Expert answer:Distribution Channel Article Review
Solved by verified expert:Distribution Channel Article Review Scenario: You work for a newly formed sports apparel company and your manager has requested you help the company decide on the best distribution strategy to use for its products. You have begun research on the strategies and methods available by reviewing relevant articles on the topic. Based on your article review, you will decide what strategy(ies) is/are best and explain the reasoning behind your conclusion. Select an article from the University Library that is less than five years old on the role of distribution channels in marketing. Compose a 1,000-word article review covering the following: Define what a distribution channel is and discuss why it is important to the marketing process. Discuss the differences between direct and indirect distribution channels.Introduce the article and its author(s) and give a brief summary of its core message(s).Analyze the relationship distribution channels have to maintaining a satisfied target market.Compare and contrast similarities and differences in distribution strategies for online versus brick and mortar businesses. Do this using the sports apparel company as an example. Explain what distributing through brick and mortar might look like and then describe an online distribution plan to illustrate your points.Recommend distribution strategy(ies) for the company and what reasoning led you to conclude this was the best solution. Cite a minimum of two peer-reviewed sources with one being the article from the University Library. Format your paper consistent with APA guidelines. I have attached an article from the University Library to be used as a reference for the paper also.
successful_mult_channel_strategy.pdf
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Successful multi-channel strategy: mixing
marketing and logistical issues
Sophie Jeanpert and Gilles Paché
Sophie Jeanpert is
Assistant Professor of
Marketing and Gilles Paché
is Professor of Retailing and
Supply Chain Management,
both at the Centre de
Recherche sur le Transport
et la Logistique (CRETLOG), Aix-Marseille
University,
Aix-en-Provence, France.
Introduction
When a company simultaneously manages several distribution channels, there is an
important issue as to the sharing of marketing and logistical resources between them. The
aim should be to make important economies of scale in transport, order management and
storage. One of the main issues is that the sales force of a channel (e.g. in shop sales) is
rarely trained to face a logistical failure encountered in another channel (e.g. Internet
sales). In service industries, the management of distribution channels must incorporate the
role of employees in the measurement of process performance (Tyagi and Gupta, 2013).
More generally, multi-channel strategy often faces a lack of integration at two levels:
logistics and marketing. Using three illustrations in the French context (King Jouet, Fnac
and Darty), this paper aims to show that an active integration strategy can improve service
delivery and the levels of satisfaction of multi-channel consumers. The information is based
on an analysis of secondary data resulting from interviews given by top managers. It aims
to provide the key to success in multi-channel strategy.
Multi-channel strategy
Multi-channel distribution enables the consumer to use different channels (e.g. Internet,
brochure and retail premises) as part of the purchasing process. This is now the rule, rather
than the exception. Large retailers have not always considered the changes and modifications
arising from this change. Two research streams should be distinguished: the first focuses on an
analysis of consumer behaviour and the second focuses on the management of companies
developing a multi-channel strategy.
Consumer behaviours
In a multi-channel context, the consumer benefits from the complementarity and synergies
between traditional and digital channels. Consumers can use both channels either
simultaneously or alternatively, depending on what they want, for example in terms of
availability, purchasing experience or type of need. Consumers no longer limit themselves to
multi-channel behaviour through multiple interactions with the different channels. Instead, they
adopt cross-channel behaviour, by means of crossed and multiple interactions between the
channels. This emphasises the need for an integrated approach to provide a consistent and
smooth experience to consumers through all the channels used. A failure to provide this
integration between channels is likely to undermine customer loyalty. Perceived integration
between stores and Web sites contributes an essential element to customer loyalty.
The consumer’s experience of integration results in a coherent answer to a question asked via
different channels or to an interaction through a channel that takes into account past
interactions via other channels. Moreover, multi-channel integration means that the consumer’s
PAGE 12 JOURNAL OF BUSINESS STRATEGY
VOL. 37 NO. 2 2016, pp. 12-19, © Emerald Group Publishing Limited, ISSN 0275-6668
DOI 10.1108/JBS-05-2015-0053
activity can be tracked along the different channels, and this in turn facilitates an understanding
of the consumer’s multi-channel behaviour. This enables companies to provide offers that are
better adapted to consumer needs or even to anticipate them. The importance of integration in
multi-channel consumer experience leads Seck and Philippe (2013) to introduce perceived
quality of integration, referring to the “capacity to provide the client with a similar experience
through all the channels used”. This is the case for Sephora in France. By scanning its loyalty
card with a smartphone with the MySephora application, a salesperson is able to access the
consumer’s complete sales record (on the Internet as well as in store), and the software
automatically suggests products that are consistent with the consumer’s profile.
