’s channel strategy and the downstream retailers’ collusive behavior. The results show that the manufacturer can deter retailer collusion by strategically changing its channel strategy. This effect occurs when the discount rate (used to calculate the present value of future profits) is relatively large and the manufacturer’s direct selling efficiency is relatively high (i.e., the variable cost of direct selling is relatively low). With the deterrence of direct selling, retailers abandon collusion and “no collusion” is a win-win strategy for both levels in the supply chain. However, when the manufacturer is not efficient in direct selling or the discount rate is small, direct selling is not effective in deterring retailer collusion and the manufacturer is worse off. These findings provide insights into channel strategies and supply chain management.

ANALISIS KINERJA PEMASARAN PADA INDUSTRI OLAHAN GERABAH DI KABUPATEN TAKALAR PROVINSI SULAWESI SELATAN

The aims of the research were to anayze marketing performance of processing industry of earthenware vessels and to find out whether product,business,and theeffectiveness of distribution channel strategies have influence on the increase ofmarketing performance.The populations were the owners of processing businessof earthenware vessels in Pattalassang district of takalar Regency consisting120industries.The sample consisted of 57 industries selected using simple randomsampling method based on Rao formulae.The data were obtained in two step,i.e.library study and questionnaire.The measurement of variables used LIKERTScale which indicated the level of respondents agreement with a score raging from1 to 5 (really agre,agree,quite agree,not agree,really not agree).The datewereanalyzed using multiple linear regression analysis.The results of inferentialanalysis indicate that the variables of product(X1),business(X2),and theeffectiveness of distribution channel(X3) strategies have positive and significantinfluence on marketing performance either simultaneously or partially.Theobtained regression equation is y =1.115 + 0.525x1 +0.237x2 + 0.025x3.

The Cost of Life Distribution in Europe

The cost of life distribution varies considerably across markets and channels. This is increasingly important for insurers and regulators due to the continuing low interest rate environment in Europe, which strongly affects profits. The aim of this paper is to study the distribution costs of different distribution systems/channels and markets, examine the key drivers of distribution costs and discuss future developments against the background of digitalisation and an increasing intensity of intermediary regulation. Our analysis is based on empirical data for the European insurance market. This is complemented by interviews with several industry experts. Our findings suggest that distribution costs depend on various factors and cannot be explained solely by differences in distribution channel strategies.

Marketing channel strategy management in international markets

We explore the key challenges of a changing global market context and their effects on manufacturers' marketing channel strategies in times of retail firm internationalisation and proliferation of retailer brands in international markets. Empirical research is based on surveying a random sample of Slovenian manufacturing firms and explores the underlying relationships between the manufacturer export market orientation, innovativeness, relationships with customers in foreign markets, proliferation of retailer brands and the manufacturers' distribution strategy. The study highlights the relationships between these dimensions of international marketing process and delineates some key strategic responses of firms to changing marketing channel context. Finally, some strategic suggestions for their international distribution channel strategy are presented.

Impact of supply chain power and drop-shipping on a manufacturer’s optimal distribution channel strategy

With the expansion of the Internet and the proliferation of e-businesses, many manufacturers have chosen to distribute products through online retail channels in addition to brick-and-mortar retail channels. In this paper, we consider a dual-channel supply chain in which a manufacturer considers selling a product through a conventional retail channel and an online channel. Considering two common procurement and order fulfillment policies for online retailers (etailers), conventional batch ordering and drop-shipping, we investigate the impact of supply chain power structure in terms of market power and retail channel dominance on a manufacturer’s optimal distribution channel strategy. We analyze and compare the two procurement models with respect to the etailer’s order fulfillment policies. We find that a manufacturer never prefers a drop-shipping etailer as the first mover in a sequential pricing game with a batch ordering traditional retailer. The manufacturer prefers to award the power of retail channel dominance to a batch ordering retailer with relatively high market power even if the etailer also follows a batch ordering policy. Drop-shipping benefits both the manufacturer and the etailer when the etailer has relatively low market power.

Optimal distribution channel strategy for new and remanufactured products

The market for remanufactured products is large and growing rapidly, accelerated by the widespread popularity of internet sales and online auctions. Whereas extant remanufacturing research focuses primarily on such operations management issues in collecting of end-of-life products, remanufacturing technologies, production planning, and inventory control, we consider an operations-marketing interaction issue by identifying the optimal channel structures for marketing new and remanufactured products. Specifically, based on observations from current practice, we consider three channel strategies a dominant manufacturer can adopt: (1) marketing both new and remanufactured products through an independent retailer; (2) marketing the remanufactured products through the independent retailer, while controlling the new product sales by using its own online channel; (3) marketing the remanufactured products through the manufacturer-owned online channel, while selling new products through the independent retailer. Our results show that the manufacturer prefers to differentiate new and remanufactured products by opening a direct online channel, no matter how the system parameters change. However, which type of products (new or remanufactured) the manufacturer should sell through the online channel depends on the cost saving from remanufacturing, the customer's acceptance of remanufactured products and the online inconvenience cost. Furthermore, this paper shows that, compared with channel strategy I where the manufacturer sells both new and remanufactured products through an independent retailer, this dual channel strategy benefits the end consumers, but might do harm to the retailer and the total supply chain in some situations.

