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Distribution Management
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Quiz
What are the 5 Primary and 4 Support Activities that
“Porter” names in his model to describe Value creation in
the Supply chain?
9+1 point
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Quiz
9 Value creating stages - Porter
• Primary activities
–
–
–
–
–
Inbound logistics
Operations goods
Outbound logistics
Marketing / Sales
Service
• Support activities
–
–
–
–
Procurement function
Tech Development
Human resources
Infrastructure
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
SAF Channel participants – Chapter 2
SAF Distribution Overview
Evolution of SAF
distribution
channels
Informal sector
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Trends
Franchising
SAF Distribution - Overview
Typical SAF Distribution channels participants
Manufacturing
Wholesalers
Informal retailers
Consumers
Hugo van Zyl
083-629 2069
[email protected]
Retailers
Marketing 2B
Distribution Management
The Typical distribution channel
Importer
Producer
Wholesaler
Manufacturer
Retailer
Consumer
Supplier
Importer
Producer
Retailer
Manufacturer
Consumer
Supplier
Global
company
Local
Manufacturer
Local
Wholesaler
Local Retailer
Local
Consumer
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Evolution of SAF distribution channels
• History lesson!!
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
SAF Retailers ( Grocery)
2004
# Stores
Sales ($mn)
Metcash
1’544
3’272
Spar (SAF)
813
1’829
Shoprite
743
4’067
Pick n Pay
594
4’288
Woolies (SAF)
221
1’744
Massmart
167
2’532
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Trends.
•
•
•
•
Evolution of Distribution channels is linked to economic development.
SAF – Large informal retail sector ( Spaza shops and street vendors)
But 2% of Retailers are responsible for 70% of sales (P&P et al)
Wholesalers have evolved into Self service wholesalers (Metcash Africa)
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Trends - Wholesalers
• Phase of evolution is dependant on the economic
development of the country.
• Phase 1
– Divorced its operation from those of importers.
• Phase 2
– Certain activities handed over to retailers
• Phase 3
– Specialization according to manufacturing lines.
• Phase 4
– Attraction of End consumers
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Importance of Wholesalers in developing countries
• Wholesalers are key in Marketing activities
• Control the Distribution channel.
• Activities:
–
–
–
–
–
Collects products and Raw material
Network with Markets
Keep stocks
Break down bulk
Finance function
• Cash / Carry Wholesalers are prominent in developing economies
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Evolution of C/C Wholesalers
• C/C Wholesalers market a limited range with fast
turnover.
• Gains a competitive advantage by buying in bulk.
• Focus on small independent retailers and individual
consumers
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Development of C/C Wholesalers
• 1960 – 1970
– No C/C wholesalers, Full service wholesale responsible for
distribution to retailers
• 1970-1985
– Makro and Metro established
• 1986 – 1990
– Growth in Makro and Metro
– Opening of Price club (P&P)
• 1991- 2005
– Consolidation into Premier group and Massmart
– Economic and tech innovation causing further changes in C/C
profile
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Metcash Organogram
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Massmart organogram
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
SAF retailers
• 3 main groups responsible for 63% of all food purchased
in Retail market
• Purchase directly from manufacturer
• In competition with C/C wholesalers
• Some C/C wholesalers targeting Consumers so lines are
blurring
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Comparison of Clicks vs. Dischem
+
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Franchising
“Being in business for yourself but not by yourself”
• Arrangement between the franchisor and the franchisee
• Franchisor – Seller and owner of the trademark or name
of the business
• Franchisee – purchases the right to use the name /
trademark and the processes of the business
• Highest are of growth in retail business globally
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Franchisor
Advantages
•
•
•
•
•
Disadvantages
Acquire funds
No direct ownership of Brand
Reduction in Distribution cost
Motivation is high
Co-operative advertising
opportunities
• Regulations limiting power
• Loss of control:
–
–
–
–
–
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Over brand
Over Distribution
Expansion programs
Financial situation
Corporate intellectual property
Franchisee
Advantages
• Risk of failure minimized:
– Business model proven
– Products proven
• Continuous service
• Economies of scale
• High return on investment
Disadvantages
• No guarantees of success
• Little say in expansion
programs
• Loss of some level of
independence
• Pricing model might may be a
disadvantage to the
Franchisee
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Franchising in SAF
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Informal sector and Distribution channels
• Developing countries have an “informal business” sector
• ASGISA – 2nd economy
• Unemployed people that operate a small “informal”
business
• In general outside the normal regulations and legal
framework
• Critical and essential part of economy.
• Needs some from of distribution network to service
demands
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
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