Non-traditional Channel Arrangements

In recent times, firms have been taking to different kinds of non-traditional channel arrangements such as:

• Outsourcing of channel arrangement/marketing logistics
• Exclusive retailing

Outsourcing of Channel Arrangement

Complete outsourcing of channel arrangement is the most striking of the non-conventional attempts. Firms contract outside logistics specialists to operate as their marketing channel.

Exclusive Retailing

In India, many firms have been practicing exclusive retailing for the past several years. In recent years, however, the idea has proliferated fast. More and more companies are now recognizing the inadequacy of the traditional wholesaler-retailer trade channels and are going in for exclusive retail networks. Across industries, it is becoming a trend, partly displacing and partly co- existing with the traditional wholesaler-retailer set-up.

Firms pursue exclusive retailing in different forms such as:

• Exclusive dealers without franchising arrangement
• Exclusive retailing through showrooms
• Exclusive retailing through shop-in-shop
• Franchising

Exclusive Dealers without Franchising Arrangement: Exclusive retail networks have been in existence in India for many years now. In the earlier days, businesses like textiles and footwear were the ones in which this concept was widely prevalent. In textiles for example, Reliance (Vimal) achieved phenomenal success by setting up a network of exclusive retail shops. Garden Silks too has taken to this route. It has over 150 exclusive retail outlets, of which seven are company-owned. Bombay Dyeing is another example. Ready-made garment brands like Louis Philippe and Van Heusen, have also taken to exclusive retailing. In footwear, Bata runs a network of 1,200 exclusive shops and is expanding it further. It also has a parallel network of BSC stores, which are also exclusive shop to a large extent. Liberty Shoes, Bata’s challenger, has also gone in for exclusive shops. It now has over 150 such shops.

Degree of Exclusiveness can Vary: A scrutiny of practices prevailing in the market shows that a firm can practice exclusive retailing to varying degrees of exclusiveness and in combination with non-exclusive retailing.

Bata, for example, has 900 company-owned exclusive shops, 120 franchisee exclusive shops and 600 market extension programme dealers, who are semi-exclusive. In addition, it has a; separate, non-exclusive wholesaler-retailer system, consisting of 200 wholesalers and 12000 dealers.

Ready-made garment brands like Louis Philippe, Van Heusen, and Allen Solley were, to start with, marketed through exclusive outlets/franchisee showrooms. But, after some time, the companies concerned voted for a policy of semi-exclusiveness. They opened the door to multi-brand textile shops. They also adopted the shop-within-shop concept.

In the matter of size, exclusive retail networks can range from very small to very huge depending on the nature and ‘classes of the product/brand. Pierre Cardin, for example, markets its products through just eight exclusive shops in India. Reliance (Vimal), against this, has a network of over 2,000 odd exclusive Vimal showrooms.

Shop-in-Shop

Today; many super stores reserve special areas in their shops exclusively for particular brand. These are called shops-within- shops. The Louis Philippe line, for example, is sold through the shop-in-shop in the super store Shoppers Stop.

Philips Corners: Philips is another good example of a company using the shop-in-shop concept. It has established its ‘shops-within-shops’ in many stores, and named them the ‘Philips Comers’ In fact, Philips overcame the problem of not having exclusive showrooms by voting for the shop-in-shop concept. It gained good visibility for its products in multi-brand outlets. ‘Philips Comers’ helped in keeping a good presence in outlets where consumers went to compare various brands. The internationally standardized colours, shelves and display windows of the ‘Corners’ helped Philips to cut across the clutter.

Advantages of Exclusive Retailing

Helps the firm get best locations.	With exclusive outlets, the firm can avoid margin wars.
Superior store image.	Superior store image.
Uniform store image.	Facilitates building store loyalty.
Spreading awareness about the company and its brand.     More appealing visual merchandising.	Creates special enthusiasm for the company’s brand at the retail level; multi-brand outlets cannot create such enthusiasm for a particular brand.
Full product range of the company can be stocked and displayed in all outlets.	Enables better control of the outlets.

Showrooms

Showrooms are one type of exclusive outlets. There are actually two kinds of showrooms:

• Own
• Franchised

Titan Watches is a good example of a company putting the concept to fine use. The two kinds of showrooms have certain commonalities as well as certain differences.

Advantages of Own and Franchised Showrooms

Own showrooms

• Help the firm to be more close to the customers and in direct touch with time.
• Help the firm get market feedback directly from customers; with franchisee showrooms, this advantage may not be available to the same extent.
• Own showrooms can be controlled better and used more for enhancing company image as compared to franchisee showrooms.

Franchised Showrooms

• Franchised showrooms often do not the job more economically; they incur lower overheads compared to company showrooms.
• Often suitable space is not readily available at the desired locations for setting up own showrooms; franchises bring in such space.
• Help save set-up time
• Budget constraints also drive firms towards franchisee showrooms.
• Setting up own showrooms is usually an expensive business. Singer, for example has estimated that it cost Rs. 4 lakh to set up one showroom of its own. Companies can at best have only a limited number of own showrooms as coverage of the entire market will be prohibitively costly given the size of the country. Franchisee showrooms become the easy answer for quick growth without sacrificing the requirement of exclusive retailing. Titan Watches is a good example of a company using a mix of own and franchisee showrooms, leaning heavily on the latter in view of their advantage.

Franchising is one form of exclusive retailing. It, however, involves certain special features. Franchising, in fact, is not just a method of retailing; it is a method of marketing, Here, the franchisee, who is an independent businessperson, abides by the marketing plan of the franchiser and pays him a fee for the use of his brand and know-how. In many cases, franchising covers manufacturing as well, wherein the franchisee uses the process/formula of the franchiser in addition to the brand and marketing know-how

Example of Citihome: Citibank’s home loan division, Citihome is one example Citihome appoints franchisees under its Shelters scheme for generating customers for home loan. It has found that the franchisees carry out the task at much lower cost compared to the company’s own branches. The franchisee’s personal knowledge of the customers is an added benefit. In addition, franchisees also ensure continuity. These factors are of special importance in home loan business.