Maximizing online bookings through a multi-channel-strategy

PurposeHotel managers are being challenged by the increasing multitude of distribution and sales channels. Online travel agencies (OTAs) in particular generate a great deal of uncertainty: Which are the best ones? Which ones offer the best conditions? How many channels are optimal for my hotel? How can I evaluate costs versus benefits? These and other questions concerning the optimal online distribution channel strategy have produced different reactions in practice. The aim of this paper is to challenge the need for an over-optimization of channel strategy by proposing that the consumer, at the end, deals with a network of information presented on one networked environment, including the Web. Hence, the network effect of the numerous online platforms is what drives consumer choice and, finally, bookings.Design/methodology/approachA series of multiple regressions with representative samples of hotels in Switzerland from the years 2009, 2010, 2011 and 2012 was performed to estimate the importance of the number of platforms against other independent variables. Additionally, further multiple regressions with samples from the years 2011 and 2012 using the most important platforms (first-tier channels) shows again that the number of platforms is more important.FindingsThe analyses show that the estimated number of online bookings by the respondents in the hotels is a result of the number of channels, not the type of channel. This is particularly true for non-categorized establishments and one- and two-star hotels. The analyses do not confirm the billboard effect, according to which particular platforms (first-tier channels) increase the probability of bookings. Thus, the survival strategy is to maximize share of shelf and to build on interdependencies and network effects.Research limitations/implicationsThe study looks only at online bookings. Additional research into the connection between online and offline channels, particularly from the viewpoint of the consumer, will provide further insights. The study looks at the booking volume per channel, not the monetary sales volume or the profit. A study that quantifies not only the volume of bookings but also the total profit or the contribution to profit per channel could quantify the benefits of the multi-channel strategy.Originality/valueThe multiple online channel strategy seems to be the more effective approach to maximizing bookings online, regardless of the platforms chosen. Results of the study challenge the current opinion among practitioners that the multitude of distribution channels forces them to choose among single online channels and, therefore, drives the search for criteria to assess these channels or even to disregard them. The consistent results across 2009-2012 show that even in the turbulent phase of the advent of OTAs in the travel industry, hotels can adopt a winning strategy. Finally, the results suggest that the intermediation of online distribution of hotel beds has approached the condition of perfect competition, causing the OTA business model to be cannibalized.

Distribution channel strategies in a mixed market

This paper studies equilibrium channel strategies in a mixed market with a public firm and a private firm. The public firm is concerned with social welfare, while the private firm aims to maximize its own profit. Each firm decides whether to adopt an integrated or a decentralized channel. We examine two standard market competition modes, Bertrand and Cournot. Within each competition mode, we consider two typical vertical contracts, wholesale-price and two-part tariff contracts. Our results suggest that equilibrium channel structures depend on the market competition mode, the vertical contract form, and the level of product substitutability. Specifically, the channel strategy of the private firm depends mainly on the vertical contract form: under a two-part tariff contract, the private firm always chooses decentralization; under a wholesale-price contract, the private firm chooses integration for most scenarios except for highly substitutable products under Bertrand competition (i.e., under very intense competition). The channel strategy of the public firm depends mainly on the competition mode: under Bertrand competition, the public firm always chooses decentralization; under Cournot competition, the public firm always chooses the opposite of the private firm׳s strategy.

O efeito da distribuição sobre o market share em diferentes canais

Apesar dos avanços nos estudos sobre os efeitos das estratégias de canais de distribuição, a relação entre distribuição e participação de mercado é ainda um tópico pouco explorado, especialmente em mercados emergentes. Por essa razão, a proposta central deste artigo é investigar a relação entre a variáveis de distribuição e market share no mercado brasileiro, especificamente no setor de bebidas, comparando dois importantes tipos de canais do mercado de consumo: grandes e pequenos supermercados. Para tanto, foi conduzida uma pesquisa empírica com base em um banco de dados contando com mais de 180 Stock Keeping Unit (SKUs) comercializados por três fabricantes na região sudeste do Brasil. Por meio de análises estatísticas, os resultados indicam existir uma relação convexa e crescente entre as variáveis estudadas, ou seja, existe um ponto de inflexão no qual o crescimento do market share é mais acentuado em razão da distribuição. Além disso, verificou-se que as curvas que descrevem essas variáveis apresentam efeitos diferentes quando comparados grandes e pequenos supermercados.

