International Channels of Distribution

How do you get the product/service to foreign consumers?

Distribution Plan
1. Determine which selling approach is best.
a. Consult Country Commercial Guides (CCGs) "Marketing U.S. Products and Services in (country) chapter b. Industry Subsector Analyses (ISAs)

2. Find distributors. 3. Find end foreign buyers (trade leads).

For example, How would you distribute shoes in Italy? Shoes Distribution Varies Across Countries
A
Producer

B
Producer

C
Producer

D
Producer Agents

Wholesaler Retailer Consumer Consumer Retailer Consumer

Wholesaler Retailer Consumer

For Example German Vs. French Shoe Distribution Distribution London: Euromonitor, 1988, pp. 162, 171
Germany France

Organized Independents (buying groups)

Major Shoe chains

35%

Independent Shoe stores

Direct Sales

56%
14% 2% 2% 1% 25% 100%

29%

Clothing stores Department stores Variety stores Other retailers

Mail
Department Stores Hypermarkets Discount Stores

7%
6% 6% 6%

Independent Shoe Stores

Other retailers

4%
7% 100%

Who are Your Customers/ What Brands Styles Do They Buy? Where Do They Shop?

Would They Shop in Specialty Stores? Distributing Shoes in Italy j99

Bruno Magli Gucci Childrens Shoes E400

Outdoors? Shoe Stores? Specialty Stores? Distributing Shoes in Italy

j99

Should You Set Up Your Own Store Chain? Distributing Shoes in Italy
j99

Potential Italian Shoe Distributors

ITALY BOLOGNAFIERE Piazza Constituzione, 6 - 40128 BOLOGNA Tel: 39 051 282111 - fax: 39 051 282333 E-mail:dir.com@bolognafiere.it CENTRO SERVIZI E.F.D. Contact: Dott.ssa Chiara Padovani Via B. Franceschini, 5 - 50142 FIRENZE Tel: 39 055 7398932 - Fax: 39 055 7398935 E-mail:obiemoda@iol.it FIERA MILANO Largo Domodossola, 1 20145 MILANO Tel: 39 2 49971 - Fax: 39 2 49977244 730 Fifth Avenue, Suite 600 New York, NY 10019 (USA) Tel: 1 212-459-0044 - Fax: 1 212-459-0090 iacc@ix.netcom.com LINEAPELLE - ANTEPRIMA - PREVIEW Via Brisa, 3 - 20123 MILANO Tel: 39 02 8807711 - Fax: 39 02 860032 E-mail:trend@trendselection.com AREAPELLE Segreteria: Via Brisa,3 20123 MILANO Tel: 39 02 801020 - Fax: 39 02 72000120 E-mail:lineapelle@unic.it FIRENZE EXPO Spa Firenze Tel: 00 39 55 49721 - Fax: 00 39 55 490573

What is a Channel of Distribution?

Process including the physical handling and distribution of goods, the passage of ownership (title) and the buying and selling negotiations between producers and middlemen and between middlemen and customers.

What Is An International Marketing Channel?

Middlemen in the process between Manufacturer & Final International Consumer who may or may not
Physically handle & distribute the goods Assume title to goods Negotiate buying and selling

Middlemen used when the can perform functions more efficiently than manufacturers can

Marketing Channels for Consumer Goods and Services

A
Producer

B
Producer

C
Producer

D
Producer Agents

Wholesaler Retailer Consumer Consumer Retailer Consumer

Wholesaler Retailer Consumer

Marketing Channels for Industrial Goods and Services

A Producer B Producer C Producer Agent D Producer Agent

Wholesaler

Wholesaler

Industrial Buyer Industrial Buyer Industrial Buyer Industrial Buyer

Channel Decisions When Entering New Country

Whether to Use Established Channels or Build Own Channels? Whether to Use Home-country (located in producing firms country) or Host-country (located in foreign country) middlemen? Which intermediaries? How many intermediaries?
Exclusive one or a select few Selective more than a few, less than all Intensive as many outlets as possible

Examples of Home-Country Middlemen

(1) Global Retailers Global Retailers

Examples of Home-Country Middlemen

(2) Export Management Company
Export Management Companies
Independent firm which acts as the exclusive export sales department for noncompeting firms; Typically represent smaller companies in specialized industries Ranges in size from 1 to 100 employees and handles 10% of exported manufactured goods

Example of Export Management Company

You sell to AMEX; We take it abroad & absorb all risks Amex Export Functions: We purchase products from our business partners for resale in international markets. We pay for products purchased on terms similar to our business partners' standard domestic terms. We've developed over the past twenty years a unique system and strong know-how to select, appoint, and manage international distributors to market these products overseas. We attend trade shows, implement advertising programs, and translate material. We are responsible for invoicing, collection and bear the responsibility for payment. We handle shipping details, customs forms, export licensing, and all relevant export documentation. We constantly research and appraise market conditions overseas, and provide useful feedback to our business partners to incorporate in their marketing, and product development plans. We travel, meet face-to-face with our customers and see first-hand their needs and marketing efforts.

