Information Flows in a Retail Distribution Channel

In an effective retail distribution channel, information flows freely and efficiently among the three main parties: supplier (manufacturer and/or wholesaler), retailer, and consumer. This enables the parties to better anticipate and address each other’s performance expectations. We highlight the flows in Figure 8-2 and describe the information needs of the parties next.

A supplier needs to know different kinds of information. From the retailer, the supplier needs estimates of category sales, inventory turnover rates, feedback on competitors, the level of cus­tomer returns, and so on. From the consumer, the retailer needs to know about attitudes toward given styles and models, the extent of brand loyalty, the willingness to pay a premium for superior quality, and the like.

A retailer also needs to know different kinds of information. From the supplier, the retailer needs advance notice of new models and model changes, training materials for complex products, sales forecasts, justification for price hikes, and so on. From the consumer, the retailer wants to know why people shop with the retailer, what they like and dislike about the retailer, where else people shop, and so on.

And the consumer needs different types of information. From the supplier, the consumer needs assembly and operating instructions, the extent of warranty coverage, where to send a complaint, and so forth. From the retailer, the consumer needs to know how various alternatives compare, where specific merchandise is stocked in the store, the methods of payment accepted, the rain check policy when a sale item is out of stock, and so on.

Retailers often play a crucial role in collecting data for other members of the value delivery chain because they have the most direct contact with shoppers. They can assist other channel members by:

Permitting data to be gathered on their premises. Many research firms like to conduct surveys at shopping centers because of the large and broad base of shoppers.

  • Gathering specific data requested by suppliers, such as how shoppers react to displays.
  • Passing along information on the attributes of consumers buying particular brands and mod­els. Because many credit transactions involve retailer cards, these retailers can link purchases with consumer age, income, occupation, and other factors.

For the best information flows, collaboration and cooperation are necessary—especially between suppliers and retailers. This is not always easy. Managing supply chain systems, processes, and infrastructure and the associated changes to transform legacy store-based opera­tions to omnichannel is complex and difficult. The lack of visibility across supply chain functions, as well as fragmented, incomplete, insufficient data, and/or manual processes of pre-existing systems and infrastructure, are not ideally suited for omnichannel functions. This results in the limited ability of existing retailers to compete effectively with new retailers deploying systems designed for omnichannel operations.

Fortunately, many retailers are working to improve their information-sharing efforts. And as in many aspects of retailing, Walmart is leading the way. Thousands of suppliers have online access to Walmart’s database through its password-protected online Retail Link system, which handles hundreds of thousands of information queries weekly. Retail Link was developed to promote more collaboration in inventory planning and product shipping, and it is a linchpin of Walmart’s information efforts.4

Source: Barry Berman, Joel R Evans, Patrali Chatterjee (2017), Retail Management: A Strategic Approach, Pearson; 13th edition.

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