Clinite and Nutrite consumers tend to shop in the following four distribution channels:
•Mass Merchandisers and e-Grocers (e.g.: Carrefour, Walmart, peapod.com, walmart.com) – These “super stores” typically sell a wide variety of goods, including food items, housewares, and personal care products. They strive to operate on a low-price, high-volume basis and to minimize overheads. As a consequence, the level of service offered is lower than that of the two other channels. While mass merchandisers carry many different product categories, the depth of each product line is usually restricted to few units. They often distribute the cheaper, lower-quality products. Their lack of technical expertise and the low level of service may well prevent them from distributing Nutrites in the early years. There are 3 main chains of such stores, for a total of 12,000 outlets.
•Specialized Mass Retailers (e.g.: Sephora, Boots, CVS, Duane Reade) – These stores are usually smaller and also belong to organized chains. They are geographically close to their customers (in shopping centers or downtown areas) and can provide a high level of customer service. As they do not distribute many different product categories, cosmetics account for a large proportion of their sales. These stores usually carry a broad product line for each category, including the most expensive and/or high-performance products. Because of their high level of expertise in cosmetics, specialty stores are likely to be the preferred distribution channel for Nutrite products. Four main chains exist in this category, representing 2,000 stores.
•Department stores (e.g.: Nordstrom, Macy’s, Sogo) – Department stores are characterized by the wide product assortment they offer. They usually have a significant amount of space displaying cosmetics, often with a specific counter dedicated to each major manufacturer. They also provide extensive customer service. Department stores are often organized in chains that have a degree of power in negotiating margins with manufacturers. Similar to specialized mass retailers, department stores are likely to be the second preferred distribution channel for Nutrite products. Five such chains with a total of 10,000 stores are identified in the Markstrat world.
In addition to the traditional distribution channels described above, you also need to consider the marketing opportunities offered by the Internet.
•Beauty Specialist Portals. This category of stores includes the web-only merchants (such as buymebeauty.com or feelunique.com) as well as the e-commerce websites of traditional retailers (e.g. ulta.com, sephora.com) – These are dedicated to highlighting the range of beauty products found in the owners’ stores. There are about a dozen specialized web sites in period 0. All these various portals and sites have different characteristics in terms of image, awareness levels, financial strength, range of products offered, price ranges, the selling mechanisms applied (up-selling, cross-selling, automated replenishment), the customer base (proportion of each segment likely to visit the site), etc. Convenience is the key advantage of online stores as consumers may shop from their home at the time of their choice. In addition, they have access to an almost unlimited choice and can compare features and prices very easily. Privacy and security are the primary concerns of online shoppers, but new mechanisms are put in place by banks and e-commerce sites so as to reduce fraud. Online stores are likely to become more important in the next 5 to 10 years.
Within the Clinite market, market research studies show that all distribution channels are important; therefore each of them should be contacted by the companies’ commercial team.
Differences between margins obtained by the stores in each of the three channels are mainly due to differences in the level of service and volume sold. These margins are applied to retail prices and are approximately constant across brands for a given channel. In Markstrat, the distributor margins are 30% for Mass Merchandisers; 40% for department stores; and 35% for the other ones.