Channels of Distribution

Channels of Distribution

Are you aware that the study material of Business Studies, which is now in your hands, is prepared

at the headquarters of the National Institute of Open Schooling (NIOS) situated at New Delhi.

How did it come to your hands? Was it available at your study centre or you bought it from the

market? If you got it from your study centre, then just think for a while: how did it reach your

study centre? Actually, after publishing the study material, NIOS sent this material to your study

centre and then you collected it from there. Similarly, the NIOS study material available in the

market is directly purchased by the booksellers from NIOS. Then, the booksellers sell it to you.

Thus, the study material published by NIOS reached you either through your centre or through

booksellers. In a similar way most of the goods and services we use in our daily life also come

from the producers or manufacturers and reach us through some people. In this lesson, let us

learn how the goods and services of our need reach us.

20.1 Objectives

After studying this lesson, you will be able to:

•

explain the meaning of channels of distribution.

•

identify different channels of distribution;

•

describe the functions of wholesalers and retailers;

•

distinguish between wholesalers and retailers; and

•

identify different types of retail trade.

Business Studies

70

20.2 Meaning of Channels of Distribution

You know that the main purpose of trade is to supply goods to the consumers living in far off

places. As goods and services move from producer to consumer they may have to pass through

various individuals. Let us take an example. A farmer in Srinagar has an apple orchard. Once the

apples are ripened he sells the apples to an agent of Delhi. The agent collects the apples from

Srinagar, packs them, and sells them to a wholesaler at New Delhi

then distributes them to various retail fruit vendors throughout Delhi by selling smaller quantities.

Finally, we purchase apples from those vendors as per our requirement. Thus, we find that while

coming from the producer at Srinagar, the product reaches the consumers by passing through

several hands like an agent, a wholesaler and a retailer. All these three are called middlemen.

These middlemen are connecting links between producers of goods, on one side and consumers,

on the other. They perform several functions such as buying, selling, storage, etc. These middlemen

constitute the channels of distribution of goods. Thus, a channel of distribution is the route or path

along which goods move from producers to ultimate consumers.

The route taken by goods as they move from producer to consumer is known as

Channel of Distribution.

sabzimandi. The wholesaler

Fig. 20.1 Channels of Distribution

20.3 Types of Channels

Normally goods and services pass through several hands before they come to the hands of the

consumer for use. But in some cases producers sell goods and services directly to the consumers

without involving any middlemen in between them, which can be called as direct channel. So

there are two types of channels, one direct channel and the other, indirect channel.

From the above diagram it can be found that there is just one direct channel i.e. from producer to

the consumer. There are many indirect channels like:

Agent Retailer

Producer

Wholesaler

Consumer

Channels of Distribution

Channels of Distribution

Channels of Distribution

Channels of Distribution

Channels of Distribution

Are you aware that the study material of Business Studies, which is now in your hands, is prepared

at the headquarters of the National Institute of Open Schooling (NIOS) situated at New Delhi.

How did it come to your hands? Was it available at your study centre or you bought it from the

market? If you got it from your study centre, then just think for a while: how did it reach your

study centre? Actually, after publishing the study material, NIOS sent this material to your study

centre and then you collected it from there. Similarly, the NIOS study material available in the

market is directly purchased by the booksellers from NIOS. Then, the booksellers sell it to you.

Thus, the study material published by NIOS reached you either through your centre or through

booksellers. In a similar way most of the goods and services we use in our daily life also come

from the producers or manufacturers and reach us through some people. In this lesson, let us

learn how the goods and services of our need reach us.

20.1 Objectives

After studying this lesson, you will be able to:

•

explain the meaning of channels of distribution.

•

identify different channels of distribution;

•

describe the functions of wholesalers and retailers;

•

distinguish between wholesalers and retailers; and

•

identify different types of retail trade.

