What is sales channel research?
Sales channel is a path where the product and service is transferred from the producer to the consumer. Sales channel research, also known as sales network research, is a research towards the sales channel of the product, distributors and product distribution.
What kind of business problems can be solved through sales channel research?
Sales channel is a bond connecting the enterprise and the consumer. Traditional sales channel consists of four parts: Exclusive distributor, distributor, sub-distributor and retailer. They play a role of distributing products for the enterprise.
When the supply of the product can not meet the demand, distributors rely more on the enterprise. However, with the diversification of the commodities, same products of different brands increase, and distributors have more freedom to select. As a result, the relationship between the enterprise and the distributors shows a significant change. Especially the rise of retail chains began to overthrow the traditional marketing mode of the enterprise. If a company is weaker and weaker in controlling the channel, it will only act as manufacturing part in the whole industry chain.
Through sales channel research, the enterprise can get a general idea of the channel types, the channel members, the channel features and so on, which is helpful for them to choose and set up their own channel modes and channel management strategies. A smooth sales channel can effectively save the cost and resource of the enterprise and ensure the product reaching the terminal smoothly. On the contrary, if the channel is blocked, it will severely affect the market operation of the enterprise.
How to conduct sales channel research？
Sales channel research includes channel member research and channel structure research.
Channel members include suppliers, agents, dealers, users and so on. As they share the ownership of the product and the service of the enterprise while taking the corresponding risk, they play a key role in forming a benign development of the industry chain. Channel member research covers the reputation of the major agents and dealers among their users and the market, the product portfolio they manage, their finance situation, the sales network they cover, their ability of distribution, the training and management of sales person, and so on.
Channel structure includes the number of levels in the channel, the density of each level and the type of dealers in each level. The channel level means the number of levels an enterprise needs to finish its sales target. The channel density means the number of dealers in the same level of the channel. The type of dealers means how many kinds of dealers in each level of the channel.
The content of channel structure research is as follows:
Basically, the process of sales channel research is as follows:
General survey of the sales channel
What is the general survey of the sales channel?
General survey of the sales channel is to get a general idea of the distribution of the product in the retail terminals within the market the enterprise covers. The content includes: the number of retail terminals in the surveyed area, the number of valid retail terminals, distribution rate, stock-out rate, the number of retail terminals out of stock, SKU and the display of each SKU in the valid retail terminals.
What kind of problems can be solved by the general survey of sales channel?
With the development of the commodity economy, the form of the sales channel has undergone 5 phases.
The first phase is dominated by wholesalers. In the era of shortage economy, the products produced by manufacturing enterprises can always easily be sold. Therefore, in this phase, the manufacturing enterprises should constantly invest and expand their production scale, and it’s unnecessary for them to expand the sales channel. The sales can be managed by their professional wholesalers.
The second phase is dominated by both department stores and franchised stores. With the expansion of the production scale, the market is transferred from ‘supply not meets the demand’ to ‘supply and demand balanced’. In this phase, the manufacturing enterprises enhance the strength to cooperate with retailers (mainly department stores and franchised stores) in order to strengthen their control of the market and sales.
The third phase is dominated by low-price store (mainly chain supermarkets, bulk markets, hypermarkets, home appliances & IT products hypermarkets). With the improvement of the level of urbanization and the increase of suburbanization, the employment rate of female has been increased and the pace of life has been accelerated. Therefore, the shopping time of female has been decreasing. Besides, the income is lower than what is expected, which cause the consumers being sensitive to the price. In order to cater to such shopping behavior of the consumers, chain supermarkets and home appliance & IT products hypermarkets has been set up in residential districts and bulk markets and hypermarkets has been set up in suburb areas.
The fourth phase is dominated by shopping mall. Due to the decrease of time in shopping and recreation, people need a multi-function shopping area. Therefore, a hyper and comprehensive shopping mall mixed with shopping, catering, recreation, finance and so on.
The fifth phase is dominated by no-store, which includes mailing of table of contents, direct selling, TV direct selling and on-line sales
At present, the most important sales channels are those in phase two and phase three, including department stores, franchised stores, chain supermarkets, bulk markets, hypermarkets, home appliances & IT products hypermarkets. The distribution of the products in these channels will directly affect the final sales. So manufacturers should pay great attention to them.
For the multinational companies who entered into China, the marketing channel will cover the areas with extremely big difference. China is a large country. The consuming habits, the level of development, the traffic situations and the business rules differs greatly in different areas. Besides, the development of domestic sales channel is still in the primary stage with many non-standard phenomena, therefore, the logistics of the product has become a big challenge. The general survey of the sales channel can help the multinational companies manage the channel more effectively and find out the distribution of the product in retail terminal and the display of them.
