Channel System Integration

Bhat-Bhateni Supermarket and Departmental Store is one of my favorite retailer, I chose to go ahead with for the discussion post. It is the largest supermarket and department store chain in Nepal serving more than 50,000 customers from its fourteen stores in different parts of Nepal. The supermarket offers more than 150,000 varieties including groceries, kitchenware, sports and toys, clothing, liquor, electrics and even jewelry from more than 750 local and international suppliers (“About Bhat-Bhateni”, 2018).

This supermarket uses horizontal marketing system. This is the structure that most businesses use around the world. With the use of horizontal marketing system, the economic incentive to help other succeed doesn’t exist (Mathur, 2012). The store has the power to replace any product that it has in its store for the other competitor of the same category, move the product to a different section or make any other changes. For example, Bhat-Bhateni can decide to replace soap products from ‘ABC’ company with another company in ‘XYZ’. Their recent tie-up with eSewa to convert their online shopping system to integrate with eSewa (a digital wallet owned by F1Soft) to run a full-scale e-commerce system is something that further explains their practice of horizontal marketing system.

I would like to see the business also move towards vertical marketing system as with horizontal marketing structure, the cost multiplies with every new additional location, creates competition between other business for self-space where no business benefit from each other effort as they’ll be cutting off their own profit, time and resources as an owner yourself is spread out along with the resources. Having said that I would like to see the business also move towards vertical marketing system, it’s not that I like the business to shift completely towards this system but also incorporate contractual vertical marketing system to practice by allowing licensing of the model. A license would allow more control with the superstore to ensure that the quality and control of the stores aren’t lost while also providing (allowing to rent) the brand of Bhat-Bhateni after paying the certain license fee. In addition to that, the business can also opt to add a certain percentage of royalty in addition to it for the profits or an annual license fee. This will help them maximize the profit with equal effort as of now while working in isolation, those will also help spread the name out to add more value to the initial business. An example of successful venture putting this into practice can be Starbucks of whose almost more than 5,000 stores worldwide are licensed.

Multiple channel is something that might be something I might probably use them. This is because it provides a different way for the business to reach to the customer like having a web-based platform where they can sell things online and provide a home delivery system. All those are some form of luxury which you always look out from in the current age and time and help reach out to more people while also maximizing the sells (Aldin & Stahre, 2003). In addition to that, Bhat-Bhateni also produces some of the exclusive items which are consumed in day to day life, they can use other wholesalers, retailers to market and sell those products, with the pricing being reasonable and those products of good quality - I’ll certainly buy those products from these channels as well.

Reference

About Bhat-Bhateni. (2018). Retrieved from bbsm.com.np/about-us/welcome-to-bbsm/ 8

Aldin, N., & Stahre, F. (2003). Electronic commerce, marketing channels and logistics platforms–a wholesaler perspective. European Journal Of Operational Research , 144 (2), 270-279.

Mathur, P. (2012). Designing and managing integrated marketing channels. Retrieved from slideshare.net/PranjalMathur/desig...

A marketing channel is a means of reaching customers with product and service. Marketing channel is a path for your product or service so that you can engage with your customer. All goods go through channels of distribution and your marketing will depend on the way your goods are distributed.

Channel : the channel is the process and partners that move a product from the procedure to the consumer (Robicheaux & Coleman, 1996). What does channel do in marketing? It connects producer with the consumer, it completes the transition, manages the logistics and financing. There are three types of marketing channel.

Communication Channel : communication channel is a pathway to deliver message to customer and receiver message from a customer. For example, newspaper, poster, email, and social media

Distribution Channel: Distribution channel is a pathway to deliver the product to the customer. In marketing, we have different distribution marketing channel i.e. manufacturer-consumer, manufacture- retailer-consumer, and manufacture- wholesaler-retailer- consumer, and manufacture- wholesaler-distributor- retailer. For example Warehouse, transportation vehicle, shop, wholesaler, and retailer.

Selling Channel: Channel that you utilize for making an impression to targeted people to achieve closing sales.

