Does this sound familiar?Euromarche opened its first ‘hypermart’ in Cincinnati in 1984, named Biggs. It was 1.5 times the size of a football field with 75 aisles, 40 checkout lanes and 60,000 different low-priced items.Carrefour built two hypermarts in the late 80’s and early 90’s.

By 1994 all three were shut down. Customers said that the stores were too big and overwhelming.A study commissioned by Kmart showed that hypermarkets would need to attract 4 times as many shoppers as a regular department store and the average transaction would need to be $43, which was double the average for discount stores.

Costs were so high that the gross margin was only about 8%, which was half of the typical discount store margin. In many other countries, hypermarkets were flourishing, with Carrefour owning 240 stores in France, Spain, Portugal, Italy, Turkey, Brazil, Argentina and Taiwan

Distribution

Process of getting goods and services from producers to consumers

Includes the physical path that take goods and services to marketIncludes the legal ownership of items

Important consideration because it affects cost, timeliness, location of product, and even if it’s possible to operate in a country

Channels of distribution

Physical path that goods/services take to consumersDirect Channel

Producer Consumer

Indirect Channels

Producer ConsumerIntermediaries

Home Country Intermediaries

BrokersWholesalersAgentsExport Management Company (EMC)Export Trading Companies

Host Country Intermediaries

Manufacturing RepresentativesDistributorsForeign Country BrokersManaging Agents

Wholesalers

Buy products from the producer and resells to other wholesalers, retailers or consumersStores product before shipping them to next stepMay carry full or limited lines of products May specialize or carry a variety of products

Agents

Negotiate the sale of goods or servicesAgents do not take title of goodsCharge a commission based on the sale price of the item that changes hands

Export Management Company

Provides complete distribution servicesMay purchase and resell goods or act as agentOffers knowledge of specific markets and import regulations

Export Trading Company

One step beyond EMCProvides market research, packages, ships and distributes abroadMay also do banking, investing and manufacturing

How do you choose?

Product characteristicCustomersGeographyRetail ConcentrationAvailabilitySix C’s: Cost, Capital, Control, Coverage, Character, Continuity

Less developed country channels

Souk – Ethiopia and E. African countries

Small, walk-up store whose proprietor sells everythingProprietors know what customers want, so morning sales may be coffee, incense and paper cone for coffee ceremony and evening would be cigarettes and gum

Government-owned department stores are less likely to have this service

Mass quantities of merchandise which is slow to sellMay have to use stamps, seals, and papers to go through buying processClerks work from 9-5 with a two hour lunch

Pulperia – Cost Rican private store similar to general store in first part of century.

Customers tell clerks what they want and clerks fetch all of the items Proprietor repackages mass quantities of staples (i.e. 50 lb bag of sugar is sold in smaller portions)

Snack food company Sabritas in Mexico uses donkeys and canoes to distribute in some remote areas

Physical DistributionMode of

Transportation

Speed Cost Accessibility

Air

Rail

Truck

Ship

Mode of Transportati

on

Speed Cost Accessibility

Air High High Low

Rail Medium

Medium Medium

Truck High High High

Ship Low Low Low

Freight Forwarders

Company which performs the task of moving goods to the buyer. Provides information on rules, shipping methods, packing of goods, and insuranceAlso handles all paperwork and arrangements for actual shippingMay be able to combine small shipments of several companies into full loads

Packaging Concerns

Handling necessity and easeDamage during transportClimatePilferageCustomer’s requirementsFreight ratesCustoms duties

Western European manufacturer sent four truckloads of plastic extruders to Iran. The extruders were shipped on wooden pallets. Shortly after the arrival of the merchandise, the marketer received a telex from the customer stating that 90% of the cargo was damaged. A group of service engineers were sent to find out the cause.

It was found that the customer had neither a forklift nor a crane to use in unloading the trucks. So workers simply pushed the pallets to the side of the truck and let them fall to the floor.

Package Labeling

Name of shipperCountry of originContainer’s weight (pounds and kilograms)Size of container (inches and centimeters)Number of packages per container (1 of 6)DestinationHazardous material labels

DocumentationBill of Lading – contract between the owner and carrier of goods being exported; serves as titleExport Declaration – form required by U.S. Dept. of Commerce for shipments greater than $2,500 or for shipments to certain countries

Commercial invoice – quote for goods going abroad; initial contract between buyer and seller, not a final agreement; can be used to arrange financingCertificate of origin – specifies the exact origin of the product and helps determine if tariffs will be applied