For domestic FMCG manufactures, an extensive and dense channel coverage is the biggest advantage of them. There should be a great number of sales persons covering the tier 1 cities to counties. Lacking of innovation technologies and a strong brand, many domestic FMCG largely depend on the dense channels to compete with foreign companies. However, if the management of the channels are not doing well, it will be a heavy burden for them. So conducing general survey of the sales channel regularly can help the manufacturers monitor whether their sales channels are healthy.
Case:
After Coco-cola Company entered into China’s market, many FMCG companies marveled at its prominent sales performance and excellent brand building. Coco-cola attributed the biggest factor affecting its success to distribution rate of its retail terminal. After conducing a survey of its sales channel, Coca-cola found that Coca-cola, Pepsi-cola, P&G, Unilever, Master Kong, Uni-president are all excellent FMCG companies with their terminal distribution rate basically at 85%-90%. Especially in the urban markets, the terminal distribution rate of multinational companies is higher. The terminal distribution rate of some outstanding domestic FMCG companies like Wahaha and Nongfu Spring is normally at 70%. The terminal distribution rate of ordinary FMCG companies is below 60% while that of the companies in bad performance is very low. That’s the secret why Coca-cola company can exist in the market for a long time. The most important part of the market strategy is to pay great attention to the terminal distribution rate. By constantly increasing the distribution rate, it can interact with the consumers. It is not only easier for the consumers to buy the product, but also transfers mature brand information and systematical brand value by a high distribution rate.
How to conduct the general survey of the sales channel?
Find out the market area that the general survey should cover, divide each city within the market area into various regions by roads. For each region, there is a specific person who must walk through every road in his/her region and write down the information of the retail stores on the road including the name of the store, business type, address, telephone and so on and go into each store to survey the product and write down the information of the product including its SKU, the quantity of each SKU, production date, price, and how it is displayed and take some photos.
Retail network monitoring
What is retail network monitoring?
Retail network monitoring means conducting surveys monthly or quarterly with regard to the distribution situation, display situation, inventory situation, product turnover situation, price situation, sales situation, and the service attitude of the shop assistants. The chronological record of the data dynamically shows the sales situation and its law of certain brand of product.
Why should we conduct retail network monitoring?
Through retail network monitoring, we can get the information like all the brands of a certain product, the sales volume, sales amount and market share of each SKU, and we can thus infer the market size of a certain brand in a certain city. If we combine these data with the sales situation and advertising cost of each period and make an analysis, we can also evaluate the effect of adverting. If the retail network monitoring is conducted simultaneously in several cities across the country, we can compare the performance of the product in different cities, and find out reasons and corresponding solutions. Besides, the retail network monitoring can also evaluate the service attitude of the shop assistants so that we can compare the service quality among different retail stores and explore how service quality influences the sales of the product.
How to conduct retail network monitoring？
Retail network monitoring includes product monitoring and service monitoring. For product monitoring, it can be conducted by the interviewers who go to the retail stores and record the information. For service monitoring, it can be conducted by the survey method of mystery customer.
What is business circle research？
Business circle is an area where it radiates from the shop as its center in a certain direction and distance to attract the customer. Whether it is large shopping mall or small shops, their sales cover a limited geographic area, the center of which is the shopping mall and it radiates in all directions towards the residential area where the customer who may go to the shopping mall live. The sales of the retail shop normally has geographical limitation. Therefore it has relatively stable business circle. Business circle research is to survey the business scale, the business mode, types of products it sells and the operating conditions of the area where the shop locates.
How to conduct business circle research?
Because the target of business circle research is shopping mall/shop, it requires studying the customer source of the shopping mall/shop, the economic characteristics of the area and consumers’ buying motivations and buying habits. Besides, it also needs to study the positioning of the shopping mall/shop, the combination of the commodities, the decoration of the shopping mall/shop, the selling point and sales promotion, the shop assist and their service attitude, and the difference from their competitors.
The customer source research mainly studies various characteristics of the customers of the shopping mall/shop including economic, social, and geographic distribution of the customers and their buying motivations and buying habits as well. It is normally conducted in the area where shops gather together. It includes:
（1）Monitor customer flow. We monitor the customer flow of various time periods in the main entrance of the surveyed shopping mall/shop；
（2）According to the data of the customer flow in various time periods, we make the quota of the questionnaire for business day or other time;
（3）We go to the shopping mall/shop to conduct fieldwork; Interview the customer who comes out after buying things and paying the money.
