Marketplace channel structures describe the way a manufacturer or selling organization delivers products and services to its customers. Typical channel structures between business and consumer organizations are shown in Figure 2.5.
A distribution channel will consist of one or more intermediaries such as wholesalers and retailers. For example, a music company is unlikely to distribute its CDs directly to retailers, but will use wholesalers who have a large warehouse of titles which are then distributed to individual branches according to demand. Of course, today they can distribute digital tracks straight to online retailers such as iTunes and Napster, a major change to their channel strategy. Bands can even bypass retailers and sell direct; for example, in 2008 Radiohead released their In Rainbows album direct from their site, allowing purchasers to name their own price!
The relationship between a company and its channel partners shown in Figure 2.5 can be dramatically altered by the opportunities afforded by the Internet. This occurs because the Internet offers a means of bypassing some of the channel partners. This process is known as disintermediation or ‘cutting out the middleman’.
Figure 2.6 illustrates disintermediation in a graphical form for a simplified retail channel. Further intermediaries such as additional distributors may occur in a business-to-business market. Figure 2.6(a) shows the former position where a company marketed and sold its products by ‘pushing’ them through a sales channel. Figures 2.6(b) and (c) show two different types of disintermediation in which the wholesaler (b) or the wholesaler and retailer (c) are bypassed, allowing the producer to sell and promote direct to the consumer. The benefits of disintermediation to the producer are clear – it is able to remove the sales and infrastructure cost of selling through the channel. Benjamin and Weigand (1995) calculate that, using the sale of quality shirts as an example, it is...
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