If a company decide to go direct that can be a right business decision but if you remove the middleman then you have to figure out how to do on your own all thought things the middleman is good at doing for you (Gulatia, Bristowb, & Wenyu, 2010). So our professor Krishna sir told us "you should have use the specialty of middleman who is really good at doing this job”. In our local context two types of marketing channels are popular. They are

Direct Marketing Channel: When a producer and ultimate customer deal directly with each other. For example, think about Dell computer selling strategy. It’s most of computer they sell direct to customer via internet. Customer order from online and dell employees are send it to consumer. Another suitable example is apple, you can buy apple products via online and other places. But the real fact of Apple has own company’s store. You are dealing directly apple employee. The third example of a direct channel is IBM when IBM calls large customer they have own high-power experience very senior sells representative who does that interact with them. My example is we used milk product on the daily basis form a nearest dairy. The dairy person has own milk production farm and he direct sells his product with us. In his business no any middleman is there. So sometimes I used direct marketing channel strategy. So in Direct marketing Manufacturer makes the goods and sells them to the consumer directly with no intermediary, such as a wholesaler, agent or retailer (Klein, Frazier, & Roth, 1990). Goods come from the manufacturer to the user without an intermediary or middleman. For example, a farmer may sell some produce directly to customers. For example, a bakery may sell cakes and pies directly to customers.

Indirect marketing channel: When there are independent intermediaries between the producer and consumer. You have the producer of product. You have the independent retailer or chain of retailer stores and this retailers store helping you to reach the customer. For example, I drink coca cola but I can’t get coca- cola from direct coca- cola industry. I get coca- cola from different supermarket, mart and retailer. For a suitable example of service, in an insurance company to sell their product for their Target customer whether they are a business customer or consumer via independent brokers. So in multichannel distribution strategy Distribution that involves more than one intermediary involves an agent called in to be the middleman and assist with the sale of the goods (Song & Wang, 2014). An agent receives a commission from the producer. Agents are useful when goods need to move quickly into the market soon after the order is placed. For example, a fishery makes a large catch of seafood; since fish is perishable it must be disposed of quickly. It is time consuming for the fishery to contact many wholesalers all over the country so he contacts an agent. The agent distributes the fish to the wholesalers. The wholesalers sell to retailers and then retailers sell to consumers (Blunt, 2017).

References
Blunt, L. (2017). Types of Marketing Channels. Chron .

Gulatia, R., Bristowb, D., & Wenyu, D. (2010). A Three-Tier Model Representing the Impact of Internet Use and Other Environmental and Relationship-Specific Factors on a Sales Agent’s Fear of Disintermediation Due to the Internet Medium. Journal of Marketing Channels, informaworld.com/smpp/title~conten....

Klein, S., Frazier, G. L., & Roth, G. (1990). A transaction cost analysis model of channel integration in international markets. Journal of Marketing Research , 196-208.

Robicheaux, R. A., & Coleman, J. E. (1996). The Structure of Marketing Channel Relationships. SAGE Journals.

Song, W., & Wang, R. (2014). Consumer Choice, Firm Performance and Channel Coordination in a Dual-Channel Distribution System. American Journal of Operations Research, 2014, 4, 217-227.

Kotler & Keller (2016), in their book Marketing Management, marketing channel also known as distribution channel is the set of activities involved in the process of making product or service available for the consumption by the consumer or business organization. Effective marketing channel aims in reaching out or attracting more customers to bring profitability.

BigMart is the best retailer for now as they have been doing really well with the retailing and mainly the groceries. They have around 25 stores within Kathmandu valley, in small and residential area that makes them popular among the households. Currently, they are in focused for Kathmandu valley only. They sell each item required in an household and has proved them as a one stop solution mainly for the working women who cannot go to each shop for purchasing things and also can’t go too far distance early morning sometimes. They targeting the households on different part of cities have been successful as for groceries; people in Nepal would still go to the stores and buy things by themselves. They are more focused for finished groceries, but, the customers are now demanding morning milk and vegetables also. So, they have separate stall for the vegetables which are organic. The growth has been increasing rapidly that they have introduces BigMart app for online purchase to their shoppers.

BigMart, a year’s back, there is no other distribution channel other than the retail stores. Therefore they sell only through their retail stores that are placed in various parts in the cities and mainly in the residential area including; Pepsicola, Lazimpat, Battisputali, Koteshwor, Shantinagar, Ekantkuna, etc. Their target market being the residential areas and the household, they have been doing well. In current, they have also developed BigMart app which provides ways to customers to interact with BigMart Loyalty system and get benefited with various promotions and discount vouchers offered by BigMart Stores. Customers can make mobile order and choose from nearby store to pick up the items. The ultimate purpose of the app is to provide value and savings concept to their shoppers.