Based on the above, we will find out the constitution of the core consumers of the shopping mall/shop who for example account for 60% of the total number, the constitution of the secondary consumers who for example account for 30% and the constitution of the consumers in the third level who for example account for 10%. Through the study of the characteristics of the constitution of the consumers in various levels, we can help the client to invest its limited capital in its target consumers and carry out specific sales promotion and make selling points.
Shopping mall/shop evaluation research mainly studies how consumers think of the site selection of the shopping mall/shop, the display of the commodities, the decoration, the shopping environment and the facilities in it as well as their suggestions. It includes the study of client’s own shop (by which we can collect consumers’ suggestions towards various aspects of the client’s own shop) and the study of other shops (by which we can compare the performance of the client’s shop and its competitor’s shop in various aspects. The research methods of shopping mall/shop evaluation research are similar to those of customer source research. Besides those ones, there are several other methods as follows:
（1）Accompanying shopping: Toknow will appoint supervisors or interviewers to accompany the customers who are shopping in the shopping mall. They will observe and record the shopping area they walk through and the commodities they do window-shopping or actually buy. They will accurately record the real feeling of the consumers regarding the display of the commodities, the service of the shop assistants, the facilities and so on. These are very useful data when the shopping mall/shop makes business management decisions；
（2）Mystery shopping: Toknow will invite supervisors or interviewers of different ages, occupations and gender to the shopping mall/shop and write down the shopping record, which will be submitted to the client. It is very useful for the study of the image of client’s own shop or the study of the difference from the competitor’s shop.
（3）On-site group discussion: Toknow will arrange a suitable place and the corresponding facilities and gather the consumers who do window-shopping or really buy things together, asking them to discuss about the performance of the shop in various aspects. Toknow will submit the conclusions and suggestions to the client which will help the client to further improve its products and service.
The advantage of Toknow in the site selection of the retail terminal
Business circle research can also help the enterprise with the site selection. Site selection of the retail terminal is the key factor influencing the success of retail business of an enterprise. A successful site selection system is one of the core competitive strengths of an enterprise. However, with limited experience and specialty, currently many enterprises don’t do a good job in site selection. They mainly have the bewilderments in the following three aspects:
1、It takes great risk to select the site with feeling instead of scientific evidence. Normally, in the small and medium sized the companies, the boss judge the site according to his experience accumulated for many years and his feeling. Some of them even select the site through Fengshui. When they talk about the standard of site selection, most of them use their past experience and their feeling without scientific evidence and system, which is very risky.
2、The difficulty of obtaining a site in a mature business circle, lack of investment profit forecast lead to the failure of the decision-making: For such kind of enterprises, they already have some standards and experience in site selection, and they pay attention to strategic site selection to take a vantage position. But it is really difficult to obtain a site in a mature business circle. Besides, as the rent will cause a high operating cost, if the enterprise can not forecast the investment profit accurately, and if the rent is higher than the sales profit, it will lead to a failure of business operation. For other enterprises, in order to lower the cost or avoid the strong competition, they adopt the strategy of “encircling the cities from the rural areas”; they choose the site in a secondary business circle, which may lead them to be the victim if they can’t forecast the time when the business circle will become mature scientifically and accurately.
3、Lack of system and standard becomes the biggest problem of site selection when an enterprise want to expand its business. When an enterprise wants to expand its business, it will meet a problem: they must increase the number of retails stores to expand in order to lower the operation cost. However, as they haven’t set up and perfected the standards and norms and lack of organizations and systems, once they want to select sites and open the shops in large quantities, they will be up to their ears in work and still can’t find the sites they want. So their expansion planning has to be postponed again and again and site selection becomes the biggest obstacle of their expansion strategy.
However, in some developed European and American countries, many world-renowned enterprises including the multinational retailing chain corporations takes 10 years to form a scientific and rigorous site system, which plays an important role in the development of an enterprise. Based on this system and combine the research of the current situation of China’s retailing industry, Toknow conclude a scientific method of site selection, which includes four steps in building a site selection system. Basically, the chain corporations can make their own site selection systems even if they don’t have any according to these four steps. It will solve the difficulty problem of site selections and expansion of chain stores, enhance the loyalty of the franchises to the headquarter, and obtain stable and rapid development. The main contents and methods of building a site selection system in four steps are as follows:
Step 1, analysis of the comprehensive economic data of a city
Step 2, business circle comprehensive evaluation by using the business circle model
Step 3, the evaluation of the department stores and business streets in the business circle
Step 4, the evaluation of the position of the counters in the department store or the franchised stores
For more detailed processes, please refer to Toknow.