Grey Market

What is Grey or Gray Market?
•A grey market is a market where a product is bought and sold outside of the manufacturers authorized trading channels.
•Grey market is an unofficial market in which goods are bought and sold at prices lower than the official price set by a regulatory agency
•A grey market or gray market is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer. In contrast, a black market is the trade of goods and services that are illegal in themselves and/or distributed through illegal channels, such as the selling of stolen goods, certain drugs or unregistered handguns.

Description of Grey Market
Unlike black market goods, grey-market goods are not usually illegal. Instead, they are sold outside normal distribution channels by companies which may have no relationship with the producer of the goods. Frequently this form of parallel import occurs when the price of an item is significantly higher in one country than another. This situation commonly occurs with electronic equipment such as cameras. Entrepreneurs buy the product where it is available cheaply, often at retail but sometimes at wholesale, and import it legally to the target market. They then sell it at a price high enough to provide a profit but under the normal market price. International efforts to promote free trade, including reduced tariffs and harmonized national standards, facilitate this form of arbitrage whenever manufacturers attempt to preserve highly disparate pricing. Because of the nature of grey markets, it is difficult or impossible to track the precise numbers of grey-market sales. Grey-market goods are often new, but some grey market goods are used goods. A market in used goods is sometimes nicknamed a Green Market.
Importing certain legally restricted items such as prescription drugs or firearms would be categorized as black market, as would smuggling the goods into the target country to avoid import duties. A related concept is bootlegging, the smuggling or transport of highly regulated goods, especially alcoholic beverages. The term "bootlegging" is also often applied to the production or distribution of counterfeit or otherwise infringing goods. Grey markets can sometimes develop for select video game consoles and titles whose demand temporarily outstrips supply and the local shops run out of stock, this happens especially during the holiday season. Other popular items, such as dolls can also be affected. In such situations the grey market price may be considerably higher than the manufacturer's suggested retail price. Online auction sites such as eBay have contributed to the emergence of the video game grey market

Drop Shipping

What is Drop Shipping?
•Drop shipping is an arrangement that a retailer makes with a wholesale distributor. The retailer sells the product, and the wholesaler then ships it to the customer complete with the retailer's label on the package.
•Drop shipping is a product delivery method in which the seller (retailer) accepts payment for an order, but the customer receives the product(s) directly from the manufacturer. In a drop shipping arrangement, the retailer acts as a middleman between the manufacturer and the customer. His profit in the transaction is the difference between the wholesale and retail price of the items sold.

Advantages of Drop Shipping
•No inventory
•No shipping
•You buy wholesale and sell retail
•Distributor supplies product information and new products

Disadvantage of Drop Shipping
The main disadvantage to drop shipping is that there is a slightly higher chance that there will be returns. Since the retailer cannot see the product, it's possible that the wrong type will be shipped, and the quality of the product cannot be verified.

When starting a retail business, inventory can easily be one of your largest expenses. Not only that, but over time you have to keep your inventory current and stocked with the products your customers most want to buy. If your inventory becomes outdated, you might have to sell it to a discount company at a loss. Overall, no inventory means less risk to you as a retailer.
Depending on the size of your business, shipping and mailing can expend a lot of your resources. This includes processing orders, packaging, and making arrangements with a shipping company to pick packages up or taking them down to the post office yourself and mailing them. For small businesses, it requires having one or more employees dedicating part of their workday to shipping, taking time away from other tasks. For larger businesses, it means having a full-time mailroom with perhaps a dedicated mailroom supervisor. Either way, drop shipping offers an alternative that alleviates shipping and frees your employees for other duties.
The great thing about drop shipping is that you never have to buy an item wholesale until you've already sold it retail. Not only do you benefit from no inventory costs, you also profit from the difference between the wholesale and retail price. You have to get the best price you can wholesale in order to stay competitive in the retail market.
The key to finding a distributor with the best price is to get as close as possible to the manufacturer of a product. Contact the manufacturer and if they don't drop ship, they can recommend a distributor who does. (Please note that the distributor will require you to have a resale or tax number to buy the products wholesale.)
Once you have secured an arrangement with a distributor, you can begin using their product information on your Web site. Larger distributors have marketing packages and smaller ones will let you download pictures and information from their site. In addition, if the distributor begins carrying a new product line, you have the option of adding it to your online selection. This keeps you current without having to do your own research and development.

Things to consider when selecting a distributor for drop shipping
•Watch out for companies that aren't legitimate wholesalers. (Be suspicious if they don't ask for a tax ID number.)
•Be wary of monthly fees. (You should not have to pay to sell their product.)
•Online shopping is highly competitive. Optimally, products should be in demand, but not widely available online — what are called niche markets.
•Be sure the drop shipper uses a method of shipping, such as FedEx or UPS, which can be tracked. (This is helpful when the customer wants a status on their order.)
•Ask about the distributor's policy on defective products and returns. (This always comes up in retail businesses.)

How Drop Shipping Works
Steps Involved in Drop Shipping
•You open an Internet Store with a shopping cart and accept credit cards on your site. You can also sell on Internet Auction sites such as eBay.
•You find a distributor who will dispatch the products you want to sell.
•You open an account with the "drop ship" distributor(s) you choose.
•You receive descriptions and images of the products you wish to sell from the distributor and put them on your Internet Store or Auction.
•When a customer buys from your Store or Auction, they pay with their credit card. Your Store or Auction charges their credit card plus shipping.
•You email the order to the drop ship distributor with the customer's name and address.
•Then the drop shipper dispatches the product to your customer from the warehouse with YOUR business name on the package.
•Then the company charges you the wholesale price plus shipping. Remember you have already passed the shipping charge on to your customer, so the shipping costs you nothing.

Supply Chain

What is a Supply Chain?
A supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers that participate in the production, delivery, and sale of a product to the consumer. The supply chain is typically made up of multiple companies who coordinate activities to set themselves apart from the competition.
A supply chain has three key parts:
1.Supply focuses on the raw materials supplied to manufacturing, including how, when, and from what location.
2.Manufacturing focuses on converting these raw materials into finished products.
3.Distribution focuses on ensuring these products reach the consumers through an organized network of distributors, warehouses, and retailers.
While often applied to manufacturing and consumer products, a supply chain can also be used to show how several processes supply to one another. The supply chain definition in this sense can apply to Internet technology, finance, and many other industries. A supply chain strategy defines how the supply chain should operate in order to compete in the market. The strategy evaluates the benefits and costs relating to the operation. While a business strategy focuses on the overall direction a company wishes to pursue, supply chain strategy focuses on the actual operations of the organization and the supply chain that will be used to meet a specific goal.

