Chapter 06
Distribution channels
45 terms
Practice by level
Terms
01Distribution channelKênh phân phối
Definition
The path goods take from the maker through intermediaries to outlets and shoppers.
Examples
- Company volume moves through 42 distributors and 6 modern trade chains to reach 18,400 outlets.
- Annual sales of 950 billion dong split across four channels: general trade 62 percent, modern trade 24 percent, on premise 9 percent, ecommerce 5 percent.
Easy to get wrong
A channel is not the same as a delivery route. The channel says who takes ownership and where the money flows, while the route only says how the goods travel.
02Direct channelKênh trực tiếp
Definition
A route where the maker delivers and invoices the final seller or the shopper with no intermediary buying the goods.
Examples
- The company ships direct to 6 modern trade chains worth 228 billion dong a year.
- Adding 47.5 billion dong of platform sales, the direct channel is 275.5 billion dong, or 29 percent of turnover.
Easy to get wrong
Cutting the intermediary does not automatically lift margin. Chains buy at 158 thousand dong a case against 170 thousand from distributors, before listing and display fees of 6 percent of sales.
03Indirect channelKênh gián tiếp
Definition
A route where goods pass through at least one intermediary that takes ownership before reaching the outlet.
Examples
- 674.5 billion dong, or 71 percent of turnover, flows through 42 distributors.
- In remote areas goods take one more step through 3 wholesalers to reach 4,200 outlets.
Easy to get wrong
An intermediary is more than an added cost. The 42 distributors hold 232 thousand cases of stock and each ties up 1.8 billion dong of working capital the maker does not have to fund.
04Channel levelCấp kênh
Definition
The count of intermediaries between the maker and the shopper.
Examples
- The two level route through distributor then outlet carries 71 percent of turnover.
- The three level route adds a wholesaler and serves 4,200 remote outlets with 26 thousand cases a month.
Easy to get wrong
One more level is not always bad. For outlets buying about 6 cases a month, running a direct route can cost more than the 4 thousand dong a case the wholesaler takes.
05General tradeKênh truyền thống
Definition
The network of family owned groceries and market stalls that buy through distributors.
Examples
- General trade brings 589 billion dong a year, or 62 percent of turnover.
- 15,640 outlets place an order in a month and each buys 18 cases on average.
Easy to get wrong
Small outlets do not mean evenly spread sales. The 2,760 A grade outlets are 15 percent of the count but carry 45 percent of channel volume.
06Modern tradeKênh hiện đại
Definition
Supermarkets and convenience stores owned by retail chains that buy under a central contract.
Examples
- 6 chains with 540 stores bring 228 billion dong a year, or 24 percent of turnover.
- An average modern trade store brings 35 million dong a month against 3.1 million dong for a general trade outlet.
Easy to get wrong
High turnover per store does not mean high profit. Chains buy at 158 thousand dong a case, 12 thousand below the distributor price, and listing plus display fees take another 6 percent of sales.
07On premise channelKênh tiêu dùng tại chỗ
Definition
Customers who sell drinks and food for consumption on the spot, such as restaurants, eateries and coffee shops.
Examples
- 1,240 outlets bring 85.5 billion dong a year, or 9 percent of turnover.
- An average venue buys 5.75 million dong a month, about 34 cases.
Easy to get wrong
This channel does not run on the recommended retail price. A venue sells a bottle at 15 thousand dong against 9.5 thousand in a grocery because the shopper is paying for a seat and service.
08Ecommerce channelKênh thương mại điện tử
Definition
Selling through online marketplaces or a company storefront, with goods delivered to the shopper home.
Examples
- 12,400 orders a month at an average value of 320 thousand dong, worth 3.97 billion dong.
- The full year is 47.5 billion dong, or 5 percent of turnover, with a platform fee of 18 percent of order value.
Easy to get wrong
Platform pricing is not the online team problem alone. An order priced at 8 thousand dong a bottle sits below the 9.5 thousand grocery price and undercuts 18,400 outlets.
09DistributorNhà phân phối
Definition
A business that buys goods from the maker, stores them, resells and delivers to outlets in an assigned territory.
Examples
- The company works with 42 distributors, each covering 438 outlets on average.
- An average distributor buys 16 billion dong a year and sells 7,870 cases a month.