According to Morash & Clinton (1998), supply chain integration customer value through collaborative closeness versus operational excellence. It is a collection of physical entities such as manufacturing plants, distribution centres, conveyances, retail outlets, people and information, which are linked through consumption. Effective and efficient supply chain increase customer value while maintaining competitive prices. In my view, BigMart should particularly focused for their competitiveness on supply chain, as their computers like Mall, Bhatbhateni are extending their branch too. Their online presence and the demands can fulfil by the nearest stores form the ordered place. There was a research on US female m-internet users, mobile retail apps offer customers reward opportunities when they physically walk into stores or scan the barcodes of certain products using mobile cameras (Kang & Johnson, 2015). People are looking for ease in everything and this online presence has helped their shoppers so far. They have been able to build the customer value and place in people’s heart, which they are also hoping for the same through their online service.

The BigMart innovation network encourages new products and ideas. Previously, they have introduced only the finished packaging goods, but, as per our needs they have introduced organic vegetables which has made us ease. In current, their online presence will definitely help us purchase from our homes. I am regular customer for BigMart, and this online presence has really helped me in ordering grosser.

References

Kang, J. Y. M., & Johnson, K. K. (2015). Positive word-of-mouth for mobile location-based service retail apps usage. International Journal of Mobile Communications, 13 (6), 599-618.

Kotler, P., & Keller, K. L. (2016). Marketing Management . Boston: Pearson.

Morash, E. A., & Clinton, S. R. (1998). Supply chain integration: customer value through collaborative closeness versus operational excellence. Journal of Marketing Theory and Practice, 6 (4), 104-120.

Marketing channel consists of the interdependent organizations that are involved in the process of making a product or service available for use of consumption. The marketing channel consists of sales force, internet and manufacturer’s representatives. Retailers are a part of consumer marketing channel that helps in making the goods and services available to the end users (Kotler & Keller, 2016).

In Nepal, Bhat-Bhateni Supermarket and Departmental Store is my favorite retailer. It has total of fourteen stores located in Kathmandu, Pokhara, Chitwan, Dharan and Butwal. Bhat-bhateni offers a full range of 120,000 products from 750 local and international suppliers. The products offered includes wide range of groceries, fresh fruits and vegetables; a broad range of leading international liquor, toiletries and cosmetics brands; and an extensive choice of kitchenware, clothing, sports, toys and electrical items and jewelries. In addition to the outlets, Bhat-Bhateni is providing information through its informative websites, e-commerce sites and mobile application. The recent tie up of this institution with e-sewa to start a full-fledged e-commerce site has added new horizon to its business (Bhat-Bhateni Supermarket and Departmental Store, n.d.).

Bhat-Bhateni works on horizontal marketing system. In horizontal marketing system, two or more unrelated companies put together resources or programs to exploit emerging market opportunities. Each companies lack the capacity to venture alone in the market (Mathur, 2012). Bhat-Bhateni does not have products of its own. It just acts as a place where the manufacturers sell their products and the customers buy from there. It has the authority to put the selected products in display. It can replace or discard the products as per its wish.

I think it can incorporate vertical marketing system to enhance its business. If it works in coordination with some other institutions rather than in isolation, it can expand its business even more. The vertical marketing system allows channel members to act as a unified unit for the benefit of every firms involved.

Personally, I always visit the stores of Bhat-Bhateni when I have to shop. But there are others who prefer online shopping or shopping from other means. So using multiple channels can be beneficial for the store. Segmenting the market and incorporating multiple channels for different segments can increase its popularity and scope.

References

Bhat-Bhateni Supermarket and Departmental Store . (n.d.). Retrieved from Welcome to Bhat-Bhateni: bbsm.com.np/about-us/welcome-to-bbsm/

Kotler, P., & Keller, K. L. (2016). Marketing Management. London: Pearson.

Mathur, P. (2012, February 17). LinkedIn . Retrieved from slideshare.net/PranjalMathur/desig...

Retailer is a middleman whose primary task is selling to the ultimate customer (American Marketing Association, 2015). They are the intermediaries, which makes the product or service available to the general public by using different forms of distribution. Meanwhile Distribution channel has become complicated and yet easy to access with the growth of Information and technology. So, I would choose "Gillette" as the best retailer that has come up with new concept, which looks complicated yet has made shaving easy by the use of IT.