Supply Chain Modeling
There are a variety of supply chain models, which address both the upstream and downstream sides.
The SCOR (Supply Chain Operations Reference) model, developed by the Supply Chain Council, measures total supply chain performance. It is a process reference model for supply-chain management, spanning from the supplier's supplier to the customer's customer. It includes delivery and order fulfillment performance, production flexibility, warranty and returns processing costs, inventory and asset turns, and other factors in evaluating the overall effective performance of a supply chain.
The Global Supply Chain Forum (GSCF) introduced another Supply Chain Model. This framework is built on eight key business processes that are both cross-functional and cross-firm in nature. Each process is managed by a cross-functional team, including representatives from logistics, production, purchasing, finance, marketing and research and development. While each process will interface with key customers and suppliers, the customer relationship management and supplier relationship management processes form the critical linkages in the supply chain

Supply Chain Management
Supply Chain Management (SCM) is a process used by companies to ensure that their supply chain is efficient and cost-effective. A supply chain is the collection of steps that a company takes to transform raw components into the final product. Typically, supply chain management is comprised of five stages: plan, develop, make, deliver, return.
Plan: This is the first stage in supply chain management, A plan or strategy must be developed to address how a given good or service will meet the needs of the customers. A significant portion of the strategy should focus on planning a profitable supply chain.
Develop is the next stage in supply chain management. It involves building a strong relationship with suppliers of the raw materials needed in making the product the company delivers. This phase involves not only identifying reliable suppliers but also planning methods for shipping, delivery, and payment.
Make, this is the third stage in supply chain management, the product is manufactured, tested, packaged, and scheduled for delivery. Then, at the logistics phase, customer orders are received and delivery of the goods is planned. This fourth stage of supply chain management stage is aptly named Deliver.
The final stage of supply chain management is called Return. As the name suggests, during this stage, customers may return defective products. The company will also address customer questions in this stage.
Another model for understanding supply chain management is grouping all management activities into three categories: strategic, tactical, and operational. Strategic activities include building relationships with suppliers and customers, and integrating information technology (IT) within the supply chain. Studying competitors and making decisions regarding production and delivery would fall under the tactical category. The operational category includes the daily management of the supply chain, including the making of production schedules.
Companies use forecast-distribution models in order to have the appropriate inventory, or safety stock, necessary to meet fluctuations in customer demand. Forecast-distribution helps companies maintain more efficient, and therefore more effective, supply chain management. Under this model, participants in the lower-end of the supply chain, rather than those near the end-customer, increase their orders frequently when there is a rise in demand. Conversely, when there is a decrease in demand, they decrease or stop their orders to prevent excessive inventory. This greater variation in demand that can be seen in the supply chain as one moves away from the end customer is known as the whiplash or bullwhip effect. A possible solution to this effect is Kanban, a demand-driven supply chain. The participants in the supply chain would react to actual customer orders, not forecasts of them.
Problems associated with supply chain management are handled within supply chain event management (SCEM), which is the process of planning for and preventing factors that might affect the supply chain.

Developments in Supply Chain Management
There are six major movements that can be observed in the evolution of supply chain management studies; they are as follows;
1. Creation Era
The term supply chain management was first coined by an American industry consultant in the early 1980s. However the concept of supply chain in management, was of great importance long before in the early 20th century, especially by the creation of the assembly line. The characteristics of this era of supply chain management include the need for large scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management.
2. Integration Era
This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of SC evolution is characterized by both increasing value-added and cost reduction through integration.
3. Globalization Era
The third movement of supply chain management development, globalization era, can be characterized by the attention towards global systems of supplier relations and the expansion of supply chain over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back to several decades ago (e.g. the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing competitive advantage, creating more value-added, and reducing costs through global sourcing.
4. Specialization Era—Phase One—Outsourced Manufacturing and Distribution
In the 1990s industries began to focus on “core competencies” and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond the four walls and distributing management across specialized supply chain partnerships.
This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI).
The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands.
5. Specialization Era—Phase Two—Supply Chain Management as a Service
Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non asset based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management.
At any given moment, market forces could demand changes within suppliers, logistics providers, locations, customers and any number of these specialized participants within supply chain networks. This variability has significant effect on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to the more-complex requirements, including the configuration of the processes and work flows that are essential to the management of the network itself.
Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of best in class domain specific partners to contribute to the overall value chain itself – thus increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity.
Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root in transportation and collaboration categories most dominantly. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model we are currently focused on today.
6. Supply Chain Management 2.0 (SCM 2.0)
Building off of globalization and specialization, SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era".
Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is it helps us navigate the vast amount of information available on the web to find what we are looking for. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM results – the combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near/far and off shoring, and talent scarcity.
SCM 2.0 leverages proven solutions designed to rapidly deliver results with the ability to quickly manage future change for continuous flexibility, value and success. This is delivered through competency networks composed of best of breed supply chain domain expertise to understand which elements, both operationally and organizationally, are the critical few that deliver the results as well as the intimate understanding of how to manage these elements to achieve desired results, finally the solutions are delivered in a variety of options as no-touch via business process outsourcing, mid-touch via managed services and software as a service (SaaS), or high touch in the traditional software deployment model.

Supply Chain Business Process Integration
Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers as it attempts to satisfy this demand. Shared information between supply chain partners can only be fully leveraged through process integration.
Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) are:
1.Customer relationship management
2.Customer service management
3.Demand management
4.Order fulfillment
5.Manufacturing flow management
6.Supplier relationship management
7.Product development and commercialization
8.Returns management
Much has been written about demand management. Best in Class companies have similar characteristics. They include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting
One could suggest other key critical supply business processes combining these processes stated by Lambert such as:
a.Customer service management
b.Procurement
c.Product development and commercialization
d.Manufacturing flow management/support
e.Physical distribution
f.Outsourcing/partnerships
g.Performance measurement


a) Customer Service Management Process
Customer Relationship Management concerns the relationship between the organization and its customers. Customer service provides the source of customer information. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. Successful organizations use following steps to build customer relationships:
•determine mutually satisfying goals between organization and customers
•establish and maintain customer rapport
•produce positive feelings in the organization and the customers
b) Procurement Process
Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship, where both parties benefit, and reduction times in the design cycle and product development are achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers in scheduling, supply continuity, hedging, and research into new sources or programs.
c) Product Development and Commercialization
Here, customers and suppliers must be united into the product development process, thus to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must:
1.coordinate with customer relationship management to identify customer-articulated needs;
2.select materials and suppliers in conjunction with procurement, and
3.develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination.
d) Manufacturing Flow Management Process
The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes, and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations.
e) Physical Distribution
This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g. links manufacturers, wholesalers, retailers).
f) Outsourcing/Partnerships
This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything else it will outsource. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, to manage and control this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level.
g) Performance Measurement
Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts internal measures are generally collected and analyzed by the firm including
1.Cost
2.Customer Service
3.Productivity measures
4.Asset measurement, and
5.Quality.
External performance measurement is examined through customer perception measures and "best practice” benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking. Components of Supply Chain Management are 1. Standardization 2. Postponement 3. Customization

