Retailing and Wholesaling MBA (Masters Level) Essay

Retailing and Wholesaling MBA (Masters Level) - Essay Example Value-added resellers normally have a disadvantage in cost structure compared to channel members that compete mainly on the basis of price or convenience, such as discount stores or mail-order firms. This means that the value-added reseller in a diverse multiple channel context must either (1) charge a higher price than other channel members based on the provision of valued services or (2) live with a relatively small gross margin (Dunne and Lusch 2007). Professor Leo Aspinwall advanced the depot theory to explain some of the reasons for the changes that have occurred in the physical handling and storing of goods, the growth of manufacturers' wholesale branches, and the changing position of general-line wholesaling. The depot theory of distribution states that goods tend to move toward the point of final consumption at a rate established by the ultimate consumer. The theory views depots as places that move rather than store goods -- that get goods to retailers at the lowest handling and transportation costs (Dunne and Lusch 2007). Accordingly, a steady flow of goods is envisaged from production to final consumption. The intermediaries facilitating the flow are in essence depots that perform a largely service function on the basis of costs of services performed, and so tend to eliminate merchandising profits. For example, backward integration of retail food chains and cost-plus wholesalers illustrate the performance of the depot func tion and the elimination of merchandising costs (Dunne and Lusch 2007). If the retailer links with independent channel members in one or several of its multiple channels (e.g., it uses independent sales representatives), the same basic challenges faced by the manufacturer in utilizing multiple channels could be faced by the retailer as well. Intrabrand or intratype competition could be heightened in the territories served by the retailer's multiple channels, prices and margins could be reduced, conflicts and alienation could arise, and support and control could wane (at least in the independent channels) (Dunne and Lusch 2007). The functions of retailers in the channel have been to assemble merchandise, maintain an inventory, price, promote, advertise, sell, and account for the merchandise, again as a service to the manufacturer and the ultimate consumer. Further, retailers have also provided a place for consumers to shop and find other services that might assist them in obtaining or using the available goods. The channel systems that have developed and, granted, have been improved over the years, have been built on some very basic beliefs about consumers, their needs and wants, and what they are willing to accept from channel members. It is these basic marketplace assumptions that are being challenged by direct and database marketers (Dunne and Lusch 2007). As was discussed earlier, technology and communication allow consumers to learn about and demand increasingly differentiated and even personalized products. As this occurs, the traditional economies of scale that have accrued to those manufacturers and retailers with extensive facilities and large sales volumes are no longer important in the marketplace. Smaller companies, using technology and direct and database marketing approaches, can compete not only effectively, but in many cases more efficiently than can large companies. As technology expands and sales-driven inventorying become