Multi-channel retailers

Lang, G. (2010). Fulfillment systems in multi-channel retailing - customer expectations and economic performance. 8th International Research Conference in Logistics and Supply Chain Management (RIRL), Bordeaux, pp. 1-25. 

Figure 13.2. Multi-channel distribution system with independent retailer(s)...

The authors find that at equilibrium the manufacturer will price in the direct channel so as to drive all customers to the retail channel. In this case, the direct channel exists not to sell product, but as a mechanism for controlling the independent retailer s price. At the same time, there always exist circumstances under which the retailer and the manufacturer are both made better off as a result. This is possible because a reduction in the wholesale price accompanies the use of a direct channel. Hence, multi-channel approaches need not suffer from channel conflict. 

Studying assortment decisions fundamentally requires a multi-product perspective that includes substitution effects. This has posed difficulties even in a traditional retail context without incorporating competition. As such, product line strategy for multi-channel settings presents a very open research opportunity. 

This restriction to two levels does rule out some plausible multi-channel scenarios. For example, the manufacturer may start selling through wholesalers who in turn sell to existing retailers, thereby creating a new channel with three echelons (manufacturer-wholesaler-retailer) instead of only two (manufacturer-retailer). In the analytical literature we have reviewed, this option has been considered only in cases in which the entire network was under the full control of the manufacturer, thereby preventing any channel conflict (cf Cohen era/. 1995). 

The connectivity pattern determines the paths, connecting any two suppliers, oti which the goods, informatiOTi, and cash may flow in the network. Three different connectivity patterns are usually present in a supply network dyadic, multiple dyadic and multi-channel (Ring and Van de Ven 1992). Dyadic network (one-to-one) refers to the interaction between exactly two companies the path cramects a supplier to another supplier or to a customer. Multiple-dyadic network refers to the interaction of raie company with several other companies (one-to-many or many-to-one). This can take the form of N suppliers and one service provider, or one supplier and N retailers. An example is the relationship between an airline and several independent travel agents, or between a car manufactmer (such as GM) and its multiple dealers. A multi-channel network denotes relationships in which several companies interact with several other companies (many-to-many). Possible interactions include M suppliers linked to N retailers. These connectivity patterns, in a 2-tier network, are shown in Fig. 4.2. 

According to the Natural Foods Merchandiser (30) in developed marketplaces, there are primarily six channels of distribution at the retail level. These include the natural products retailers/health food stores, mass market retailers (drag, grocery and discount stores), multi-level marketers, mail order, health care practitioners and the internet. The recent survey pointed out that nearly half of the natmal products are sold through natural products... 

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