Wholesale Price

What is a Wholesale Price?
A wholesale price is the price offered to purchasers of manufactured goods or to commercial sellers in many cases. Sometimes, small warehouse stores like Costco offer wholesale prices to some of their customers who own businesses. These prices are usually about half the price of something that could be purchased at retail value. Sellers or producers of other goods (like restaurants) confer a higher price to the retail customer, often at a 100% or more mark-up.
Goods don’t just have to be manufactured; they can also be grown. A farmer for instance, offers a wholesale price to a grocery store or a produce buying company. The produce buying company may spend money to package or repackage goods for sale, usually in smaller lots. These are then sold at a retail price that is much higher than if you were to purchase the goods from the farmer on your own.
Part of the reason that manufacturers of goods or growers can offer wholesale prices is because they sell their goods in bulk. A grocery store doesn’t buy just one tomato from a farmer; it buys several tons of tomatoes. This way the farmer, though selling the goods at a lower price than what they would cost in a grocery store, is assured a larger sum payment for the goods, and is able to get rid of his produce.
The same applies to any manufactured item. Retailers don’t go looking for one manufactured item, unless it’s exceptionally large or special ordered. Instead they buy thousands of the item and are assured a lower price. Larger retailers, who make very large purchases of the same item and have the ability to offer these items at a high number of stores, may be able to get better wholesale prices that would a small independent store that can only purchase a small number of a single good. Purchasing volume is important when determining wholesale price.
Due to the fact that wholesale price for goods can be so much lower than retail markup, there’s often considerable price flexibility on certain items, particularly clothing and furniture. Generally, even when a company offers sales or clearances they may still make a profit, though not as high a one as they’d get if they sell things at full price. Consumers wise to this price flexibility tend to wait for sales to shop. They know that prices can be flexible when markup is high, and there’s no point purchasing something at full retail price when you can purchase something at a price much closer to wholesale price.

Wholesale

Wholesale is a Sale of goods, generally in large quantity, to a retailer for resale purposes. For instant Wholesalers buys goods in bulk quantities from either manufacturers or importers, and then sells in smaller quantity to retail stores.
In this business you must have good negotiation skills to get the lowest possible products prices from the manufacturers so that you can have decent margin to cover the costs of distribution and leave a profit.
There are some strategies to achieve the best possible prices, ranging from simple haggling, quantity discounts, early payment discounts and even buying whole container loads in partnership with other wholesalers that did not compete in our area.
A wholesaler usually works with the manufacturer to provide quantities of goods to other retail outlets or businesses. Often, they may also be the distributor of the product as well. A wholesaler is usually only interested in volume sales and does not sell single or low-quantity lots of the products. In situations such as this the manufacturer sells only to its wholesalers, who in turn sell to businesses or distributors. The manufacturer may be the wholesaler in some cases they usually handle all logistics involved in getting the merchandise to your location, as well as billing for the products and delivery.

Wholesale Merchants
Wholesale merchants buy and sell merchandise on their own account, that is, they take title to the goods they sell. They generally operate from warehouse or office locations and they may ship from their own inventory or arrange for the shipment of goods directly from the supplier to the client. In addition to the sale of goods, they may provide, or arrange for the provision of, logistics, marketing and support services, such as packaging and labelling, inventory management, shipping, handling of warranty claims, in-store or co-op promotions, and product training. Dealers of machinery and equipment, such as dealers of farm machinery and heavy-duty trucks, also fall within this category.
Wholesale merchants are known by a variety of trade designations depending on their relationship with suppliers or customers, or the distribution method they employ. Examples include wholesale merchants, wholesale distributors, drop shippers, rack-jobbers, import-export merchants, buying groups, dealer-owned cooperatives and banner wholesalers.
The first eight subsectors of wholesale trade comprise wholesale merchants. The grouping of these establishments into industry groups and industries is based on the merchandise line or lines supplied by the wholesaler.

Wholesale Agents and Brokers
Wholesale agents and brokers buy and sell merchandise owned by others on a fee or commission basis. They do not take title to the goods they buy or sell, and they generally operate at or from an office location.
Wholesale agents and brokers are known by a variety of trade designations including import-export agents, wholesale commission agents, wholesale brokers, and manufacturer's representatives and agents.

Variety Store

Definitions of Variety Store.
•Variety store is a retail store that sells a wide assortment of low-priced, popular merchandise.
•Variety store is a retail store carrying a variety of items in the low and popular price ranges, targeted for the family market. Variety stores carry items such as apparel, women's accessories, gift items, and stationery.
•A retail establishment that offers a wide assortment of inexpensive and frequently purchased merchandise, including health and personal care items, candy, boxed or packaged food, and house wares.

Products found in a Variety Store
Variety store products include cooking supplies, small tools, personal hygiene supplies, kitchen supplies, organizational supplies, small office supplies, holiday decorations, electronics supplies, gardening supplies, home decor novelties, toys, pet supplies, out of print books, DVDs and VHS tapes, food products and automotive supplies.
Some items sold at a certain price point would cost that much anyway, whereas other items offer a substantially lower price than usual. There are three reasons a variety store is able to sell merchandise at such a low price:
•The product is a generic or private label, often specially manufactured for such stores, using cheaper ingredients and processes than products intended for the mass market.
•The product was manufactured cheaply for a foreign market but was then re-imported by an unauthorized distributor (grey market goods).
•The product is purchased from another retail store or distributor as discontinued and discounted merchandise. (Often items were manufactured to coincide with the promotion of a motion picture, television show or special event (e.g. Olympic games), and are past their prime price.)
Some stores carry mostly new merchandise, some mostly closeout merchandise bought from other stores below regular wholesale cost.
Depending upon the size, some variety stores may have a frozen food and drink section, and also one with fruits and vegetables. The Deal$, Dollar Tree, and 99 Cents Only Store chains in the U.S. are three such examples. Some stores may have a section of single price point items combined on the same premises with a section selling larger, relatively more expensive merchandise like CD players, lamps, and silverware. The flagship store of Jack's 99 and Jack's World in New York City is an example of such a store. Jack's 99 carries all types of items that retail for 99 cents, whereas Jack's World sells branded goods at discount prices.