Easy to get wrong
A distributor is not a company department. They take ownership and carry stock and credit risk, so the relationship is commercial rather than a chain of command.
10WholesalerNhà bán buôn
Definition
A buyer who takes large volumes and resells to small outlets, usually without a sales route and without delivery.
Examples
- 3 wholesalers take 26 thousand cases a month at 186 thousand dong a case.
- They resell at 190 thousand dong, keeping 4 thousand dong, or 2.1 percent.
Easy to get wrong
Wholesalers are convenient but hard to see. Their volume reaches about 4,200 outlets with no sell out data, so coverage and price at those outlets are only estimates.
11Retail outletĐiểm bán lẻ
Definition
A store that sells straight to consumers and forms the last link of the channel.
Examples
- The company covers 18,400 outlets and 15,640 of them place an order in a month.
- An average outlet buys 18 cases a month at 192 thousand dong a case.
Easy to get wrong
An outlet is not the end shopper. Owners buy to resell, so the decision rests on the 36 thousand dong margin per case and on how fast it sells rather than on personal taste.
12Key accountKhách hàng trọng điểm
Definition
A retail chain or large customer negotiated centrally and served by dedicated staff.
Examples
- The largest chain buys 96 billion dong a year, 10 percent of company turnover and 42 percent of modern trade.
- 6 key chains are handled by 4 dedicated staff, each covering 1 or 2 chains.
Easy to get wrong
The largest customer is not automatically the most profitable. The 96 billion dong chain buys 12 thousand dong a case cheaper and takes another 6 percent of sales in listing and display fees.
13Distribution agreementHợp đồng phân phối
Definition
The document setting territory, targets, prices, payment terms and exit rules between the maker and the distributor.
Examples
- The agreement runs one year with a 16 billion dong target, 15 day credit and 60 days notice to terminate.
- Of the 42 agreements, 5 expire this quarter.
Easy to get wrong
A distribution agreement is different from a one off purchase contract. It binds territory and targets for a full year, so ignoring the 60 day notice clause can lead to a damages claim.
14Distributor territoryĐịa bàn phân phối
Definition
The geographic area and outlet list a distributor has the right to serve, written into the agreement.
Examples
- The eastern distributor covers 3 districts with 512 outlets.
- The 42 territories split all 18,400 outlets with no outlet sitting in two territories.
Easy to get wrong
The boundary has to follow the outlet list rather than the administrative line alone. A shop on the border still belongs to exactly one distributor, or two representatives will call on the same customer.
15Distributor working capitalVốn lưu động nhà phân phối
Definition
The cash a distributor must put up to hold stock and give credit to outlets while waiting to be paid.
Examples
- An average distributor needs 1.8 billion dong: 0.94 billion in stock, 0.6 billion in outlet credit and 0.26 billion in operating cash.
- At a margin of 22 thousand dong a case and 7,870 cases a month, they earn 173 million dong of gross margin a month.
Easy to get wrong
A target set without checking capital will not run. Raising the target 20 percent forces the distributor to find about 360 million dong more, and that cash does not appear out of gross margin.
16Sales representativeNhân viên bán hàng
Definition
The person who runs the route, pitches and takes orders at each outlet, usually employed by the distributor.
Examples
- 115 representatives cover 18,400 outlets, or 160 outlets each.
- Each brings in about 427 million dong a month, around 2,515 cases.
Easy to get wrong
A distributor representative is not a company employee. The company sets the standard of work and pays incentives, while the employment contract and base salary sit with the distributor.
17Area sales supervisorGiám sát bán hàng
Definition
A company employee running a group of representatives and territories, riding the route to coach and to check.
Examples
- 19 supervisors run 115 representatives, 6 each.
- Each supervisor rides a route 3 sessions a week and visits 12 outlets per session.
Easy to get wrong
Riding the route is not a presence check. The session has to end with concrete notes, for example 4 of the 12 outlets visited failed the basic display standard.
18Sales routeTuyến bán hàng
Definition
The list of outlets one representative visits in a day, sequenced to keep travel short.
Examples
- A daily route holds 27 outlets and runs 6 days a week for 162 calls.
- The 160 outlets of one representative are split into 6 daily routes.
Easy to get wrong
A sales route is not a delivery route. The representative takes orders today and the truck runs its own schedule the next day, so the two stop lists do not match.
