Page 50 - DMGT553_RETAIL_STORE_MANAGEMENT

Unit 3: Pre-Store Opening

These distribution centres represent not only a significant change in the way retail firms operate, Notes
but unlike store fronts they are often not very visible to the general public. These centres are
commonly located away from central cities, either outside metropolitan areas altogether or on
the edge of such areas. In searching for inexpensive land, favourable leases and low tax rates,
retailers can easily lose sight of the value of a diverse workforce.
The retail distribution centre, impacts the employment opportunities of minorities and women.
In the retail industry, traditional warehouses designed to house inventory are being
replaced by much large and more technologically sophisticated distribution centres that
work towards maintaining a “just-in-time” inventory in stores and making the goods
“shelf ready”.
Distribution centres often require greater space encouraging location away from the central
city to lower priced real estate in less populated areas.

Retail Distribution Centres are described from a number of perspectives. To examine the
characteristics of these retail distribution centres, it is useful to first use a measure of geographic
location.

3.3.1 Distribution Channel Selection

A net of distribution or trade channel is the path or route along which goods move from
producers to ultimate consumers. It is a distribution network through which a producer puts his
products in the hands of actual users. A trade or marketing channel consists of the producer,
consumers or users and the various middlemen who intervene between the two. The channel
serves as a connecting link between the producer and consumers. By bridging the gap between
the point of production and the point of consumption, a channel creates time, place and possession
utilities.
The selection of distribution considers the following factors in detail:
The spread and character of the market: The character of the market is a key parameter in
deciding upon the channel of distribution. The practices in the markets, like the speed of
distribution, the depth of distribution, the merchandising required for the product etc.,
will have an influence in the determination of the distribution channel.
The pace of stock turnover.
The nature of the good or service.
Products factors refer to the property of the product: The property of the product viz.,
perishable or non perishable, bulky or non bulky, products that required temperature
control and those which don’t require, are yet another set of factors that determines the
choice of a distribution channel.
The cost of distribution: The cost of distribution adds on to the cost of the product. Thus,
the distribution cost could reduce the expected margin for the sell or reduce the sales
volume expected due to the higher price of the product. Thus cost of distribution is a key
factor while deciding the channel of distribution.

The customer specific factors etc: The behaviour of consumer has the utmost influence in
deciding upon the choice of the distribution channel. For example for a banking company,
if the target consumers are well educated and computer literate, they could consider
distribution of financial products online. Even they could plan consumer education
programs on financial products online. But, on the other hand if the bank focuses to
capture a rural area where the target customers are more or less illustrate, the bank may
have to look for a direct distribution channel.

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