Business Studies

70

20.2 Meaning of Channels of Distribution

You know that the main purpose of trade is to supply goods to the consumers living in far off

places. As goods and services move from producer to consumer they may have to pass through

various individuals. Let us take an example. A farmer in Srinagar has an apple orchard. Once the

apples are ripened he sells the apples to an agent of Delhi. The agent collects the apples from

Srinagar, packs them, and sells them to a wholesaler at New Delhi

then distributes them to various retail fruit vendors throughout Delhi by selling smaller quantities.

Finally, we purchase apples from those vendors as per our requirement. Thus, we find that while

coming from the producer at Srinagar, the product reaches the consumers by passing through

several hands like an agent, a wholesaler and a retailer. All these three are called middlemen.

These middlemen are connecting links between producers of goods, on one side and consumers,

on the other. They perform several functions such as buying, selling, storage, etc. These middlemen

constitute the channels of distribution of goods. Thus, a channel of distribution is the route or path

along which goods move from producers to ultimate consumers.

The route taken by goods as they move from producer to consumer is known as

Channel of Distribution.

sabzimandi. The wholesaler

Fig. 20.1 Channels of Distribution

20.3 Types of Channels

Normally goods and services pass through several hands before they come to the hands of the

consumer for use. But in some cases producers sell goods and services directly to the consumers

without involving any middlemen in between them, which can be called as direct channel. So

there are two types of channels, one direct channel and the other, indirect channel.

From the above diagram it can be found that there is just one direct channel i.e. from producer to

the consumer. There are many indirect channels like:

Agent Retailer

Producer

Wholesaler

Consumer

Channels of Distribution

71

(i) Producer Agent Wholesaler Retailer Consumer,

(ii) Producer Wholesaler Retailer Consumer

(iii) Producer Agent Consumer

(iv) Producer Wholesaler Consumer and

(v) Producer Retailer Consumer

Let us discuss about some of the common channels.

(i) Direct Channel

In this channel, producers sell their goods and services directly to the consumers. There is no

middleman present between the producers and consumers. The producers may sell directly to

consumers through door-to-door salesmen and through their own retail stores. For example,

Bata India Ltd, HPCL, Liberty Shoes Limited has their own retail shops to sell their products to

consumers. For certain service organizations consumers avail the service directly. Banks,

consultancy firms, telephone companies, passenger and freight transport services, etc. are examples

of direct channel of distribution of service.

(ii) Indirect Channel

If the producer is producing goods on a large scale, it may not be possible for him to sell goods

directly to consumers. As such, he sells goods through middlemen. These middlemen may be

wholesalers or retailers. A wholesaler is a person who buys goods in large quantities from

producers; where as a retailer is one who buys goods from wholesalers and producers and sells

to ultimate consumers as per their requirement. the involvement of various middlemen in the

process of distribution constitute the indirect channel of distribution. Let us look into some of the

important indirect channels of distribution.

This is the common channel for the distribution of goods to ultimate consumers. Selling goods

through wholesaler may be suitable in case of food grains, spices, utensils, etc. and mostly of

items, which are smaller in size.

Under this channel, the producers sell to one or more retailers who in turn sell to the ultimate

consumers. This channel is used under the following conditions –

(i) When the goods cater to a local market, for example, breads, biscuits, patties, etc.

(ii) When the retailers are big and buy in bulk but sell in smaller units, directly to the consumers.

Departmental stores and super bazars are examples of this channel.

Producer Wholesaler Retailer Consumer

Producer Retailers Consumer

Business Studies

72

Intext Questions 20.1

Complete the following statements using suitable words:

(i) Route or path along which goods move from the producer to ultimate consumer is known

as __________.

(ii) A retailer acts as a __________ between the wholesaler and the ultimate consumers.

(iii) Where goods are sold through middlemen, it is known as ___________ channel of

distribution.

(iv) Where goods are sold directly to consumers without using services of middlemen, it is

known as ___________ channel.

(v) In the direct channel, producers sell goods to customers through door-to-door salesmen

and through their own __________.

