Place

Japans Distribution System

Japans
Distribution
Multiple layers of wholesalers who have
developed close, personal relationships
with other wholesalers, manufacturers,
importers, and retailers.
4 Features
1. Structure dominated by many small
middleman dealing with many small
retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a
unique culture
4. Laws that protect the foundation of the
system the small retailer.
Manufacturers try to create their own
distribution
Leading market share holders depend
on distribution coverage
Independent channel members --> part
of the family
First come our customers, then our
dealers, then our employees.
Problems of
Distribution
Many-layered system of smaller
wholesalers and a large number of
mom-pop stores
Have gradually eased
Emergence of larger chains
Discount stores
Hallmarks:
Middlemen positioning themselves
to minimize costs
Central clearing point for the
collection, rearrangement and
dispersion of merchandise
Western Distribution
Western Distribution
Put image here
Japanese Distribution
Hallmarks:
No central clearing point
More control by manufacturers
Better service quality
Better price stability
Japanese Distribution
Put image here
Key Points
Marketer: stays close to the ultimate
consumer and dealers
Manufacturer: helps with trade &
financing
Dealer: sells only manufacturers brand
A form of mutual dependence
Advantages
Close business relationships
Easier for retailers/distributors to
suggest product modifications and
improvements
Prevent waste in design stage
Quicker innovations
Advantages
Encourages the sharing of information
product trends,
innovations,
competition,
and overall market opportunities
Advantages
Business loyalty demonstrated
Reduces uncertainty and tension
More cooperative business
relationship
Shiseido supports retailers through:
Inventory control
Shelf stocking
Sales training
Store demonstrations
Kao established Hansha:
a network of distributors
stabilized product flow to smaller
wholesalers and larger retailers
entry barrier against foreign brands
Put image here
Close to Customers
Rebate arrangements --> not
unusal
Gifts for the spouse
Free trips & golf tournaments
Personal visits are key
Whiskey management tools
Narrow focus
Limit expansion
In a foreign market:
new Japanese channels are
established by hands-on research,
trial & error
Disadvantages of
having close links
Supermarkets vs
Wholesalers
1960s, supermarkets became a threat
Wholesalers reduced prices
1990s, supermarkets established direct
buying offices
More pressure for wholesalers
Changes
Now underway
Used to be a tight, integrated
distribution channel within the Keiretsu
Under pressure from structural changes
in Japanese retailing
Significant alterations in Japan's Large
Scale Retail Store Law
Eased restrictions on opening of
new large retail stores.
Original law protected the smaller
"mom and pop" operations.
Substantial increase in the number
of applications to open new retail
stores
Western-type shopping malls and
superstores dotting Japan


Main cause: Recession in Japan
Direct marketing, catalog sales
Almost anything can now be ordered at
discounted prices through catalogs
Online retailers
Breakdown of vertical distribution
keiretsu
Trend
Trend towards greater efficiency within
the Japanese distribution system
fewer smaller retailers and
wholesalers.
Deregulation & changing patterns of
consumption
new marketing and sales strategies to
take advantage of these
developments.
Kaos response:
consolidating warehouses &
wholesalers
offer more co-op advertising support
to independent channel members
increased salespeople
pruned their product lines
fewer variants, stronger brands
Imports are already benefiting
from these trends
Increased sales by Japanese
department stores and other
mass merchandisers
A variety of new retailing
ventures that match changing
Japanese lifestyles.
Modernized & consolidated operations
Reduces inefficient elements in the
system.
However, the process is slow.
The characteristics of the
distribution system are deeply
rooted in the cultural history of
Japan.