Supermarket

A supermarket, also called a grocery store is a self-service store offering a wide variety of food and household merchandise, organized into departments. It is larger in size and has a wider selection than a traditional grocery store and it is smaller than a hypermarket or superstore.
The supermarket typically comprises meat, fresh produce, dairy, and baked goods departments along with shelf space reserved for canned and packaged goods as well as for various nonfood items such as household cleaners, pharmacy products, and pet supplies. Most supermarkets also sell a variety of other household products that are consumed regularly, such as alcohol (where permitted), household cleaning products ,medicine, clothes, and some sell a much wider range of nonfood products.
The traditional suburban supermarket occupies a large amount of floor space, usually on a single level, and is situated near a residential area in order to be convenient to consumers. Its basic appeal is the availability of a broad selection of goods under a single roof at relatively low prices. Other advantages include ease of parking and, frequently, the convenience of shopping hours that extend far into the evening or even 24 hours a day. Supermarkets usually make massive outlays of newspaper and other advertising and often present elaborate in-store displays of products. The stores often are part of a corporate chain that owns or controls (sometimes by franchise) other supermarkets located nearby

Typical Supermarket Merchandise
Larger supermarkets in North America and Western Europe typically sell a great number of items among many brands, sizes and varieties, including:
•Alcoholic beverages (as state/provincial and/or local laws allow)
•Baby foods and baby-care products such as disposable diapers
•Breads and bakery products (many stores may have a bakery on site that offers specialty and dessert items)
•Books, newspapers, and magazines, including supermarket tabloids
•Bulk dried foods such as legumes, flour, rice, etc. (typically available for self-service)
•Canned goods and dried cereals
•Car-care products (motor oil, cleaners, waxes)
•CDs, Audio cassettes, DVDs, and videos (including video rentals)
•Cigarettes and other tobacco products
•Clothing and footwear (typically a general, limited assortment)
•Confections and candies
•Cosmetics
•Dairy products and eggs
•Delicatessen foods (ready-to-eat)
•Diet foods
•Electrical products such as light bulbs, extension cords, etc.
•Feminine hygiene products
•Financial services and products such as mortgages, credit cards, savings accounts, wire transfers, etc. (typically offered in-store by a partnering bank or other financial institution)
•Flowers
•Frozen foods and crushed ice
•Fresh produce, fruits and vegetables
•Greeting cards
•Housecleaning products
•Housewares, crockery and cooking utensils, etc. (typically limited)
•Laundry products such as detergents, fabric softeners, etc.
•Lottery tickets (where operational and legal)
•Luggage items (typically limited)
•Meats, fish and seafood’s (some stores may offer live fish and seafood items from aquarium tanks)
•Medicines and first aid items (primarily over-the-counter drugs, although many supermarkets also have an on-site pharmacy)
•Nonalcoholic beverages such as soft drinks, juices, bottled water, etc. (some stores may have a juice bar that prepares ready-to-drink freshly squeezed juices, smoothies, etc.)
•Personal hygiene and grooming products
•Pet foods and products
•Seasonal items and decorations
•Snack foods
•Soft drinks
•Tea and Coffee (some stores may have a commercial-style grinder, typically available for self-service, and/or a staffed coffee bar that prepares ready-to-drink coffee and tea beverages)
•Toys and novelties
In some countries, the range of supermarket merchandise is more strictly focused on food products, although the range of goods for sale is expanding in many locations as typical store sizes continue to increase globally

Convenience Store

Convenience stores are small-sized stores that offer a limited range of grocery and other items that people are likely to need or want as a matter of convenience. Most convenience stores are located on busy street corners or in gas stations. Both travelers and locals use convenience stores.
Travelers stopping for gas or for washroom facilities often appreciate the convenience of having food, drinks, reading material and maps available without having to go to a supermarket. Convenience stores are usually open even when supermarkets are closed and usually allow for quicker shopping and service. To compensate for the convenience they offer, the prices are often higher at convenience stores than they are at supermarkets.
Locals are likely to go to a convenience store when their regular supermarket is closed and they need to replace an item such as milk, toilet paper or bread that they run out of in the home. However, many locals also go to convenience stores regularly to buy lottery tickets, magazines and candy. Students often buy cold drinks and snack foods from convenience stores.
Many convenience stores have microwaves for heating up prepared sandwiches, soups, and hot dogs they sell. Some also have coffee and breakfast sandwich specials for morning commuters. A newspaper is sometimes included in these offers. Convenience stores often carry at least some ready-to-go bakery items such as muffins and doughnuts.
Convenience stores are often organized into a few short aisles of candy, chips, and toiletries in the center and glass cases of drinks and frozen foods against the side and back walls. Drink and coffee machines and prepared foods are often together in another area and there may or may not be a deli. The front counters may hold containers of candy and beef jerky. Magazines and newspapers may be available at the front counter and/or at a magazine rack in the store.
There are at least 75 different convenience store chains in North America, 15 in Europe and 30 in Asia. In Taiwan, convenience stores are often used regularly by residents for banking services and bill payments. Convenience stores, like fast food restaurants, are popular not only for the convenience, but also because they tend to focus on getting customers in and out quickly.

Types of Convenience Stores
Various types exist, for example: liquor stores (off-licences–offies), mini-markets (mini-marts) or party stores. Typically junk food (candy, ice-cream, soft drinks), lottery tickets, newspapers and magazines are sold. Unless the outlet is a liquor store, the range of alcohol beverages is likely to be limited (i.e. beer and wine) or non-existent. Most stores carry cigarettes and other tobacco products. Varying degrees of food and grocery supplies are usually available, from household products, to prepackaged foods like sandwiches and frozen burritos. Automobile-related items such as motor oil, maps and car kits may be sold. Often toiletries and other hygiene products are stocked, as well as feminine hygiene and contraception. Some of these stores also offer money orders and wire transfer services. Convenience stores that are near fishing destinations may carry live bait, such as night crawlers or crickets.
The most common type of foods offered in convenience stores are breakfast sandwiches and other breakfast food. Throughout Europe convenience stores now sell fresh French bread (or similar). A process of freezing part-baked bread allows easy shipment (often from France) and baking in-store. Some stores have a delicatessen counter, offering custom-made sandwiches and baguettes. Others have racks offering fresh delivered or baked doughnuts from local doughnut shops. Some stores have a self-service microwave oven for heating purchased food. In Hong Kong, convenience stores even provide lunch and dinner.
In the US, some fast food chains offer a counter in convenience stores. Instead of cooking food in the store, these counters offer a limited menu of items delivered several times a day from a local branch of the restaurant. Convenience stores may be combined with other services, such as a train station ticket counter, post office counter or a petrol pumps. In Asian countries, like Japan or Taiwan, convenience stores are more common because of the higher population density. They are found with gas and train stations, but also can be stand-alone stores. Here, items like soft drinks or snacks are sold. Hot dogs, sausages, hard boiled tea eggs, and fish cake can be found in stores. Delicatessens are absent, instead pre-made sandwiches can be bought. Non-food products like magazines are also sold, but at a lesser extent.