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Trust orientations in the organic food distribution channels: A comparative study of the Canadian and French markets

The objectives of this research are to (i) identify supply side factors that determine trust/mistrust in OF products, and (ii) determine the distribution channel strategies to increase trust in OF products. A total of 80 individual in-depth interviews were conducted in Canada and France with managers from superstores, specialty stores, farmers, markets, producers and certification bodies. Results show a clear distinction between the Canadian and French OF distribution structures in terms of trust. Consequently, distributors have to adapt their strategies and tools in order to enhance trust in OF, in their distribution channel and in the overall food supply chain.

Distribution Channel Strategies for a Manufacturer with Complementary Products

ABSTRACTIn this article, we consider distribution channel strategies for an incumbent manufacturer who produces two complementary products and must determine whether or not to have another company to sell its products. We identify factors that affect the manufacturer's motivation to use dual‐channel distribution. Our results show that both complementarity between complements and product substitutability between firms influence the manufacturer's channel strategy. We find that if the potential entrant does not produce the complement of the primary product, a higher complementary effect for the complement will weaken the motivation of the incumbent to add an indirect channel. We also find that the incumbent has a stronger incentive to add the indirect channel when a product's substitutability is high. Furthermore, we show that when the two channels have the same pricing power, the incumbent has a stronger incentive to sell through the indirect channel in a higher pricing power environment.

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Selecting distribution channel strategies for non‐profit organizations

PurposeThe purpose of this paper is to better understand the selection of a distribution channel strategy for a non‐profit organization selling products or services to its end customers.Design/methodology/approachTwo channel strategies are generally considered: an integrated channel where the non‐profit organization sells its products or services using its own selling departments or branches; and a decentralized channel where the non‐profit organization sells through a for‐profit retailer. The fundamental question is: how should a non‐profit organization select its distribution channel strategy under certain market conditions?FindingsIt was found that selecting a decentralized channel strategy results in an optimal retail price that is higher than that under an integrated channel strategy, which results in lower customer welfare under the decentralized channel. It was also found that a decentralized channel behaves as an integrated fully for‐profit channel. Thus, whether a non‐profit organization should choose an integrated or a decentralized channel when facing competition from an integrated or a decentralized fully for‐profit channel depends on its cost structure and the level of substitutability of the products or services offered by the two channels.Practical implicationsWhen competing with an integrated fully for‐profit channel, the non‐profit organization is better off using an integrated channel under strong competition or a decentralized channel under weak competition. When competing with a decentralized fully for‐profit channel, the selection is more complicated. It was found that a decentralized channel is the best choice if the price competition factor, where threshold value depends on the cost structure, is large.Originality/valueNon‐profit organizations have a clear (perhaps increasing) need for distribution centers or retailers in order to reach people who need their products or services. Moreover, it has been reported that the interactions between for‐profit and non‐profit sectors continue to grow, thus increasing the forms of community involvement available to reach people. It is thus clear that additional research is needed to better understand the selection of a distribution channel strategy for a non‐profit organization selling products or services to its end customers, and also the related managerial implications.

Distribution systems, loyalty and performance

PurposeThis paper aims to examine the influence of distribution systems and customer loyalty on firm performance.Design/methodology/approachEfficiency scores and profitability are used as the proxies for performance. The data envelopment analysis approach is used to calculate efficiency scores. The sample is from the Taiwanese life insurance industry.FindingsThe results suggest that a multiple distribution channel strategy performs worse than a single distribution channel strategy in terms of efficiency and profitability. It is also found that agent turnover rate is negatively related to technical efficiency, cost efficiency, and profitability. The evidence also suggests that insurers with higher customer loyalty perform better than insurers with lower customer loyalty.Originality/valueThe paper's results can assist insurers to make decisions on distribution channels and improve agent turnover rate and customer loyalty.

Distribution channel strategy and efficiency performance of the life insurance industry in Taiwan

Changes in regulations and laws, in the past few decades, have affected Taiwan’s life insurance industry and caused many insurers to modify their marketing strategies. This article analyzes the evolution of the productive patterns in a sample of 24 life insurers that operated in Taiwan from 1997 to 2006. We estimate Malmquist productivity indexes and decompose them into four sources of productivity change. Further, we compare the differences in efficiency scores before and after the change of distribution channel strategy. The results suggest that a direct distribution channel strategy performs better than a non-direct distribution channel strategy in terms of efficiency and productivity change. It means that the coexisting direct/indirect distribution systems cannot improve the efficiency of life insurers.