19Journey planLịch viếng thăm
Definition
The schedule setting how many times each outlet is visited in a cycle and on which day of the week.
Examples
- On a weekly cycle, A grade outlets get 2 calls, B grade 1 call and C grade 1 call every two weeks.
- One representative runs 162 calls a week across 160 outlets.
Easy to get wrong
More calls do not lift sales on their own. If a C grade outlet takes 4 weeks to sell 6 cases, a weekly call burns time without adding an order.
20Store callCuộc viếng thăm
Definition
One visit by a representative to an outlet to check stock, pitch and close an order.
Examples
- A representative makes 27 calls a day at about 12 minutes each.
- 27 calls times 12 minutes is 5.4 hours in outlets, and the rest of the day goes to travel and the morning meeting.
Easy to get wrong
Being at the outlet is not yet a call that meets the standard. A call has to include counting the shop stock, making the pitch and logging the result, otherwise 27 is just a count of walk pasts.
21Strike rateTỷ lệ đơn thành công
Definition
Outlets that placed an order divided by outlets called on in the same period, as a percentage.
Examples
- 27 calls a day produce 19 orders, a rate of 70 percent.
- The system reached 68 percent last month against a standard of 72 percent.
Easy to get wrong
The rate can be dressed up by skipping hard outlets. Dropping 5 hard outlets from 27 lifts the rate to 86 percent while the order count stays at 19.
22Average order valueGiá trị đơn bình quân
Definition
Total order value divided by the number of orders in the same period.
Examples
- 19 orders a day worth 17.1 million dong give an average order value of 900 thousand dong.
- A 900 thousand dong order is about 5 cases at the 192 thousand dong trade price.
Easy to get wrong
A rising average order value is not automatically good news. If orders fall from 19 to 14 while total value holds, the average rises while coverage slips.
23Sales targetChỉ tiêu bán hàng
Definition
The turnover or volume a representative, distributor or region must reach in a period.
Examples
- A representative target is 2,600 cases a month against 2,515 achieved, or 97 percent.
- A distributor target is 16 billion dong a year, about 4 billion dong a quarter.
Easy to get wrong
A target measured on stock pushed into the distributor invites end of period loading. Pair it with sell out at outlets, otherwise hitting 100 percent only moves goods from one warehouse to another.
24Outlet universeTổng số điểm bán
Definition
The count of outlets on a territory that could stock the category, used as the denominator for coverage.
Examples
- A territory census counts 46,000 outlets able to stock this category.
- The company reaches 18,400 of them, leaving 27,600 without the product.
Easy to get wrong
The universe has to be recounted on a schedule. Keeping a three year old figure of 46,000 while new shops opened will report coverage higher than it really is.
25Numeric distributionĐộ phủ số
Definition
The share of outlets on a territory that stock the company product, out of the total outlet universe.
Examples
- 18,400 outlets out of 46,000 gives numeric distribution of 40 percent.
- Next year the goal is 21,000 outlets, or 46 percent.
Easy to get wrong
Numeric distribution counts every outlet the same. A shop buying 47 cases a month and one buying 3 cases each count as one outlet, so the figure says nothing about turnover.
26Weighted distributionĐộ phủ trọng số
Definition
The share of category turnover sitting in outlets that stock the company product, against category turnover across all outlets.
Examples
- The 18,400 covered outlets hold 58 percent of category turnover across all 46,000 outlets.
- Numeric distribution is 40 percent while weighted is 58 percent, a gap of 18 points.
Easy to get wrong
Weighted running above numeric is not an anomaly. It says the company sits in the larger outlets, and the 18 point gap is exactly the value of picking the right outlets.
27Active outletĐiểm bán hoạt động
Definition
An outlet that placed at least one order in the period under review, usually a month.
Examples
- 15,640 of 18,400 outlets ordered during the month, a rate of 85 percent.
- 2,760 outlets placed no order, and 1,100 of those have been silent for three months.
Easy to get wrong
Covered outlets and active outlets are two different numbers. The list of 18,400 will inflate over time unless outlets silent for months are taken off it.
28Outlet classificationPhân hạng điểm bán
Definition
Splitting outlets into grades by purchase volume so call frequency and investment can differ by grade.
Examples
- 2,760 A grade, 5,520 B grade and 10,120 C grade outlets make up the 18,400 covered.