Convenience Store differences from Supermarkets
Although larger, newer convenience stores have quite a broad range of items, the selection is still limited compared to supermarkets, and in many stores only 1 or 2 choices are available. Prices in a convenience store are typically, but not always, higher than at a supermarket, mass merchandise store, or auto supply store (with the exception of the goods such as milk, soda and fuel in which convenience stores traditionally do high volume and sometimes use as loss leaders).
In the US, the stores are sometimes the only stores and services near an interstate highway exit where drivers can buy any kind of food or drink for miles. Most of the profit margin from these stores comes from beer, liquor, and cigarettes. Although those three categories themselves usually yield lower margins per item, the amount of sales in these categories generally makes up for it. Profits per item are much higher on deli items (bags of ice, chicken, etc), but sales are generally lower. In some countries most convenience stores have longer shopping hours, some being open 24 hours.

Department Store

Definitions of Department Store
•Department Store large retail store having a wide variety of merchandise organized into customer-based departments. A department store usually sells dry goods, household items, wearing apparel, furniture, furnishings, appliances, radios, and televisions, with combined sales exceeding $10 million.
•Department Store retail establishment that sells a wide variety of goods. These usually include ready-to-wear apparel and accessories, yard goods and household textiles, house wares, furniture, electrical appliances, and accessories. In addition to departments (supervised by managers and buyers) for the various categories of goods, there are departmental divisions to handle, for example, merchandising, advertising, service, accounting, and financial strategy.
History of Department Stores
American department stores
"In considering the social effects of the department store, one is inclined to attach the greatest importance to the contributions which they have made to the transformation in the way of life of the greatest strata of the population, a transformation which will remain the one great social fact of these last 100 years." -- Hrant Pasdermadjian, The Department Store, Its Origins, Evolution and Economics, 1954
The Big Stores

The three biggest department stores in the mid-1960s, both in sales volume and physical size, were Macy's, Hudson's, and Marshall Field, in that order. Hudson's, shown here, had 25 stories, 16 of them selling floors. Two of its four below-ground floors were basement stores, where 60 departments did up to 25% of the store's business.

At its peak in mid-century, Hudson's employed up to 12,000 employees and welcomed 100,000 shoppers a day. It had its own telephone exchange (CApitol), and the nation's third largest switchboard, exceeded only by the Pentagon and the Bell System itself.

Restaurant reviewer Duncan Hines loved Hudson's tea rooms. In the 1947 edition of Adventures in Good Eating he wrote: "This splendid department store has devoted the greater part of a floor to the tea rooms. The food is at all times very tempting and the service has that quality of quiet elegance which adds so much to the pleasure of dining. ... Don’t overlook the dining room on the mezzanine, if you happen to be in a bit of a hurry. Their chicken pie is outstanding."
Marshall Field, the man, was a dry goods wholesaler. He wasn't fond of retailing or of the idea of selling all kinds of merchandise under one roof. Like many other people he thought department stores were low class. Field never became really enthusiastic about his department store, said to be the brainchild of Harry Selfridge, its early manager, and later founder of Selfridge's in London. Selfridge made the store customer-friendly by improving its lighting, opening a tea room, and -- horrifying to Field -- installing a few bargain tables here and there.

Nevertheless, Field's remained conservative in many of its practices. For years it curtained its show windows on Sundays, refused to display women's underwear on manikins, and wouldn't let salesclerks wear makeup.

For decades the Marshall Field store wrestled with the John Wanamaker store in Philadelphia for the title of America's most prestigious large-scale, full-service department store.
Although the store did poorly during the Depression, by 1945 its business was booming. It had become an institution. Reeling from the shock of Pearl Harbor, a Chicago woman exclaimed, "Nothing is left any more – except, thank God, Marshall Field’s."
Types of Department Stores
Upscale Department Store
Characteristics of a typical upscale department store may include:
•Sale of brand name perfumes and beauty supplies, like Burberry, Calvin Klein or M•A•C at the main entrance, with specialists in cosmetics there to assist customers with applying and selecting makeup.
•General sale of name brand clothes above an average price level, such as Dior, Chanel, Versace, Lacoste, etc.
•When items are discounted, the price resembles that of an average priced item at a lower scale department store.
•Sale of small household appliances like blenders, or small electronic items such as portable radios.
•Specialized services or subset businesses such as personal shopping assistance, salons, restaurants, and/or travel agencies.

Mid-Range Department Store
Characteristics of a mid-range department store may include:
•Sale of cosmetics.
•Sale of some brand names, with greater emphasis on private label brands.
•Sale of accessories.
•Sale of some small household appliances.
•Sale of furniture in larger locations.

Comparison to Upscale Department Store
•Sale of cosmetics but generally not brand name. Fragrances and beauty supplies may be placed further into the interior of the store, without cosmetic specialists at the counters.
•Greater proportion of moderately-priced brand names.
•Accessories and purses aren't upscale brand names, with greater proportion of lesser-known or private label branded items.

Discount Department Store/Super-Store
•Sells cosmetics, generally not name brand.
•Generally doesn't sell name brands.
•Sells accessories, generally not name brand.
•Sells small household appliances.
•Sells toys, electronics and video games.
•Sells household necessities.
•The "super-store" variant usually sells food products and has a "one stop shop" vibe.

Comparison to Mid-Range Department Stores
•Sells fewer major brand names.
•Offers a wider variety of products.
•More likely to anchor a power centre than an indoor shopping mall.

Off-Price Retailer
•Most products are name-branded.
•Products may be over-runs, seconds, or last season's stock liquidated from department stores.
•Product mix typically emphasizes women's clothing and may include men's clothing, children's clothing, shoes, accessories, perfume, toys, house wares, or packaged gourmet food.
•Stores are most frequently located in power centre’s but may also appear in shopping malls.

