Developing A Strategy for Distribution Channel
Marketing is about how to get the consumer, become aware of the product hence consume it. There are four P’s found in marketing. These are Product, Place, Promotion and Price. The first, product means that you must have a good or service to sell to market. The second, place means you must look for a place to sell the product. The third, promotion depicts that you must make the potential consumer aware of your product and the last price, means you must price the product according to the target market’s capabilities.
If you’re targeting the rich, than price the product accordingly. For companies, marketing is a must and they know that if they can’t market the product they will go out of business. Even though a product’s quality is very good, if there are no sales, it is a waste of time. This paper is about the ‘place’ part of the market mix. It is about leapfrog, an educational toy maker and other toy manufacturers and their quest with Wal-Mart the leading supermarket in the United States. Supermarket space has become a very key feature in the marketing of goods.
Supermarkets like Wal-Mart have realized this and are thus becoming unreasonable when dealing with suppliers. Wal-Mart has been able to sell itself until it has become one of the most preferred shopping places in the United States. Wal-Marts gets about 100 million customers (about a third of the US market) in a week according to (Zimmerman & Hundson 2006). It is considered the largest toy re-seller in the US with about 45% of the retail toy business. It overtook “Toys R US” the previous largest toy reseller in the 1990’s (Zimmerman & Hundson 2006).
Wal-Marts’ goal has been to offer the lowest prices as possible to its consumers. The founder Sam Walton found out that by pricing lower markups, one gets to sell more due to the sales volumes. This concept has made manufacturers find out that they are forever going to be under the mercy of Wal-Mart to offer low prices. Wal-Mart keeps a database of prices and suppliers and the suppliers who can offer the lowest price gets the shelf space. Manufacturers from US are finding themselves competing against those from China and the Asian market whose prices are way down compared to US prices. Read about open access good example
Factories in Asia use the “sweat shop” concept to manufacture and labour is way cheaper there. In the US, manufacturers are faced with more costly labour and operation costs. The US manufacturer thus feels he is hardly ever going to make a profit if he adheres to Wal-Mart’s conditions The toy industry is a $ 20 billion dollars a year industry in the United States. The main companies found include Leapfrog, Jakks pacific, RC2, among others. Wal-Mart has made all the other resellers of toys like Toys R US out of business by offering toys at lower prices.
This has meant a decrease in profit for manufacturers. The question they are asking themselves is should they sell to Wal-Mart or completely block it out of their system. They seem to have made a choice as they are looking for alternatives before Wal-Mart kills the whole toy industry. One way that Toy manufacturers are trying to overcome Wal-Mart is by avoiding discount shops like Wal-Mart and targeting department shops. They claim that parents who have kids frequent these stores just as much (Palmen 2004).
Also negotiating with Wal-Mart is not going to be good for toy manufacturers in the United States especially because it does not want to listen to them. Hopefully with time the retail giant will come looking for them. Even though Wal-Mart will stock products from other countries, in the long run, Americans would like to buy their own hence will only go to stores where “American” toys are stocked. Toy manufacturers can also make use of new distribution channels that have come up with the onset of new technologies like the internet.
Customers can download games and the like from the firm’s website, and this will have completely eliminated the middleman. Toy manufactures should also use the ‘bad image’ that Wal-Mart is currently facing to move their products to new distribution channels. They should then woe their clients to these new stores and say that they do not deal with a partner who is being accused of moral issues. Consumers will eventually move as this is the age of practicing ethical business.
Wal-Mart has been accused of being a bad employer, a prices dictator to suppliers among other things (Gogoli, 2006). Toy manufacturers should refuse to sell to Wal-Mart because it is not doing business fairly. Price cutting is a good technique but on luxury goods. Luxury goods like toys are supposed to be priced at a higher mark up because they are not bought all the time but once in a while for example during special occssions like birthdays or festive seasons like Christmas. Making the toys cheap makes the children loss interest in them quickly as they are readily available.
However, making the toys expensive means that parents will only purchase if it is absolutely necessary or during special occasions like birthdays. Wal-Mart is trying to make toys become “cheap” goods country to why they were invented. Toy manufacturers should try their level best to prevent this from happening. Again, price is not the only way to compete for consumers and that is what Wal-Mart wants all to believe. For toys it is the experience of the toy or what it has to offer that makes it popular. So discounting the price of a toy is not its selling point but more what it has to offer.
So Wal-Mart is not the ideal ground to sell toys. It is high time the toy industry took control of their destiny and chart it in the direction they want before it is too late. Many industries have been crashed by moves of distributors. Overseas products normally have a bad reputation of failing to meet the standards of the US market. Toys made in China have had always had issues about quality, among other things. For example early this year, some toys from china were recalled because they had been made using a paint that was not approved due to its high lead content.
This is just a tip of the iceberg and China has often being accused of producing sub standard goods. Toy manufactures in the US should use such allegations of “sub standard” goods and woe consumers to buy “ American” where standards are strictly adhered to and never compromised. Consumer should thus buy from others stores not Wal-Mart who only stocks “cheap” products as well as “foreign” products All in all, the manufacturers should never allow themselves to go at a loss but instead look for other marketing gimmicks to increase sales hence increase profits. They should not let themselves be bullied by one firm.