- A grade holds 45 percent of channel volume, B grade 35 percent and C grade 20 percent.
Easy to get wrong
Grades have to be reviewed on a cycle. A C grade shop that expands can become B grade within six months, and holding the old grade means undercalling an outlet that is growing.
29Sell inBán vào kênh
Definition
The volume the company sells to distributors and other intermediaries in a period.
Examples
- In June the company sold 337 thousand cases into the channel across 42 distributors.
- Adding 127 thousand cases shipped direct to chains and platforms, total dispatch for the month was 464 thousand cases.
Easy to get wrong
Sell in is not product in the hands of shoppers. It is only stock that moved from the company warehouse to an intermediary warehouse.
30Sell outBán ra khỏi kênh
Definition
The volume an intermediary sells on to the next layer, usually measured as distributor deliveries to outlets.
Examples
- In June distributors sold out 331 thousand cases to outlets.
- Sell in of 337 thousand against sell out of 331 thousand lifted channel stock by 6 thousand cases.
Easy to get wrong
Distributor sell out is not yet product bought by consumers. At that point the goods sit inside shops and can still stall there.
31Channel inventoryTồn kho trong kênh
Definition
Stock already sold into the channel but not yet sold on, sitting in intermediary warehouses.
Examples
- At the end of June distributors held 232 thousand cases.
- An average distributor held 5,524 cases, about 0.94 billion dong at the 170 thousand dong buying price.
Easy to get wrong
Channel stock is already invoiced, so it does not appear on the company inventory ledger. Ignoring it makes the production plan follow distributor orders rather than real demand.
32Days of channel stockSố ngày tồn kênh
Definition
Stock held by intermediaries divided by their own average daily sell out.
Examples
- 232 thousand cases divided by 11 thousand cases of daily sell out gives 21 days of channel stock.
- The company standard is 18 to 22 days, so 21 days sits inside the band.
Easy to get wrong
The denominator has to be intermediary sell out rather than company sell in. Using the wrong one in a loading month produces a falsely low figure.
33Channel loadingNhồi hàng vào kênh
Definition
Pushing extra stock into intermediary warehouses at period end to hit a target, beyond what they can sell on.
Examples
- In December sell in reached 420 thousand cases against sell out of 336 thousand, lifting channel stock to 316 thousand.
- The following January sell in fell to 245 thousand cases while sell out held at 329 thousand.
Easy to get wrong
Loading creates no demand, it borrows from the next period. Days of channel stock jump from 21 to 28 and the next month orders drop 27 percent.
34Sell out reportBáo cáo bán ra
Definition
The data distributors send back showing what they sold to each outlet during the period.
Examples
- 38 of 42 distributors file before the third of the month, a rate of 90 percent.
- The June report shows 331 thousand cases sold to 15,640 outlets.
Easy to get wrong
A sell out report missing a few distributors distorts the whole picture. If 4 distributors carrying 9 percent of volume do not file, national sell out is understated and channel stock looks higher than it is.
35Distributor priceGiá bán cho nhà phân phối
Definition
The price the company charges distributors, the first step of the channel price ladder.
Examples
- The list price is 178 thousand dong a case and 170 thousand after a 4.5 percent discount.
- Against a cost of goods of 120 thousand dong a case, the company margin is 50 thousand dong, or 29 percent of the selling price.
Easy to get wrong
The distributor price cannot be set apart from the steps above it. Raising it to 176 thousand while holding the 228 thousand retail equivalent squeezes distributor and outlet margin instead.
36Trade priceGiá bán cho điểm bán
Definition
The price a distributor charges retail outlets, the middle step of the channel price ladder.
Examples
- Distributors sell at 192 thousand dong a case, or 8 thousand dong a bottle.
- Buying at 170 thousand and selling at 192 thousand leaves a gross margin of 22 thousand dong a case.
Easy to get wrong
This price has to be the same across all 42 distributors. One selling at 186 thousand to win customers pulls neighbouring territories to that level and collapses the ladder.
37Recommended retail priceGiá lẻ đề xuất
Definition
The price the company suggests outlets charge consumers, used as the anchor for the whole ladder.
Examples
- The recommended retail price is 9.5 thousand dong a bottle, or 228 thousand dong for a 24 bottle case.