Shopping Mall

Classes of Shopping Mall
In many cases, regional and super-regional malls exist as parts of large superstructures which often also include office space, residential space, amusement parks and so forth. This trend can be seen in the construction and design of many modern supermalls such as Cevahir Mall in Turkey. The International Council of Shopping Centers’ 1999 definitions were not restricted to shopping centers in any particular country, but later editions were made specific to the U.S. with a separate set for Europe.
Regional malls
A Regional Mall is, per the International Council of Shopping Centers, in the United States, a shopping mall which is designed to service a larger area than a conventional shopping mall. As such, it is typically larger with 400,000 sq ft (37,000 m2) to 800,000 sq ft (74,000 m2) gross leasable area with at least two anchors and offers a wider selection of stores. Given their wider service area, these malls tend to have higher-end stores that need a larger area in order for their services to be profitable. Regional malls are also found as tourist attractions in vacation areas.
Super Regional Malls
A Super Regional Mall is, per the International Council of Shopping Centers, in the U.S. a shopping mall with over 800,000 sq ft (74,000 m2) of gross leasable area, and which serves as the dominant shopping venue for the region in which it is located.

Outlet Malls
An Outlet Mall (or outlet centre) is a type of shopping mall in which manufacturers sell their products directly to the public through their own stores. Other stores in outlet malls are operated by retailers selling returned goods and discontinued products, often at heavily reduced prices. Outlet stores were found as early as 1936, but the first multi-store outlet mall, Vanity Fair, located in Reading, PA didn't open until 1974. Belz Enterprises opened the first enclosed factory outlet mall in 1979, in Lakeland, TN, a suburb of Memphis

Component of a Shopping Mall
Shopping centers are buildings that contain multiple retail stores. The term generally applies to open-air complexes containing many buildings that adjoin pedestrian walkways. Enclosed shopping centers, in which all units are accessible under a single roof, are referred to as shopping malls. In the United Kingdom, they are known as retail parks or precincts.
The first shopping centers were the covered outdoor bazaars of ancient Europe. After World War II, suburban living in the United States led to the advent of the modern shopping center. As cities became crowded and dirty, people began to seek improved living conditions which resulted in the development of outdoor strip malls.
Fully enclosed shopping malls first appeared in the 1950s. The Northgate Mall built in Seattle, Washington, USA, and the Northland Shopping Center built near Detroit, Michigan, USA, were the first indoor malls. Constructed between 1950 and 1954, they were originally open-air shopping centers which were later enclosed.
Regional and super-regional malls are designed to service larger areas than traditional shopping centers. They are often part of larger superstructures which include residential and commercial office space. They serve as the primary shopping area for the region in which they are located.
Outlet malls are shopping centers in which goods are sold to the public directly from manufacturer stores. They also include shops selling discontinued and customer returned products at significantly lowered prices. The first outlet mall opened in Reading, Pennsylvania, USA, in 1974.
Food courts are common components of shopping malls. They feature vendors selling a variety of foods and a seating area. This area is generally an open plaza surrounded by the various vendors.
Large chain department stores are also a mainstay of many shopping malls. In the beginning, these anchor stores were financially necessary for the shopping centers to remain open. Today, they exist as a means of attracting traffic to the smaller stores found within malls. They are placed as far from one another as possible to maximize this traffic.
Shopping malls are typically owned by shopping property management firms. These firms specialize in the management and promotion of the shopping centers. Many own multiple properties and usually service one or more regional areas.
There has been some controversy surrounding modern shopping malls due to their displacement of traditional small businesses and main streets. Many modern consumers still prefer shopping centers with ample parking, entertainment, and private security over crowded downtown areas. This preference has led to the downfall of many "mom and pop" stores in local commercial centers

Top Five Largest Shopping Mall of the World

South China Mall
South China Mall is the largest mall in the world located in Dongguan, China. It contains around 1500 stores and is spread in more than 6 million square feet. Mall was opened in 2005 and since then it is facing the problem of not being occupied by enough sellers. The reason behind the mall being vacant is due to its suburban location that makes it difficult to approach. In 2009, South China Mall has been renamed to New South China Mall.

Golden Resources Mall
Golden Resource Mall is the second largest shopping mall of the world located in Beijing, China. Mall is also known as “Great Mall of China” and is spread across 7.3 million square feet and was the largest mall of the world till 2005. Mall receives more than 50,000 visitors everyday and the decrease in the number of shoppers is due to costly items of the mall that is not fit for most of the ordinary people.

SM City North EDSA
SM mall is one of the largest mall malls of the world located in Philippines. It is spread across 460,000 square meters of area and was opened in 1985 for public. Mall receives more than 4 million visitors during weekend and has a capacity of up to 6.5 million.

CentralWorld Mall
Central world mall is the largest shopping mall in Southeast Asia and contains office towers as well as hotel. It is spread across 500000 square meters. Earlier the mall was known as World Trade Center in 1990 and was taken over by Central Group in 2002. It is ideal for middle class as well as upper class customers in Bangkok, Thailand.

SM Mall of Asia
SM mall is located in Philippines and spread across 410 thousand square meters. Mall has the capacity of 4.2 million and has four buildings connected to each other. The parking space of the mall is divided into six stories and has a tram traveling around the mall with 20 people holding capacity

Retailing

What is Retailing?
The sale of goods or commodities in small quantities directly to consumers
Retailing is a distribution channel function where one organization buys products from supplying firms or manufactures the product themselves, and then sells these directly to consumers. A retailer is a reseller (i.e., obtains product from one party in order to sell to another) from which a consumer purchases products

Retail Pricing

The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or percentage) to the retailer's cost. Another common technique is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer.

Retail Pricing Strategies
There are many outside influences that affect profitability and a retailer's bottom line. Setting the right price is a crucial step toward achieving that profit. Retailers are in business to make a profit, but figuring out what and how to price products may not come easily. Before we can determine which retail pricing strategy to use in setting the right price, we must know the costs associated with the products. Two key elements in factoring product cost is the cost of goods and the amount of operating expense.
The cost of goods includes the amount paid for the product, plus any shipping or handling expenses. The cost of operating the business, or operating expense, includes overhead, payroll, marketing and office supplies.
Regardless of the pricing strategy used, the retail price of the products should more than cover the cost of obtaining the goods plus the expenses related to operating the business. A retailer simply cannot succeed in business if they continue to sell their products below cost.
Now that we understand what our products actually cost, we should look at how our competition is pricing their products. Retailers will also need to examine their channels of distribution and research what the market is willing to pay.
Many pricing strategies exist and each is used based on particular a set of circumstances. Here are a few of the more popular pricing strategies to consider:

Mark-up Pricing
Markup on cost can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the cost of the merchandise.
Markup on retail is determined by dividing the dollar markup by retail.
Be sure to keep the initial mark-up high enough to cover price reductions, discounts, shrinkage and other anticipated expenses, and still achieve a satisfactory profit. Retailers with a varied product selection can use different mark-ups on each product line.

