Commercial Distribution is the management of a wide set of activities to take the product from the factory to the consumer. This course has an eminently practical approach and summarizes the main current knowledge to successfully manage distribution systems, stores and logistics. We try to answer the questions of How to bring the product to the customer? and How to sell more?
Summary
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- 1 Distribution Trends
- 2 Concentration
- 3 Specialization
- 4 Diversification
- 5 Internationalization
- 6 Increase in the size of the premises.
- 7 New commercial formulas
- 8 Application of technology
- 9 Self-service
- 10 Sources
Distribution Trends
We can observe in recent years some clear trends in distribution. These trends show us how the distribution and the main factors are evolving. Among the fundamental trends that are observed we find, the concentration, specialization, diversification, internationalization, the increase in the size of the premises, the use of new commercial formulas, the increasing importance of technology and the great growth of the formula self-service.
We go on to explain in more detail these trends that show us certain patterns of evolution that commercial distribution is experiencing.
Concentration
A clear trend in many sectors of distribution is the increasing concentration of companies. That is, each time a smaller number of companies makes a greater part of sales. In many countries it has gone from thousands of small independent supermarkets, small family businesses, to the majority of sales being made by a small group of large companies.
For example, in Spain, small local food supermarket chains emerged that were eliminating independent supermarkets. The regional chains were buying local chains to have a larger size. And many regional chains have been bought by large national or international groups.
Large chains have the great advantage of buying in bulk from suppliers. When buying in large quantities they get much lower prices. Buying in large quantities and therefore at a very low cost is the fundamental competitive advantage factor in many types of stores. In this case, size does matter and the large supply chain has a great advantage over the small one.
Specialization
The shops of the small towns of the beginning of the century sold a little of everything. They were little specialized stores. In the stores of the American West movies they sell you the same shovel, food as a rifle.
As the population size of cities increases and especially disposable income, consumers demand a wide variety of products. But it is difficult for a single store to be a specialist in a large number of products. Although some hypermarkets and department stores have a wide range of very different products. In recent years, a clear trend towards specialization has been observed. Most stores no longer sell everything but some sell appliances and others dress. And the great competition forces many companies not to sell all kinds of clothing but to specialize in a type of clothing differentiated for specific population groups.
For example, some of the most successful stores in recent years are stores that specialize only in wedding dresses such as ProNovias, or clothing for mothers, Prenatal or clothing for urban youth. The stores specialize in selling only sports items such as the Decatlón brand department stores. Even when the size of the population and the income is sufficient, specialized stores appear to sell only ties.
Diversification
Large distribution companies in their race to increase their size, their income and their profits are diversifying. These companies do not have a single distribution chain, but usually own multiple distribution chains.
Each chain can have its own image, differentiation and is directed to a specific population group. By owning multiple chains, you increase income, maintaining the specialization of each chain and achieving certain synergistic effects. If the benefits of several chains of stores managed jointly are greater than managed separately, a synergy is taking place. If by managing several chains together we manage to reduce certain costs, it is a positive synergy.
For example, the Carrefour company owns the Carrefour Hypermarkets , the Champion supermarkets and the Dia discount stores. Having several chains each with different business formulas, strategies, and store sizes, allows them to sell to different groups of consumers. And at the same time achieve a higher volume of sales and cost savings from joint management.
Other examples are provided by the chains of the textile sector. The Inditex company owns the Zara, Pull and Bear, Massimo Duti and Kid Class chains. The Cortefiel company owns the Cortefiel chain, Sprinfield, Milano, Don algodon and Douglas among others.
Internationalization
Many of the large chain stores are growing, spreading across different countries. By growing in the number of stores, they increase their income and obtain significant economies of scale. Advertising and promotion campaigns have a lower cost per store when the chain has a very high number of stores. With many stores, the costs generated by the central departments are better distributed. Therefore, the cost imputed to each store is lower when it is distributed among more stores.
And the most important factor that drives the growth of many chains is the reduction in the purchase price by buying larger quantities. By increasing the size of orders to suppliers we can obtain significant price reductions in the supply of goods.
Increase in the size of the premises.
In recent years, the triumph of large stores has been observed in many markets. Although it is not an exact and general rule, there is an increase in the sales area of the new stores.
For example, large video rental stores are destroying small stores in Spain. Large toy retailers like Toys R Us tend to eliminate small toy stores. Big sporting goods stores are putting up tough competition with small stores.
New commercial formulas
In many countries there is a growth in the number of Shopping Centers. And the growth of new commercial formulas such as specialized hypermarkets, sales through automatic machines and Internet sales.
Technology application
The application of computers has been a real revolution in business management. Of special importance has been the use of barcodes and systems to read barcodes. The standardization of barcodes and their widespread use has allowed stores to:
- Make invoices quickly and safely. Allowing to provide the consumer with an invoice with information about their purchase.
- It allows through the computer system to know at all times the products that have been sold.
- By knowing the products that the store has bought from suppliers and those that have been sold, we can know at any time the stocks.
- Facilitates analysis of sales, management of distribution and ordering from suppliers.
The use of standardized communication systems between store computers, warehouses and manufacturers facilitate the management of merchandise. These systems allow faster and lower cost management.
Self-service
A clear trend in the modern economy is the reduction of personnel costs. A typical way to reduce costs is to get the client to do some of the work. For example, in ATMs, the client performs all the operations to withdraw money without the intervention of the Bank employee.
We find that in multiple types of stores there has been an evolution from the traditional store with many employees and a counter to the self-service system. In the traditional store, the client asked the store employee for a product, he looked for it and brought it to him. In the self-service system the customer walks, looks at the various products and he selects them and goes to the cash register to pay for them.
The self-service system drastically changes the way the customer buys. In the traditional store, it is the customer who asks and is advised by the employee. In a self-service, the customer sees the entire assortment and can discover new products that he did not know, or buy products that he did not have planned or planned.
The self-service sales system increases the importance of the packaging and the labels of the products since the customer sees them and decides normally without the advice of the store employee. It is the product itself, its brand, its external appearance that has to attract the customer’s attention and convince them to buy.