_________________________________________________________________________

20.4 Wholesalers and Retailers

Wholesalers and retailers are important middlemen who generally facilitate flow of goods from

the producers to the consumers. Let us study in details about them.

i. Wholesalers

Wholesalers are one of the important middlemen in the channel of distribution who deals with the

goods in bulk quantity. They buy goods in bulk from the producers and sell them in relatively

smaller quantities to the retailers. In some cases they also sell goods directly to the consumers if

the quantity to be purchased is more. They usually deal with a limited variety of items and also in

a specific line of product, like iron and steel, textiles, paper, electrical appliances, etc. Let us

know about the characteristics of wholesaler.

Characteristics of Wholesalers

The followings are the characteristics of wholesaler:

(i) Wholesalers buy goods directly from producers or manufacturers.

(ii) Wholesalers buy goods in large quantities and sells in relatively smaller quantities.

(iii) They sell different varieties of a particular line of product. For example, a wholesaler who

deals with paper is expected to keep all varieties of paper, cardboard, card, etc.

(iv) They may employ a number of agents or workers for distribution of products.

(v) Wholesalers need large amount of capital to be invested in his business.

(vi) They generally provides credit facility to retailers.

(vii) He also provides financial assistance to the producers or manufacturers.

Channels of Distribution

73

(viii) In a city or town they are normally seen to be located in one particular area of the market.

For example, you can find cloth merchants in one area, book publishers and sellers in one

area; furniture dealers in one area etc.

Functions of Wholesalers

You have well understood the meaning of wholesaler and listed their characteristics. Now let us

know about the functions of wholesalers.

Following are the functions, which a wholesaler usually performs.

(a) Collection of goods

large quantities.

: A wholesaler collects goods from manufacturers or producers in

(b) Storage of goods

till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage.

: A wholesaler collects the goods and stores them safely in warehouses,

(c) Distribution

the function of distribution.

: A wholesaler sells goods to different retailers. In this way, he also performs

(d) Financing

sending money in advance to them. He also sells goods to the retailer on credit. Thus, at

both ends the wholesaler acts as a financier.

: The wholesaler provides financial support to producers and manufacturers by

(e) Risk taking

warehouses till they are sold. Therefore, he assumes the risks arising out of changes in

demand, rise in price, spoilage or destruction of goods.

: The wholesaler buys finished goods from the producer and keeps them in the

Intext Questions 20.2

State which of following statement about wholesalers are true and which are false:

(i) They buy goods directly from retailers, for sale to customers.

(ii) They generally provide credit facility to producers as well as retailers.

(iii) They collect goods in large quantities and store them safely till they are sold out.

(iv) Wholesalers require small amount of capital investment for their business.

(v) They are located at a number of places in different markets near the customer.

(vi) They buy goods of a large variety in small quantities for sale.

______________________________________________________________________

ii. Retailers

Retailers are the traders who buy goods from wholesalers or sometimes directly from producers

and sell them to the consumers. They usually operate through a retail shop and sell goods in small

quantities. They keep a variety of items of daily use.

Business Studies

74

Characteristics of Retailers

The following are the characteristics of retailers:

(i) Retailers have a direct contact with consumers. They know the requirements of the

consumers and keep goods accordingly in their shops.

(ii) Retailers sell goods not for resale, but for ultimate use by consumers. For example, you buy

fruits, clothes, pen, pencil etc. for your use, not for sale.

(iii) Retailers buy and sell goods in small quantities. So customers can fulfil their requirement

without storing much for the future.

(iv) Retailers require less capital to start and run the business as compared to wholesalers.

(v) Retailers generally deal with different varieties of products and they give a wide choice to

the consumers to buy the goods.

Functions of Retailers

All retailers deal with the customers of varying tastes and temperaments. Therefore, they should

be active and efficient in order to satisfy their customers and also to induce them to buy more. Let

us see what the retailers do in distribution of goods.

(i) Buying and Assembling of goods

different wholesalers and manufacturers. They keep goods of those brands and variety

which are liked by the customers and the quantity in which these are in demand.

: Retailers buy and assemble varieties of goods from

(ii) Storage of goods

goods in stores. Goods can be taken out of these store and sold to the customers as and

when required. This saves consumers from botheration of buying goods in bulk and storing

them.