Vendor Pricing
Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit. Some suppliers have minimum advertised prices but also suggest the retail pricing. By pricing products with the suggested retail prices supplied by the vendor, the retailer is out of the decision-making process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition.

Competitive Pricing
Consumers have many choices and are generally willing to shop around to receive the best price. Retailers considering a competitive pricing strategy will need to provide outstanding customer service to stand above the competition.
Pricing below competition simply means pricing products lower than the competitor's price. This strategy works well if the retailer negotiates the best prices, reduces costs and develops a marketing strategy to focus on price specials.
Prestige pricing, or pricing above competition, may be considered when location, exclusivity or unique customer service can justify higher prices. Retailers that stock high-quality merchandise that isn't available at any other location may be quite successful in pricing their products above competitors.

Psychological Pricing
Psychological pricing is used when prices are set to a certain level where the consumer perceives the price to be fair. The most common method is odd-pricing using figures that end in 5, 7 or 9. It is believed that consumers tend to round down a price of $9.95 to $9, rather than $10.

Other Pricing Strategies
Keystone pricing is not used as often as it once was. Doubling the cost paid for merchandise was once the rule of pricing products, but very few products these days allow a retailer to keystone the product price.

Multiple pricing is a method which involves selling more than one product for one price, such as three items for $1.00. Not only is this strategy great for markdowns or sales events, but retailers have noticed consumers tend to purchase in larger amounts where the multiple pricing strategy is used.

Discount pricing and price reductions are a natural part of retailing. Discounting can include coupons, rebates, seasonal prices and other promotional markdowns.
Merchandise priced below cost is referred to as loss leaders. Although retailers make no profit on these discounted items, the hope is consumers will purchase other products at higher margins during their visit to the store.
As you develop the best pricing model for your retail business, understand the ideal pricing strategy will depend on more than costs. It also depends on good pricing practices.
It is difficult to say which component of pricing is more important than another. Just keep in mind, the right product price is the price the consumer is willing to pay, while providing a profit to the retailer.

Important of Retailing

As the final link between consumers and manufacturers, retailers are a vital part of the business world. Retailers add value to products by making it easier for manufactures to sell and consumers to buy. It would be very costly and time consuming for you to locate, contact and make a purchase from the manufacturer every time you wanted to buy a candy bar, a sweater or a bar of soap. Similarly, it would be very costly for the manufactures of these products to locate and distribute them to consumers individually. By bringing multitudes of manufacturers and consumers together at a single point, retailers make it possible for products to be sold, and, consequently, business to be done.
Retailers also provide services that make it less risky and more fun to buy products. They have salespeople on hand who can answer questions, may offer credit, and display products so that consumers know what is available and can see it before buying. In addition, retailers may provide many extra services, from personal shopping to gift wrapping to delivery, that increase the value of products and services to consumers.
The Future of Retailing

Advances in technology, like the Internet, have helped make retailing an even more challenging and exciting field in recent years. The nature of the business and the way retailing is done are currently undergoing fundamental changes. However, retailing in some form will always be necessary. For example, even though the Internet is beginning to make it possible for manufacturers to sell directly to consumers, the very vastness of cyberspace will still make it very difficult for a consumer to purchase every product he or she uses directly. On-line retailers, like Amazon.com, bring together assortments of products for consumers to buy in the same way that bricks-and-mortar retailers do.
In addition, traditional retailers with physical stores will continue to be necessary. Of course, retailers who offer personal services, like hair styling, will need to have face-to-face interaction with the consumer. But even with products, consumers often want to see, touch and try them before they buy. Or, they may want products immediately and won't want to wait for them to be shipped. Also, and perhaps most importantly, in many cases the experience of visiting the retailer is an important part of the purchase. Everything that the retailer can do to make the shopping experience pleasurable and fun can help ensure that customers come back.

Kinds of retailers
A large shop is called a superstore or megastore. A shop with many different kinds of articles is called a department store.
Many shops are part of a chain: a number of similar shops with the same name selling the same products in different locations. The shops may be owned by one company, or there may be a franchising company that has franchising agreements with the shop owners

Some shops sell second-hand goods. Often the public can also sell goods to such shops. In other cases, especially in the case of a nonprofit shop, the public donates goods to the shop to be sold. In give-away shops goods can be taken for free.
The term retailer is also applied where a service provider services the needs of a large number of individuals, such as with telephone or electric power.

Distribution Channel

Definitions
•A distribution channel is the method a company uses to get their products into the marketplace for consumer use. The traditional channel goes from supplier, manufacturer, distributor, wholesaler and retailer.
•Distribution Channel (also known as Channel of distribution or marketing channel) is Path or 'pipeline' through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the vendor). A distribution channel can be as short as being direct from the vendor to the consumer or may include several inter-connected (usually independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer.
Two types of distribution channels exist, indirect and direct, namely:
Indirect Channel
•The indirect channel is used by companies who do not sell their goods directly to consumers. Suppliers and manufacturers typically use indirect channels because they exist early in the supply chain Depending on the industry and product, direct distribution channels have become more prevalent due to the Internet.
Direct Channel
•A direct distribution channel is where a company sells their products direct to consumers. While direct channels were not popular many years ago, the Internet has greatly increased the use of direct channels. Additionally, companies needing to cut costs may use direct channels to avoid middlemen markups on their products.
Indirect Channel Methods
•Distributors, wholesalers and retailers are the primary indirect channels a company may use when selling their products in the marketplace. Companies choose the indirect channel best suited for their product to obtain the best market share; it also allows them to focus on producing their goods.
Direct Channel Methods
•Selling agents and Internet sales are two types of direct distribution channels. Selling agents work for the company and market their products directly to consumers through mail order, storefronts or other means. The Internet is an easy distribution channel because of the global availability to consumers

For instant:
Paper is available from a variety of paper suppliers, however, not all suppliers provide paper to the end user. The following diagram illustrates how the distribution channel works for purchasing paper stocks.

The Paper Mill sells larger volume orders direct to the Paper Retailer, Distributor, or Printer who then resell the product. The Paper Distributor handles full and partial carton orders, which are considered smaller orders, to fit the needs of the Paper Retailer or Printer when the End User places an order for paper that is not considered to be at a volume level that a Paper Mill will sell directly to the Printer or Retailer.
The newest entry to the paper distribution channel is the Paper Portal which enables Printers, Retailers, and Paper Mills to source paper needs to a wider network of potential buyers and sellers via the Web, regardless of whether they are Paper Retailers, Paper Distributors, Printers, or End Users. Buyers and sellers of paper access the portal and use it as a marketplace to locate paper, to negotiate pricing, and to complete the transaction of either buying or selling.

