The Net As A Channel of Distribution

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Chapter 12

• The Net As A Channel of Distribution

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The Net as a Distribution Channel

• A group of independent firms that work together
  to transfer product and information from the
  supplier and the customer.
• Producers, Intermediaries, and Customers

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Types of Intermediaries

• Wholesalers- buy product from the manufacturer
  and then resell it to retailers.
• E-tailers- buy product from the wholesaler and
  then sell it directly to consumer.
• Brokers- facilitate transactions between buyers
  and sellers, called market makers.
• Agents- Manufacturing or Purchasing agents
  depending on who they are working for.

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Functions of Distribution Channels

• Transactional
• Making contact with buyers
• Using communication strategies to make them aware
  of products.
• Matching products to buyers needs
• Negotiating prices
• Processing transactions

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Functions of Distribution Channels

• Logistical
• The physical distribution
• Aggregating products
• Third-Party logistics
• Last mile problem

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Functions of Distribution Channels

• Facilitating Functions
• Include marketing research about buyers
• Financing of purchases

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• The system Perspective
• Flow of products, information and finance
• Supply Chain Management-The coordination of flows
  of material, information, and finances.

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Length Of Distribution Channel

• Disintermediation process of eliminating
  traditional intermediaries
• Internet disintermediation can fail
• 1. U.S. Have most efficient distribution system
  in the world
• 2. Intermediaries allow corporation to maintain
  focus on their core business
• 3. Traditional intermediary simply replaced with
  their internet equivalent

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E-business Models

• Online intermediaries are classified by the way
  they make money
• Content sponsorship
• Direct selling
• Infomediary
• Intermediary model

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Content Sponsorship E-Business Model

• Firms create web sites, attract a lot of
  traffic, and sell advertising.
• Involves using a niche strategy to draw special
  interest audiences
• The product sold is a space on the Web.
• Similar to traditional media, where television,
  magazines, and other media sell space and air
  time.

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Direct Selling E-Business Model

• Manufactures sell directly to customers instead
  of using intermediaries.
• Wholesalers and retailers are not needed causing
  disintermediation.
• The Internet makes it easier to bypass
  intermediaries.
• Used in business to business markets-saves
  millions of dollars at times in sales related
  expenses such as personnel, product
  configuration, and order processing costs.

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Direct Selling Considerations

• Perishable products, such as fresh foods and
  flowers are sold using this method.
• Benefits include cost savings and rapid delivery
  for the consumer.

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Infomediary E-Business Model

• Refers to an online organization that gathers and
  distributes information
• Others like DoubleClick use cookies to track
  users as they surf the web without compensation

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Brokerage Models

• The broker creates a market in which buyers
  and sellers negotiate and complete transactions.
  They typically charge a fee.

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Brokerage Model Considerations

• Benefits to the Buyer
• Convenience
• Speed of order execution
• Transaction processing
• Cost savings through Lower prices
• Decreased search time
• Savings of energy and frustration in
  locating appropriate sellers.

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Agent E-Business Models

• Agents do represent either the buyer or seller
  depending on who pays their fees.
• Manufacturers Agent
• Represent more than one seller.
• Metamediary
• An agent that represents a cluster of
  manufactures, e-tailers and content providers
  organized around a life event or major asset
  purchase.

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Benefits of Metamediaries

• They solve four major consumer problems
• Reduce search times
• Provide quality assurance about vendors
• Facilitate transactions for a group of related
  purchases.
• Provide relevant and unbiased content information
  about the purchase.
• They benefit business partners by
• Having traffic directed to their sites
• Co-branding with the metamediary

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Virtual Malls

• Host multiple online merchants in a model
  similar to a shopping mall. Hosted merchants gain
  exposure from traffic coming to the mall.
• Six benefits
• Branding
• Digital wallets
• Frequent shopper programs
• Gift registry
• Search facility
• Recommendation service

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Agent Models Representing Buyers

• Shopping Agent
• Second generation shopping agents
• Reverse Auction

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Agent Models Representing Buyer Examples

• Buyer Cooperative
• E-Tailing
• Use of bit vendors

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Does Online Commerce Work?

• Online retailing
• What are people buying?
• B2B