: To ensure ready supply of goods to the customer retailers keep their

(iii) Credit facility

credit to their regular customers. Credit facility is also provided to those customers who

buy goods in large quantity.

: Although retailers mostly sell goods for cash, they also supply goods on

(iv) Personal services

advice regarding quality, features and usefulness of the items. They give suggestions

considering the likes and dislikes of the customers. They also provide free home delivery

service to customers. Thus, they create place utility by making the goods available when

they are demanded.

: Retailers render personal services to the customers by providing expert

(v) Risk bearing

(a) fire or theft of goods

(b) deterioration in the quality of goods as long as they are not sold out.

(c) change in fashion and taste of consumers.

: The retailer has to bear many risks, such as risk of:

Channels of Distribution

75

(vi) Display of goods

attractive manner. It helps to attract the attention of the customers and also facilitates quick

delivery of goods.

: Retailers display different types of goods in a very systematic and

(vii) Supply of information

and demands of the customers to the producers through wholesalers. They become a very

useful source of information for marketing research.

: Retailers provide all information about the behaviour, tastes, fashions

20.5 Distinction between Wholesaler and Retailer

You have studied about wholesaler and retailer. You might have noticed that both of them differ

in their style and function. Let us find out these differences.

Wholesaler Retailer

(i) Buys goods in large quantities. (i) Buys goods in small quantities.

(ii) Buys goods directly from producers. (ii) Generally buys goods from the wholesalers.

(iii) Deals with limited variety of goods. (iii) Deals with wide range of products.

(iv) Requires more capital to start (iv) Requires less capital to start and run

and run the business. the business.

(v) Sell goods for resale purpose. (v) Sell goods for consumption.

(vi) No direct contact with consumers. (vi) Direct contact with consumer.

(vii) No special attention is given to (vii) In order to attract the attention of

decoration of shop. customers retailers give more attention to

decoration of shop.

Intext Questions 20.3

A. From the sentences gives below, mark (W) for those belonging to wholesalers and (R) for

retailers in the boxes given against each:

(i) Selling goods in small quantities ( )

(ii) More capital required ( )

(iii) Sale of goods for resale ( )

(iv) Dealing only in a limited range of goods ( )

(v) Direct contact with consumers ( )

B. Answer the following questions:

(i) What are the types of risks borne by the retailers? Mention any two risks.

_____________________________________________________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________________________________________________________

Business Studies

76

(ii) How do the producers get benefits from the functions of retailers. Write the benefits arising

from any two functions.

_____________________________________________________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________________________________________________________

(iii) Suppose two or three shopkeepers in your locality sell the same type of goods. From

which shopkeeper would you like to purchase your requirements?

_____________________________________________________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________________________________________________________

_____________________________________________________________________________________________________________________________________________________________________________________________________

20.6 Types of Retail Trade

You have learnt about retailers in the previous section. You may be under the impression that

retailers are small shopkeepers trading in the nearby locality. However, you will be surprised to

know that starting from hawkers and street traders, to super bazaars, departmental stores and

multiple shops, all undertake retail-trading business in our country. We can classify this retailing

business into two categoriesa.

Small-scale retail trade; and

b. Large-scale retail trade.

Small-scale retail trade is one where a limited variety and also limited quantity of goods are sold

within a local area. It requires less capital and provides goods to a limited number of customers.

On the other hand, large-scale retail trade is one where capital investment is more and it deals

with large volume of goods. It caters to the needs of a large number of customers. Super bazars,

Departmental stores and Multiple shops are examples of large scale retail trade organization.

Retail Trade

Small-scale Retail Trade Large-scale Retail Trade

Departmental Store

Itinerants Fixed Shop Multiple Shops

Super Bazar

You will be learning large-scale retail trade in the next lesson. In this lesson let us learn the details

about small-scale retail trade.

Small-scale Retail Trade

There are verities of retailers engaged in small scale retail trading. They can be classified as:

(i) Itinerant Retailing

(ii) Fixed Shop Retailing

Channels of Distribution

77

(i) Itinerant Retailing

Itinerant retailing is a type of small-scale retail trade in which retailers move around and sell a

variety of items directly to the consumers. They do not have a fixed shop where they can sell.