It is clear that the multiplication of channels available to consumers has changed their
purchasing behaviours. Studies analyse the channel selection process, the use of channels
during the purchasing process and consumer migration from one channel to another, and there
has also been research on the elements determining multi-channel adoption and its influence
on consumer profitability. Vanheems (2012) highlights changes in the profile of consumers.
Thanks to the multiplication of information sources, consumers become experts. Consumers
are less receptive to business offers and to the shop’s “theatralisation” using atmosphere
elements (colour, brightness, freshness, smoothness, etc.). They have control of temporal and
financial resources and they develop self-control. The relationship between the in-store sales
force and consumers has therefore changed. The salesperson’s dominant position in terms of
knowledge is now in question. This change can lead consumers to be more sceptical of the
claims of sales personnel.
Corporate behaviours
A second stream of research focuses on the management of multi-channel systems. There may
be a significant risk of cannibalisation. Research highlights the importance of multi-channel
coordination to benefit from synergies between the channels, as well as focusing on the
management of channel conflict. An analysis of studies on multi-channel strategy shows two
possible responses: integration strategies and separation strategies. Gulati and Garino (2000)
define the elements (brand, management, operations and capital) on which companies can
define their level of integration or separation. With a separation strategy, the company shows
a different product mix; prices are not homogeneous between the channels. On one hand, this
strategy can lead to numerous conflicts; but on the other, it enables companies to maintain
flexibility in different competitive situations. It can also facilitate the targeting of different market
segments. Against this, an integration strategy assumes the blending of a system, based on the
will to create “strong ties” between channels. Each channel must complement the others, as
indicated in Box 1 with the King Jouet case.
Recent studies have highlighted that a large majority of multi-channel companies are managed
as independent systems (in silos), where marketing or communication operations are not
carried out in common. According to Neslin and Shankar (2009), a true multi-channel company
must coordinate its channels rather that managing them independently of one another.
Multi-channel retailers must modify their operations and re-visit their organisational founding
principles, their business processes and their customer knowledge (Cunnane, 2011). This
integrated management questions a certain number of elements, such as marketing, stock
management, range of products, product orders and returned products. Van Baal (2014)
notices two levels of integration: coordination of channels and harmonisation of marketing
variables.
Coordination of channels covers activities that are invisible to consumers, such as purchasing,
logistics and customer data management. Organisational coordination must take into account
potential economies of scale. Marketing and communication functions can be coordinated: the
use of the same brand name in all channels creates benefits from brand reputation (e.g. its
perceived quality, its reputation, etc.). The trust and credibility associated with the brand
reduces the perceived risk. The use of online communication tools (e.g. e-mail, viral marketing
and Web site search) benefits all channels. For example, the company sends its consumers an
VOL. 37 NO. 2 2016
JOURNAL OF BUSINESS STRATEGY
PAGE 13
Box 1. Interview with the cross-channel manager of King Jouet
King Jouet is a French chain of stores specialising in games and toys for children. It has a network of
over 180 stores. It possesses three types of stores: those named King Jouet, located on the periphery
of large cities with a store space of over 750 m2; those named King Jouet City, located in medium-sized
cities with store spaces from 300 to 750 m2; and those named King Jouet, located in city centres with
medium-sized store space of 300 m2. This results in a substantial national coverage.
How do you plan your Web and retail activities?
The aim of the drive-to store is to decompartmentalise e-commerce and retail, to avoid internal
competition between sales made online and sales made in store. The Internet must position itself as
a business provider for stores. In our company, it only represents 10 per cent of the group’s turnover.
