Each manufacturer independently decides which distribution route to use, depending on the market. In addition to the direct and indirect methods, each manufacturer can have several channels simultaneously, which is called a combined system. From the direct method, the company gets the opportunity to make a big profit, but a good analysis of the consumer’s needs is required (Lichy, 2019). The advantages of the indirect supply method include the possibility of shipping large quantities, but there is a drawback – the weakening of control over product quality (Chernev, 2019). Turning to intermediaries leads to the manufacturer losing control over some distribution system processes gaining the opportunity to better meet the end-user’s needs. Mixed marketing is widely used because it increases market coverage, creates competition between channels, and increases the motivation to work more efficiently.
Costco
Starting in 1983 with a single warehouse, Costco now operates over 700 offices worldwide. In the beginning, Costco was only suitable for large families; they specialized in selling institutional-sized groceries. Currently, Costco offers products in several key categories: dry food and groceries, snacks, home appliances, electronics, hardware, fresh food, clothing, goods for entertainment (Costco, 2022). Most goods are bought directly from manufacturers and sent to consolidation points. Large warehouses accept large lots from manufacturers and ship the necessary goods to separate sorting points (Huo & Rui, 2021). This process increases freight volume and improves processing efficiency, eliminating many costs associated with traditional multi-stage distribution channels. A key component of Costco’s ability to efficiently move goods from manufacturers to warehouses allows the company to sell its inventory quickly (Rahman, 2020). There is a multi-stage distribution channel where the retailer must move the product from the manufacturer to the warehouse and then back to the retail store where it is sold.
Costo’s warehouses are stores in their own right, so it sells out quickly when merchandising is moved there. Another important aspect is that when goods arrive in bulk at Costco’s warehouses, they do not require much repackaging or complex and large-scale operations, but rather these goods are sold directly in bulk. Costco’s food and technology sales strategy is not much different. So, for example, a MacBook bought directly from Apple is sometimes sold at a lower price than in the official store, thanks to the membership card (Kim, 2019). However, Costco has its own brand of goods – Kirkland, sold without intermediaries, directly from the manufacturer to the buyer. Kirkland products are supplied through a direct supply channel; other products, such as Apple, are shipped indirectly. Thus, the whole system can be described as a mixed one, due to which it is possible to find an appropriate balance between price and quality.
Thus, Costco uses a mixed supply method to a greater extent. However, since Costco’s warehouses are producers, they act as a direct intermediary between the manufacturer and the buyer. This strategy helps to reduce the cost of products sold and attract buyers. In addition, logistics costs are reduced, as is the number of employees involved. With Kirkland’s brand, the supply chain becomes direct as it goes from the manufacturer to the end customer. Due to the wide range of products, a mixed chain makes the company’s work easier.
Apple Inc.
Apple Inc. is a big corporation headquartered in Cupertino California that designs and markets consumer electronics. The company’s software includes a wide range of goods: the Mac OS X operating system, iWork suite of productivity software, Aperture, a professional photography package iTunes media browser, iLife suite of multimedia and creativity software (Greg, 2020). Apple operates multiple distribution channels, including direct and semi-direct, company-owned stores, and other authorized parties to distribute its products and services to targeted customers and consumers. Apple’s strategy is to use different channels for different products depending on specific product portfolios and product types. In addition, Apple’s distribution networks span both online and offline channels, providing an incredible shopping experience and ensuring maximizing sales.
Apple’s direct sales channels are heavily invested and strategically structured to provide entire packages of Apple products and services with related products and services offered by other manufacturers. Retail is an important channel at Apple and is prioritized across online and offline points of sale for brand awareness, customer relationship management, and global reach. Integrating modern physical Apple Stores, user-friendly corporate websites, online stores, and efficient direct sales have created a strong Apple direct sales network. Apple is investing heavily indirect distribution, although these channels only account for about 30% of the total (Apple, 2021). The essence of this strategy is to offer a uniquely superior shopping experience with a focus on customer service and customer education while taking full control of Apple’s brand awareness and brand image management.
Apple Stores are always located on busy and select city streets in major cities worldwide, providing a best-in-class shopping experience that confirms the high quality of Apple products and services. In addition, Apple’s website and online stores, such as the App Store, offer more shopping opportunities for all Apple products and services, including electronics, accessories, music, mobile apps, and other digital content. Apple Direct Sales contributes to overall revenue by advising and providing appropriate Apple business solution packages to companies and organizations worldwide.
While Apple’s direct distribution networks require huge financial and human resources investments, their resulting branding benefits effectively support Apple’s indirect distribution channels. Conversely, Apple’s indirect distribution channels fill a gap in certain markets where Apple’s direct distribution networks are still in the process of being built or improved. Apple’s indirect distribution is through third-party carriers, authorized retailers, and resellers. In addition to the company-owned retail store system, Apple is also building a worldwide, solid indirect retail network with Apple Authorized Distributors, wholesalers, and retailers, some of which have their own high-quality e-commerce platforms.
Thus, the iPhone can be sold both in the official physical store and on Amazon.com. At the same time, the quality of the product will be unchanged, as it is controlled and certified. The same thing happens, for example, with an iPhone case, which can be found at various distributors. The Apple model is beneficial in many ways, but one of the main problems can be fakes that reduce the brand image.
The effective combination of direct and indirect distribution channels has provided Apple with a unique distribution channel model to expand market coverage and product availability to maximize revenue. In such a way, Apple can reduce the amount of forecasting and planning efforts for themselves and their supply chain partners in the supply chain network (Leeman, 2021). In addition, Apple’s diverse direct and indirect sales channels, combined with integrating pre-sales and after-sales services, including financing, maintenance, and warranty support, help Apple build a strong brand reputation worldwide.
References
Apple. (2021). Apple reports first quarter results. Newsroom. Apple.com. Web.
Chernev, A. (2019). Strategic marketing management: Theory and practice. Cerebellum Press.
Costco. (2022). About us. Costco.com. Web.
Greg, R. (2020). Strategic Review on Apple Inc Marketing in the United States of America.Journal of Marketing and Communication, 3(2), 47-61. Web.
Huo, H., & Rui, Y. (2021). The Assessment of Costco Management Strategy in Chinese Market Based on Supply Chain. In 2021 International Conference on E-Commerce and E-Management (ICECEM) (pp. 451-455). IEEE. Web.
Kim, J. J. (2019). The Empirical Study on Purchasing Behavior between Costco Wholesale Members and Non-Members. Journal of Distribution Science, 17(9), 25-33. Web.
Leeman, J. (2021). Export planning: A 10-step approach. 2nd Edition. Books on Demand.
Lichy, J. (2019). The driving trends of international business in the 21st Century. Cambridge Scholars Publishing.
Rahman, M. H. (2020). Financial analysis of Costco Wholesale Corporation: Exploring the strengths and weaknesses. Bangladesh Journal of Agricultural Economics, 41(1), 17-34. Web.