EMC Limitations
Relatively small with limited financial resources; may be unable to stock product or offer financing to foreign customers Focus efforts on products that bring in most profits Most do not cover Canada Manufacturers may lose control over who buys, selling price, promotion, etc.

Examples of Home-Country Middlemen (3) Export Trading Company

Export Trading Companies Larger companies that specialize in providing
intermediary services, risk reduction, financial assistance, etc.

Export Trading Companies

Export Trading Companies A typical ETC is more market-orientated and transactions driven than a typical EMC. An ETC most often acts as an independent distributor creating transactions by linking domestic producers and foreign buyers. As opposed to representing a given manufacturer in a foreign market, the ETC determines what U.S. products are desired in a given market and then work with U.S. producers to satisfy demand. ETCs can perform a sourcing function searching for U.S. supplies to fill specific foreign requests for U.S. products. A special kind of ETC is a group organized and operated by producers. These ETCs can be organized along multiple or singleindustry lines and can also represent producers of competing products. Most ETCs take title to the goods involved, but some will work on a commission basis.

Examples of Home-Country Middlemen

(4) Agents/Brokers Home country agents/brokers
Do not take title; Shorter term relationship; Specialize in certain products

Examples of Host (Foreign) Country Middlemen

(1)Merchant middlemen (take title & possession)
Distributors/Wholesalers Dealers / Retailers (Ongoing relationship to sell to customers)

(2)Agents & brokers (do not take title & seldom take possession)

Home-country or Host-country Middlemen?

Use Home-country or Host-country middlemen
Select Home-country middlemen if you do not wish to enter or do not have capability to enter foreign market Select Host-country middlemen if you seek greater control over marketing mix; have a presence in the foreign country

Marketing Channels Differ Around The World in

Services they perform Breadth of lines they carry Costs and trade margins Length of channel - long vs. short

Selecting Marketing Channels

Marketing channel decisions are among the most complex & challenging facing the firm Each channel creates different level of sales & costs Firm usually committed to decision for long time

How Do you Select Channel?

Cost Transporting & storing goods Capital Requirements Control Coverage

Character Does it fit the character of the company and the market? Continuity Can you foster loyalty among members?

Locating Middlemen
U.S. Department of Commerce; Directories; Foreign Chambers of commerce; Middlemen associations; Internet services, e.g. www.tradecompass.com Carriers e.g. shipping companies

 Two basic sources of "buy" leads: The ones you or your reps develop first-hand Second hand leads -- the ones you hear or read about
Good trade lead sources include
U.S. Governments Trade Opportunity Program found on the NTDB, FAS Agricultural Trade Leads, Commercial News USA trade leads, Global Technology Network. World Trade Center (WTC) network, and many states have their own overseas trade offices.

Locating Information About Channels of Distribution in Foreign Country

Commercial Guide - Marketing U.S. Products and Services section Articles on distribution country product ABI-Inform

For Example, How are Cars Sold in China?

Buick Succeed in China By Laying Stress on Quality,
Wall Street Journal, Oct. 26, 1999 Robert Simison,

Most cars are sold not by conventional dealers but by independent distributors and traders. Typical is the Asia Games Village parking lot in Beijing, which has become a sort of flea market for dozens of small-time traders of new and used vehicles.

For Example, When Opening Retail Outlet, Where

Do You Locate, How Many?

Memphis, TN, Jan. 17, 2004

1st Starbucks Herald Plan To

Give Parisians Caf Alternative, Jonathan Shenfield, The Commercial Appeal,

The first shop (Starbucks) near the Paris Opera, is situated to draw both tourists and localsThe chain began to establish itself across Europe nearly six years ago, starting with Britain, Switzerland and AustriaAnother outlet opens Monday in the La Defense business district, the second of about 10 planned for Paris.