The online sales in US is equal to 10% of retail trade (Stern, 2016) while the growth rate in internet sales rose by 23% in 2015 and is expected to have an creased growth rate this year (Loeb, 2016). Gillette has now come up with an online sale of its product and a revolutionary new concept called “Shave Club”. Shave Club is basically a shaving plan that includes razor plus other shaving solutions; the customer picks the models and determines a timeframe to receive next lot of cartridge and other shaving solutions, based on which the company maintains a continuous flow of the supply. The Shaving Club can be comparable to a Monthly subscription of magazine, where the buyer gets the subscription after certain time, while in shaving club’s case the only difference is that the buyer determines when he’d like to replenish the stock. Looking upon these cases, we can say they have an integrated channel system. In my opinion, Gillette must focus more on Online shaving while can follow the customer’s preference and provide small units of differentiated products based upon geographic differences.

Yes, I always use multiple channels for a product purchase. According to Floyd, Freling, Alhoqail, Cho and Freling (2014) the online product reviews has a greater on sales and consumer and consumer tend to search for reviews in the internet before buying (Floyd, Freling, Alhoqail, Cho, & Freling, 2014). The same is true for my case. I often go to the official site and look over the products and its features while will be making parallel research for its review. Recently I was researching over the Gillette’s flexible razor “Proglide” and the electric “Fusion power razors” with the intention to buy them on Bhat-Bhateni. So, now a day it’s common to search about the product online; buy online if you find a good deal or else buy it at the department stores at your convenience.

References

American Marketing Association. (2015). Dictionary . Retrieved from American Management Association: ama.org/resources/Pages/Dictionary...

Floyd, K., Freling, R., Alhoqail, S., Cho, H. Y., & Freling, T. (2014). How Online Product Reviews Affect Retail Sales: A Meta-analysis. Journal of Retailing , 90 , 217-232.

Loeb, W. (2016, January 4). Why Retailers Must Restructure In 2016 . Retrieved from Forbes: forbes.com/sites/walterloeb/2016/0...

Stern, N. (2016, January 4). Will 2016 Be A Transformative Year For Retail? Retrieved from Forbes: forbes.com/sites/neilstern/2016/01...

Marketing channels are very important as the producer may not be good at selling or many not have the network to get his product to the customer. As explained by Kotler and Kellar, "A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need or want them. (Kotler & Kellar, 2012)” Big Mart is the new upcoming retailer that has taken the departmental store segment by surprise by their aggressive expansion to every local places available. I have personally seen it presence grow in Lalitpur from the first one that opened in Ekantakuna to Jahmsikhel, Kupondol, Sanepa in a period of a year. What they have done is gone where the customers are. They have used a pull strategy which I find similar to the 7/11 stores strategy.

Big marts aggressive expansion has challenged both the local shops and the bigger departmental stores such as Salesway, Namaste Supermarket and Bhatbhateni situated in Krishna Galli. Their location presence has made the life of people easier as almost everything can be found there. Many café’s such as Himalayan Java have also opened up their branches in and around Bigmart adding value for both of them.

For now we can see that they have only used one source of channel and that is by opening their own branches. They can do better by opening up multiple channels. Opening up smaller shops packed with the essential items just as the 7/11 has done. Their expansion is trying to gain market share and pull customers in but there is larger investment in this. Instead smaller shops catering to home delivery of rations would also be an added channel system of not waiting for the customer to come but to get the product directly to the customer. Push strategy in selecting channels could be good for them. Also opening up late till 11 would be great as there are demand at night as well. The night demand has not been met by any stores. Setting up vending machines could be another channel that they could incorporate for the night time.

I would suggest multiple channels to Bigmart as one channel is not sufficient to pull the customers made even more difficult by competitors such as local vendors who have relationship marketing and larger supermarkets that already have hold in the market. According to Kotler and Kellar, "In multichannel marketing, each channel targets a different segment of buyers, or different need states for one buyer, and delivers the right products in the right places in the right way at the least cost. When this doesn’t happen, there can be channel conflict, excessive cost, or insufficient demand. (Kotler & Kellar, 2012)” Thus understanding that multiple channel is better for marketing and reaching the customer also has negative implication in not handled well.

Reference

Kotler, P., & Kellar, K. L. (2012). Social Responsibility Marketing. In K. L. Philip Koter, Marketing Management (pp. 170-171). New Jersey: Prentice Hall.