The key performance indicators implemented are not linked to e-commerce but to cross-channel
activities. We are ahead of our competitors regarding this aspect, and we started by changing our
Web site. Indeed, developing the necessary tools in store is a good improvement, but our Web site
had to have a research online purchase offline approach. We have developed practices such as click
& collect, e-reservation and the mutualised cart (reserve or purchase online, then collect from the store
or order delivery). We now provide the possibility of choosing a favourite store (giving access to its
stock), with the aim of improving the consumer’s purchasing process.
What were the effects?
This modification enabled us to offer five times more products, corresponding to the entire range
contained in over 200 stores, while keeping the same volumes of supply. We had to upgrade our
stores by placing devices to ease the consumer’s choice. Indeed, as toys are intended for children,
the choice becomes very technical and very involving. We need our sales personnel to be on an equal
footing, for example, by equipping them with tablets providing the consumer’s sales record.
Technology is not the only tool; that is why they will be trained in different sales techniques.
Web-to-store consumers are not low-end consumers; they must be treated equally, by showing our
stores’ collection points more clearly for example.
Source: available at: http://ledrivetostore.com/ (accessed 11 March 2015)
e-mail to advertise its new collection by adding links to the stores where the products can be
found, as well as their availability. Marketing coordination also allows the implementation of
cross-channel promotions and cross-selling. The coordination of logistical operations and
information management are further advantages. The creation and development of a
cross-channel database consolidating customer information facilitates genuine multi-channel
shopping experiences with shared logistical operations between on-line and off-line
purchasing. In this way, customer relationship management (CRM) operations and logistical
functions are synchronised.
There should also be fundamental changes to staff remuneration. Fournier (2009) underlines
the importance of entirely rethinking remuneration structures in a multi-channel context. He
proposes changing remuneration structures by increasing the fixed element of total
remuneration, developing qualitative objectives (e.g. integrating qualitative indicators such as
customer satisfaction or product knowledge) and setting team objectives. The remuneration
system should minimise conflict, particularly in relation to the allocation of sales, as well as
encouraging collaboration between channels. Marketing variables unite the elements that are
visible to consumers: it may be the shop image, prices or product mix (e.g. breadth and depth
of the range). The harmonisation of these marketing variables leads to advantages (e.g.
increased sales, customer loyalty and customer retention) as well as disadvantages (e.g. risks
of cannibalisation in the short run).
Challenges related to integration
Multi-channel strategy has become a management model that raises major technological and
organisational concerns. In the literature dedicated to this theme, the emphasis is placed in an
increasingly systematic way on the necessity of global and combined management of all
channels offered to consumers in terms of their coordination or even their integration. The
PAGE 14 JOURNAL OF BUSINESS STRATEGY
VOL. 37 NO. 2 2016
management of logistical operations, linked to Internet sales, is often paired with a purchasing
system developed for stores. This is a major approach as, without it, there are significant risks
for companies in terms of simply adding a new channel (e.g. Internet or a call centre) to an
existing channel (e.g. sales in stores).
Risks linked to the absence of integration
In an interview given to the magazine Marketing Direct, the CRM manager of Accenture in
France noted “the adoption of multi-channel was done by many companies through the
successive addition of channels without a genuine global integration”. Today, companies must
opt for a true multi-channel strategy based on precise objectives so as to achieve rigorous
implementation and subsequent evaluation of the policies adopted. Indeed, a failure to work on
globalising schemes of multi-channel distribution, by developing an ago-antagonist view of
different channels, can create many problems:
conflicts between channels, resulting from a lack of role convergence between them;
a lack of potential synergy between channels, leading to additional costs rather than
economies of scale or economies of scope; and
a potentially long and costly learning period for the company, resulting in a possible loss of
competitive advantage.
Therefore, many companies consider how best to integrate their channels according to a
holistic perspective. Multi-channel integration means that a company’s channels will be viewed
as being part of a coherent value-creating system, rather than as parallel or isolated elements.
This point is essential to avoid consumer frustration arising from poor delivery processes
(Jackson, 2010). In terms of logistical operations, multi-channel integration consists of
coordinating supply chains associated with different channels to create common “knots” (e.g.
warehouses and platforms), so as to create economies of scale, as well as differentiating
operations, particularly final delivery where customers have specific expectations.
