If you do not have enough cereals, breads and milk, you may drive to the nearest Coles or Woolworths to buy. Relatively, if you need buy a pair of suitable shoes for next week’s party, you may go to physical store or online store. The main reason is your cognition guides your behaviour, which means you know those locations have what you need goods. Those merchants are very happy to see such consequences because they successfully convey their products and ideas to their customers through these distribution channels.
In the field of marketing, distribution channel is the procedure that the product passes from the manufacturer to the consumers (Neil n.d.). In this process, the manufacturer can choose to cooperate with wholesaler or retailer based on own situation (as the figure). Normally, if producers have enough money and resources, they would integrate distribution channels to directly sell goods to consumers. Maybe, manufacturers need undertake many pressures if sales are below the expected. On the other hand, the manufacturer would prefer to rely on other wholesalers or retailers to sell products due to shortage of logistics or distribution channels. Several conflicts always exist in this cooperative relationship, for example, more powerful retailers, controversies about prices and profits, or lack of trust between collaborators. Better solutions are manufacturers can establish strong relation between other parties or share total revenues to them. When considering suitable channels of distributions and logistics, wise marketers should be based on the characteristics of products, level of price, and promotion approaches to decide use of intensive or selective distributions. In addition, push and pull strategies would help manufacturers effectively enhance sales and further satisfy customers. Overall, no matter directly or indirectly sells goods to customers, the final purpose is to effectively please consumers and gain profits from targeted customers (Sean n.d.).
Then, let’s move to the case. IKEA as a famous retailer has unique brand equity, and it specializes in selling well-designed and low cost home furniture. Its businesses have expanded to global market including Europe, USA, Australia, China and Japan. Besides, this company always pursues to positioning brand into cost leadership and differentiation. Its target consumers are those young couples and middle class families who are keen on fashionable household products without higher price. Furthermore, since most of sold products belong to CPGs, this company has decreased the number of transport channels as much as possible in order not to increase the cost.
Of course, the success of the IKEA is based on its products’ good quality that can please consumers’ needs, and also it cannot without effective distributions and logistics channels. According to IKEA official website, it employs catalog, website, publication, brochure, advertising and physical stores employ various channels to provide consumers a full range of products introduction. Roughly, IKEA has more than 1,000 suppliers in 52 countries and nearly 32 distribution centres in 16 countries. Then, the research of IKEA’s supplier strategy showed it has built long-term and friendly cooperative relations with other suppliers, such as Konakovo factory, Priozersk factory, Lenrauma and PROFIm through exchange values and personal bonding (2007).
However, it is noteworthy that suppliers have low power of bargaining, they may require more profits. This may threaten to the future development of IKEA. Besides, this firm had encountered several traps when establishing collaborative nexus. For example, loyalty of eastern European suppliers happen issues (Clayton 2007). Consequently, IKEA would select those suppliers who have mutual purpose. For instance, IKEA’s suppliers possibly agree to use recycled materials to manufacture products because both companies find out consumers pay more attention on environmental protection.
Clayton, H. 2013, ‘IKEA’s International Expansion’, International Journal of Business Knowledge and Innovation in Practice, retrieved 15th of May, <http://www.sapientpress.com/ijbkip/IJBKIP-01-1003-Case_Study_-_IKEA_Executive_Summary.pdf>
IKEA, n.d., ‘Getting our messages to many people’, retrieved 15th of May, <http://www.ikea.com/ms/en_US/the_ikea_story/working_at_ikea/work_areas_marketing_communications.html>
Neil, K. n.d., ‘How Does Logistics Differ From Distribution’, retrieved 14th of May, <http://smallbusiness.chron.com/logistics-differ-distribution-77542.html>
Sean, R. n.d., ‘What is the difference between a direct and an indirect distribution channel’, retrieved 14th of May, <http://www.investopedia.com/ask/answers/052115/what-difference-between-direct-and-indirect-distribution-channel.asp>
Tarnovskaya, V., Ghauri, P.N. and Elg, U. 2007, ‘Market Driving Supplier Strategy: IKEA’s Global Sourcing Network in Two Developing Markets, retrieved 16th of May, <http://www.snee.org/filer/papers/482.pdf>