- Outlets buy at 8 thousand dong a bottle and keep 1.5 thousand, or 15.8 percent of the retail price.
Easy to get wrong
It is a recommendation rather than a rule the outlet must follow. The tools that hold the price are a fair margin and steady monitoring of what the market actually charges.
38Channel marginLãi gộp kênh
Definition
The total spread intermediaries and outlets keep, measured from the company selling price up to the retail price.
Examples
- From 170 thousand to 228 thousand dong a case, channel margin is 58 thousand dong, split 22 thousand to the distributor and 36 thousand to the outlet.
- 58 thousand dong on a 228 thousand retail equivalent is 25.4 percent.
Easy to get wrong
Channel margin has to be judged against the category rather than against company preference. If a rival leaves 30 percent to the channel, a 25.4 percent spread will push outlets toward their product.
39Trade discountChiết khấu thương mại
Definition
A deduction shown on the invoice when selling to an intermediary, set as a percentage of list price.
Examples
- On a list price of 178 thousand dong a case, a 4.5 percent discount is 8 thousand dong and the net price is 170 thousand.
- Across 337 thousand cases of monthly sell in, the discount is worth 2.7 billion dong.
Easy to get wrong
An on invoice discount lowers the intermediary cost base for good. Once 4.5 percent is given, 170 thousand becomes the new anchor and pulling back to 178 thousand is very hard.
40Volume rebateThưởng doanh số
Definition
A payment made after the fact when an intermediary reaches an agreed volume, calculated on full period results.
Examples
- A 1.5 percent rebate on hitting the 4 billion dong quarterly target is worth 60 million dong.
- 38 of 42 distributors earned the rebate last quarter at a total cost of 2.28 billion dong.
Easy to get wrong
A rebate is paid after the fact so it does not lower the cost base, but it does reward buying heavily at quarter end. Tie it to sell out or a channel stock ceiling to keep loading out.
41Channel conflictXung đột kênh
Definition
A situation where two parties in the same distribution system compete with each other over price, territory or overlapping customers.
Examples
- May brought 14 distributor complaints, 9 about price and 5 about territory.
- One case involved 1,200 cases sold across a territory line, worth 204 million dong.
Easy to get wrong
Channel conflict rarely starts with bad intent. Most of it comes from how targets and rebates are set, for example a rebate on intake alone that forces distributors to find somewhere to push stock.
42Territory crossingBán lấn địa bàn
Definition
A distributor selling to outlets that belong to another distributor territory.
Examples
- In May the eastern distributor sold 1,200 cases into the western territory.
- At 192 thousand dong a case, those 1,200 cases are 230 million dong of turnover taken from another territory.
Easy to get wrong
Territory crossing surfaces late because every invoice is valid. The early signal is one territory sell out rising with no gain in coverage while the neighbouring territory loses orders.
43Diverted stockHàng tuồn
Definition
Product sold to one channel on special terms that flows into another channel to capture the price gap.
Examples
- 860 cases a month bought at the 158 thousand dong chain price reach wholesale markets and resell at 176 thousand.
- That 176 thousand sits 16 thousand dong below the 192 thousand dong distributor trade price.
Easy to get wrong
Diverted stock does not show up in sell in because the total volume is still correct. It surfaces when a territory loses orders while market prices sit below the distributor price.
44Market price monitoringKiểm soát giá trên thị trường
Definition
Measuring actual selling prices at outlets on a cycle to catch drift from the recommended retail price.
Examples
- A monthly survey covers 320 outlets and finds 22 selling below 9.5 thousand dong a bottle.
- 22 out of 320 is 7 percent, above the 5 percent alert threshold.
Easy to get wrong
A price survey helps only when the sample spans every outlet grade. Sampling only A grade outlets near the centre misses exactly the group where diverted stock shows up.
45Channel policyChính sách kênh
Definition
One agreed set of rules on price, territory, targets, rebates and how breaches are handled, applied to every intermediary.
Examples
- This year policy was signed by all 42 distributors, runs to 6 sections and took effect on 1 January.
- A first territory breach costs 5 percent of the quarterly rebate, about 3 million dong out of a 60 million dong payment.
Easy to get wrong
A policy works only when it is applied the same way to everyone. Waiving a penalty once for the largest distributor is enough for the other 41 to treat the policy as a reference document.