Page 405 - Foundations of Marketing

372 Part 5 | Distribution Decisions

Emerging Trends

Branded Stores as Entertainment Bring in Tourists

Hershey’s, Mars, and other brands are the stars of the Hershey’s operates Chocolate World stores in New York’s
show in showplace stores where each is the only brand Times Square, Niagara Falls, Canada, downtown Chicago,
for sale. The trend of retailing-as-entertainment has led and Shanghai, China. M&M’s World stores are open in
these and other companies to tell their brand stories and busy tourist destinations like Orlando, Florida, Las Vegas,
put their products and memorabilia on showy display in Nevada, Times Square, New York City, and Leicester
giant stores that draw crowds of tourists day after day. Square, London. When Mars introduced Ms. Brown, one
Although these single-brand “worlds” bring in millions of its new brand characters for M&M’s, it used the glitzy
of dollars in annual sales, they’re hardly competition for Times Square store as the backdrop.
traditional retail channels—in fact, their role is to provide Not long ago, Kellogg created a temporary Pop-Tarts
such an exciting brand experience that tourists will keep World store in Times Square. Why? The brand’s senior
buying the brand in local stores when they get home. director explains: “Our long-term hope is to strengthen the
For example, chocolate lovers on vacation can visit bonding between the brand and the consumer, and that
b
elaborate brand stores created by Hershey’s and Mars. has great benefits for the brand.”

© iStockphoto.com/CRTd

Competition

Competition is another important factor for supply-chain managers to consider. The success or
failure of a competitor’s marketing channel may encourage or dissuade an organization from
taking a similar approach. In a highly competitive market, it is important for a company to
keep its costs low so it can offer lower prices than its competitors if necessary.

Environmental Forces

Environmental forces can play a role in channel selection. Adverse economic conditions
might force an organization to use a low-cost channel, even though it reduces customer
satisfaction. In contrast, a growing economy may allow a company to choose a channel that
previously had been too costly. New technology might allow an organization to add to or
modify its channel strategy, such as adding online retailing. Government regulations can
also affect channel selection. As labor and environmental regulations change, an organiza-
tion may be forced to modify its existing distribution channel structure to comply with
new laws. Firms might choose to enact such changes before they are mandated in order to
appear proactive. International governmental regulations can complicate the supply chain
a great deal, as laws vary from country to country. For example, China allows factories to
use young students as low-cost labor when they need additional production capacity, call-
ing the positions “internships.” However, many other countries consider the practice wrong
and abusive. HP decided to impose new regulations on its Chinese suppliers to limit the
practice because stakeholders do not find forcing students out of school and into factories
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acceptable.
Characteristics of Intermediaries
When an organization believes that a current intermediary is not promoting its products
adequately, it may reconsider its channel choices. In these instances, the company may choose
another channel member to handle its products, it may select a new intermediary, or it might
choose to eliminate intermediaries altogether and perform the functions itself.

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