The adoption of a multi-channel strategy must be consistent with the company’s desire to
optimise its profitability. The choice of a “click & mortar” strategy, by adding an Internet channel
to the traditional channels, can provide the opportunity to succeed. Now, companies can make
their products, and product information, available at any time in any place and at a lower cost,
with reduced distribution and transaction costs (through reduced reliance on intermediaries).
However, the use of multiple channels requires companies to organise and manage each
channel, to establish marketing strategies, to invest in technologies and logistics and to create
a customer database. This constitutes a heavy investment and should force companies to think
about the means to make their multi-channel distribution systems as efficient and effective as
possible, in particular by linking sales personnel to it, as Fnac did (Box 2). Working on
globalising schemes becomes essential; multi-channel integration constitutes a means to
reach this objective.
Impact in terms of performance
Cross-channel management helps to develop synergies and complementarities
between the channels through the sharing of logistical operations, technologies,
marketing and communication policies. For example, some large retailers, having
developed sales through the Internet, use their retail stores as logistical bases to
prepare orders made online. They make store picking operations (Tesco model) before
delivery to the consumer’s home or they may ask the customer to come to a drive-in
store, sometimes annexed to a retail store, from which they collect the order (Auchan
model). In both cases, the physical and the digital store (Web site) are integrated in a
global strategy in terms of management of product mix and policy of product availability
for customers.
VOL. 37 NO. 2 2016
JOURNAL OF BUSINESS STRATEGY
PAGE 15
Box 2. Interview with the managing director of Fnac (France)
Fnac covers a large number of sectors, in which it is positioned as a leader: distribution of
technical and cultural products, and travel tickets. The company has a cross-channel
approach, and all products are offered and accessible to consumers both in store (80) and on
the Internet. The strategy has three main strands: Internet development, developing network of
stores on the periphery of urban areas and anticipating market changes by working in
particular on the dematerialisation of cultural products.
What is the place occupied by multi-channel in Fnac’s strategy?
Multi-channel is essential for us. Fnac.com is a powerful tool that enables us to manage our
product and customer references. We have strong added-value content, and we are capable
of understanding the needs and behaviour of consumers in store as well as on the Internet.
The value is created from the capacity to cross this information and use it in all our marketing
channels. We have deeply modified the organisation regarding customer activation by
entrusting this management to Internet teams to have a unique customer management policy.
These teams have developed a set of tools enabling us to understand and analyse the path
used by the consumer on the Web site. We provide these quality management tools and
methods and put them at the disposal of the stores.
What place do the stores and sales personnel continue to occupy?
Stores remain at the heart of our strategy, and the objective of the new organisation is to
develop in-store turnover. We will therefore enable the consumer to be more autonomous and
help the salesperson to better understand the consumer: the consumer can access its My
Fnac page and customise the advice needed. We want to develop an “everything, all the time,
everywhere” approach: a store’s salesperson should be able to offer products located in other
stores or on the Internet, and get them delivered at the consumer’s home or in store. This is
a real innovation in support of customers.
Source: Available at: http://lumens-consultants.com/ (accessed 26 May 2014)
Moreover, cross-channel facilitates a better understanding of the real performance of
each channel in terms of turnover, costs of customer contact, profitability and so on, by
providing coordinated management and a more cross-functional vision of all channels.
It enables more efficient and effective allocation of resources and logistical skills both
within and between the channels and, as a result, helps to provide a more rapid return
on investment. Furthermore, there is a direct relationship between integration and
performance. The contribution of Fabbe-Costes and Jahre (2008) underlines the
positive impact of integration on five types of performance: logistical, sales, financial,
strategic and sustainable development.
However, although a cross-channel strategy can bring cost savings and improved profitability,
significant challenges lie ahead. Given that a consumer-oriented approach is clearly a key to
success for online retailing, it is important to question the articulation between physical and
digital stores regarding the effective management of flows. Darty has addressed this issue over
the past 10 years, and it is at the root of numerous innovations (Box 3). Certain issues need to
be resolved, including:
unification of different systems, based on operating models that are very different from
one another;
assembly and standardisation of data, resulting from multi-channel interactions with the
client;
heavy …
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