Mldso and Dso

7/31/2019 Mldso and Dso

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MLDSO & DSO channels-Defining MLDSO & DSO

-Advantages/disadvantagesof MLDSO


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Outline

Nonstore retailing

Catalog

Direct-Selling Orgs (DSOs) Electronic Channels

Market Opps

Service Output Provision and Demand-Side Gaps

Channel Flow Performance and Supply-Side Gaps

Coordination Challenges


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Non-Store Retailing: Catalogs

E.g.: Sears Catalog, Lands End

Service Outputs Offered:

Break bulk Assortment and variety can vary widely (trend towards

specialty in-depth focused narrower range products)

Smaller Catalogs more targeted mailings

Ultimate in Spatial Convenience (shop from home, yetperhaps a delay without expense of overnight delivery)


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Non-Store Retailing: Catalogs

Segments served: Time starved working mother Busy Single parents People whose time and travel costs to get to a store are expensive The Housebound

Others?

Related Costs and Risks: Reliance on manufacturers if do not produce yourself Creation of the catalog (size, product coverage, segment

distribution) Mailing List look at lifetime value of mailing list and delete or add

customers Order Fulfillment Logistics of picking and packing Stock-Outs inventory management vs. delivery delays Merchandise returns 6-15% in stores, 35% in catalog sales. Returns

are more expensive to manage (bulk broken) and ship


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Direct-Selling Orgs (DSOs)

Direct Selling is the sale of a consumerproduct or service in a face to face manneraway from a fixed retail location.

Typically high reliance on personal selling E.G.s: Amway, Mary Kay, Herbal Life, Avon,

and Tupperware. Top 5 DSO countries - sales (Canada is 10th):

1. Japan2. USA3. Brazil4. Germany5. Korea


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Direct-Selling Orgs (DSOs)

MLM- Multi-level Marketing (MLDSO) MLDSO distributors are compensated in three different ways:

1. Mark-up on wholesale cost earnings2. MLDSO commission paid per sale3. MLDSO commission on sales made by subordinates (recruits)

Balance growth of Network vs. Sale of products (often based onpersonal consumption)

Ilegal Pyramid Schemes: Fraudulent mechanisms by which new recruits are required to pay a

nonrefundable fee for becoming a distributor and the distributors onlyreward is this fee (there is no sale and/or consumption of a product orservice). Ultimately the last layer of the pyramid will make no moneyfrom anyone (population maximized), yet the highest in the pyramidearns money from everyone.


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Electronic Channels

any channel that involves using the

Internet as a means of reaching the end-

user or any channel for which theconsumer literally buys on-line. B2C orB2B.


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Market Potential for E-Channels

Restrictive Marketmust be able to shop online.

Strong Growth in some countries1998 33% of US online, whereas in 2003 56% of

US online


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Service Outputs and Demand-

Side Gaps in E-Channels Positives:

Any time of day or night spatial convenience

More pleasant shopping experience, takesless time

Price-value promotions for online shopping

Lower prices Broader access

Consumer Control


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Service Outputs and Demand-

Side Gaps in E-Channels Negatives:

Product return challenges

Stock availability Timely delivery (like catalog sales)

Trust and Privacy

Prefer face-to-face shopping


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E-Channel Flow Performance

and Supply-Side Gaps New Fixed Costs Created Technical Infrastructure Warehousing or inventory arrangements Need for new intermediaries (E-bay, yahoo)

May reduce costs (EDI integration, VMI, and CRP systems) Physical Possession inventory, pick, pack, ship costs increase. 3rdParty expert business is on the rise as a result (FedEx).

Promotion impacts on alternative channels such as retail stores Negotiation may decrease or increase in intensity Risking increased fear about disclosure of financial information online,

reduce risk of holding inventory (ship direct from manufacturer) Ordering Technology has improved effectiveness of ordering

dramatically (reducing operating cost and increasing entry cost) Payment existence of electronic payment from backing has facilitated

e-commerce growth. Trust issues have induced new 3rd party memberslike PayPal.


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E-Channel Coordination

Challenges Creates Dual Channel Conflicts related to Goals,

Domain and perception-of-reality.

Bricks and Mortar in combination with onlineresellers may exert greater strength in thechannel, increasing power conflicts.

Confusion about online threat results in

restrictive channel behaviour precluding channelsuccess (e.g.: mall merchants restricted fromonline expansion by mall leasor)


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Thank You!

Mldso and Dso

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