Distribution - channel strategy
The following table describes the factors that influence the choice of distribution channel by a business:

Influence Comments
Market factors An important market factor is "buyer behaviour"; how do buyer's want to purchase the product? Do they prefer to buy from retailers, locally, via mail order or perhaps over the Internet? Another important factor is buyer needs for product information, installation and servicing. Which channels are best served to provide the customer with the information they need before buying? Does the product need specific technical assistance either to install or service a product? Intermediaries are often best placed to provide servicing rather than the original producer - for example in the case of motor cars.
The willingness of channel intermediaries to market product is also a factor. Retailers in particular invest heavily in properties, shop fitting etc. They may decide not to support a particular product if it requires too much investment (e.g. training, display equipment, warehousing).
Another important factor is intermediary cost. Intermediaries typically charge a"mark-up" or "commission" for participating in the channel. This might be deemed unacceptably high for the ultimate producer business.
Producer factors A key question is whether the producer has the resources to perform the functions of the channel? For example a producer may not have the resources to recruit, train and equip a sales team. If so, the only option may be to use agents and/or other distributors.
Producers may also feel that they do not possess the customer-based skills to distribute their products. Many channel intermediaries focus heavily on the customer interface as a way of creating competitive advantage and cementing the relationship with their supplying producers.
Another factor is the extent to which producers want to maintain control over how, to whom and at what price a product is sold. If a manufacturer sells via a retailer, they effective lose control over the final consumer price, since the retailer sets the price and any relevant discounts or promotional offers. Similarly, there is no guarantee for a producer that their product/(s) are actually been stocked by the retailer. Direct distribution gives a producer much more control over these issues.

Product factors Large complex products are often supplied direct to customers (e.g. complex medical equipment sold to hospitals). By contrast perishable products (such as frozen food, meat, bread) require relatively short distribution channels - ideally suited to using intermediaries such as retailers.


Distribution Intensity
There are three broad options - intensive, selective and exclusive distribution:
Intensive distribution aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used (e.g. cigarettes, beer). Intensive distribution is usually required where customers have a range of acceptable brands to chose from. In other words, if one brand is not available, a customer will simply choose another.
Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g. training) on them. Selective distribution works best when consumers are prepared to "shop around" - in other words - they have a preference for a particular brand or price and will search out the outlets that supply.
Exclusive distribution is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area.

Distribution channels are the pathways that companies use to sell their products to end-users. B2B companies can sell through a single channel or through multiple channels that may include
 Direct/sales team: One or more sales teams that you employ directly. You may use multiple teams that specialize in different products or customer segments.
 Direct/internet: Selling through your own e-commerce website.
 Direct/catalog: Selling through your own catalog.
 Wholesaler/distributor: A company that buys products in bulk from many manufacturers and then re-sells smaller volumes to resellers or retailers.
 Value-added reseller (VAR): A VAR works with end-users to provide custom solutions that may include multiple products and services from different manufacturers.
Consultant: A consultant develops relationships with companies and provides either specific or very broad services; they may recommend a manufacturer’s product or simply purchase it to deliver a solution for the customer.
Dealer: A company or person who buys inventory from either a manufacturer or distributor, then re-sells to an end-user.
Retail: Retailers sell directly to end-users via a physical store, website or catalog.
Sales agent/manufacturer’s rep: You can outsource your sales function to a company that sells different manufacturers’ products to a group of similar customers in a specific territory.
Distribution is one of the classic “4 Ps” of marketing (product, promotion, price, placement a.k.a. distribution). It’s a key element in your entire marketing strategy — it helps you expand your reach and grow revenue.

If they need personalized service, you can utilize a local dealer network or reseller program to provide that service.
If your users prefer to buy online, you can create an e-commerce website and fulfillment system and sell direct; you can also sell to another online retailer or a distributor to offer your product on their own sites.
You can build your own specialized sales team to prospect and close deals directly with customers.
Wholesalers, resellers, retailers, consultants and agents already have resources and relationships to quickly bring your product to market. If you sell through these groups instead of (or in addition to) selling direct, treat the entire channel as a group of customers – and they are, since they’re buying your product and re-selling it. Understand their needs and deliver strong marketing programs; you’ll maximize everyone’s revenue in the process.

Key concepts & steps
Before you begin
You can evaluate a new distribution channel or improve your channel marketing / management at any time. It’s especially important to think about distribution when you’re going after a new customer segment, releasing a new product, or looking for ways to aggressively grow your business.

Evaluate how your end-users need to buy
Your distribution strategy should deliver the information and service your prospects need. For each customer segment, consider
How and where they prefer to buy
Whether they need personalized education and training
Whether they need additional products or services to be used alongside yours
Whether your product needs to be customized or installed
Whether your product needs to be serviced
Match end-user needs to a distribution strategy
If your end-users need a great deal of information and service, your company can deliver it directly through a sales force. You can also build a channel of qualified resellers, consultants or resellers. The size of the market and your price will probably dictate which scenario is best.
If the buying process is fairly straightforward, you can sell direct via a website/catalog or perhaps through a wholesale/retail structure. You may also use an inbound telemarketing group or a field sales team.
If you need complete control over your product’s delivery and service, adding a channel probably isn’t right for you.
Identify natural partners
If you want to grow beyond the direct model, look for companies that have relationships with your end-users. If consultants, wholesalers or retailers already reach your customer base, they’re natural partners.
Build your channel
If you’re setting up a distribution channel with one or more partners, treat it as a sales process:
Approach the potential channel partner and “sell” the value of the partnership
Establish goals, service requirements and reporting requirements
Deliver inventory (if necessary) and sales/support materials
Train the partner
Run promotions and programs to support the partner and help them increase sales
Minimize pricing conflicts
If you use multiple channels, carefully map out the price for each step in your channel and include a fair profit for each type of partner. Then compare the price that the end-user will pay; if a customer can buy from one channel at a lower price than another, your partners will rightfully have concerns. Pricing conflict is common but it can jeopardize your entire strategy, so do your best to map out the price at each step and develop the best solution possible.
Drive revenue through the channel
Service your channel partners as you’d service your best customers and work with them to drive revenue. For example, provide them with marketing funds or materials to promote your products; run campaigns to generate leads and forward them to your partners