Distribution Channels Term Paper

Pages: 3 (870 words)  ·  Style: MLA  ·  Bibliography Sources: 3  ·  File: .docx  ·  Topic: Business

Distribution Channels

Wal-Mart's Impact on the Toy Industry

The toy industry is experiencing premature market consolidation due to the pricing, distribution and marketing strategies and influences of Wal-Mart. The low cost retailers' approach to competing aggressively on price specifically over the holiday season continues to have significant financial impact on Toys-R-Us profitability. Following Thanksgiving, Wal-Mart has in the past launched an aggressive loss leader campaign to capture the majority of holiday toy sales every year. This strategy has been very successful for Wal-Mart, and is considered by many industry and financial analysts to be one of the reasons for Toys-R-Us has lower sales and profits. Competing aggressively on price and availability of a select set of toys every holiday season, Wal-Mart directly impacts the manufacturers it purchases from as well. Hasbro, LeapFrog, Mattel, and many other manufacturers, having fewer distribution partners to rely on for sales, are forced to take lower prices for their new products from Wal-Mart. While none of these manufacturers had intended to sell the majority of their toy products at the lower prices Wal-Mart demands in exchange for broad distribution of the manufacturers' products, many manufacturers have no choice but to negotiate and hope to earn gross margin to cover their costs as Wal-Mart has become the most powerful toy distributor in the U.S. today, which is the toy industries' biggest market.Get full Download Microsoft Word File access
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Term Paper on Distribution Channels Assignment

Brown (2004) in her New York Times article Imagining Toyland Without One of Its Giants, makes three fundamental points with regard to the impact of Wal-Mart on toy manufacturers and Toys-R-Us specifically. First, Wal-Mart's loss leader pricing is forcing Toys-R-Us to drastically drop their prices, making the financial condition of the company riskier and leading to potential store closures. The impact of Toys-R-Us closing stores has an immediate effect on the marketing strategies of manufacturers and their ability to showcase their entire product lines, test market new products, and get shelf space for wacky and bold new concept toys. Second, Brown makes the point that in a consolidating distribution channel, manufacturer's branding becomes more critical. Third, Wal-Mart's aggressive pricing strategies with toy manufacturers who have become increasingly dependent on them due to a consolidating toy distribution channel must look to alternative channels for distributing and selling their products. Brown mentions electronics stores, bookstores, and online merchants. Industry analysts also mention that many manufacturers are turning to Web-based selling strategies on their websites, looking at the direct selling channel online.

The bottom line is that toy manufacturers should aggressively support and pursue other distribution channels and partners with toys and ancillary products purposefully-build for these specific alternative channels. No toy… [END OF PREVIEW] . . . READ MORE

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How to Cite "Distribution Channels" Term Paper in a Bibliography:

APA Style

Distribution Channels.  (2006, December 12).  Retrieved November 28, 2020, from https://www.essaytown.com/subjects/paper/distribution-channels/4654833

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"Distribution Channels."  12 December 2006.  Web.  28 November 2020. <https://www.essaytown.com/subjects/paper/distribution-channels/4654833>.

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"Distribution Channels."  Essaytown.com.  December 12, 2006.  Accessed November 28, 2020.
https://www.essaytown.com/subjects/paper/distribution-channels/4654833.