You must have seen them distributing newspapers early in the morning; selling peanuts, bangles,

toys etc. in buses and trains; selling fruits and vegetables in your locality using a cart, selling icecream,

namkeens etc. on a cycle, selling rice, earthen pots or even carpets by using a cart, etc.

You can also see them on pavements in your locality. In towns and cities we come across different

type of itinerant retailers. There are traders who sell their articles on fixed days at different

market places. In villages these market places are called “

called “weekly bazars”. The itinerant retailing also includes persons selling articles from door to

door. In most cases, the price of items is not fixed and mostly settled through bargaining. Moreover,

in most cases the items sold are not branded products.

Haat” and in towns or cities they are

(ii) Fixed Shop Retailing

Here the retailers sell goods and services from a fixed place known as ‘shop’. These shops are

usually located at market places or commercial areas or near residential localities. These shops

normally deal with a limited variety of goods. The goods are stored as well as displayed in the

shops.

On the basis of the type of goods which the fixed shops deal in , we can classify this form of

retailing as under.

a. General store or variety store

b. Single line store

c. Speciality store

Let us know the details about these stores.

a. General store or Variety store

These stores, as the name suggest, deal with a variety of items of general use. They sell products

mostly required by people for their daily use. For example, in a variety store you can find different

items on toiletry, hosiery, biscuits and snacks items, grocery, cosmetic, gift items and stationery,

etc. Normally these retailers make direct sale by cash only. However, for their regular customers,

these retailers may give discount, provide credit facility and also deliver purchased goods at the

customer’s house free of charge.

b. Single line store

These stores deal with a specific line of goods. You must have seen medicine shops, bookshops,

toy shops, ready-made garment shops, etc. These are all single line stores. They sell goods of

different size, brands, designs, styles and quality of the same product line.

c. Speciality store

These stores deal with products of specific brand or company. All varieties of any particular

brand or manufacturers are made available in these stores. You must have seen stores, like

Business Studies

78

woodland shoe shops where products starting from shoe to apparel produced by woodland

company are made available to the customers.

Intext Questions 20.4

Match the columns :

Column A Column B

(i) Super Bazar (a) Deals in goods of one brand only.

(ii) Itinerant retailer (b) Sell different varieties of the same product line.

(iii) Speciality Store (c) Large variety of goods of general use.

(iv) Variety Store (d) Large-scale retail trade.

(v) Single Line Store (e) Sell articles on carts.

_________________________________________________________________________

20.7 What You Have Learnt

􀁺

consumers.

Channel of distribution is the route taken by goods as they move from producers to

􀁺

Where a number of middlemen are involved in the process of distribution it is an indirect

channel.

When producers sell goods and services directly to the consumers, it is a direct channel.

􀁺

quantity. They sell goods to retailers and in some cases directly to consumers.

Wholesalers are those middlemen in the channel of distribution who deal with goods in bulk

􀁺

and risk taking.

Wholesaler performs the functions of collection and storage of goods, distribution, financing

􀁺

to consumers. They deal in goods in small quantities.

Retailers are the middlemen who buy goods from wholesalers or producers and sell them

􀁺

facility, render personal services, take risk, display the goods in stores or showrooms and

also provide market information to the producers.

Retailers perform the functions of buying, assembling and storage of goods, provide credit

􀁺

Retail trade may be classified as small-scale retail trade and large-scale retail trade.

􀁺

Small-scale retail trade includes itinerants retailing or fixed shop retailing.

􀁺

transactions take place in large volume.

Large-scale retail trade includes Departmental store, multiple shops and super bazaar where

20.8 Terminal Question

1) What is meant by Channels of Distribution?

Channels of Distribution

79

2) Give four examples of services that are distributed through the direct channels.

3) Explain the different channels through which a product moves from producers to ultimate

consumers.

4) Define wholesaler. How do they serve as an important link in the channel of distribution?

5) Give any four characteristics of retailers.

6) What is meant by ‘itinerant retailing’?

7) Explain the role of retailers in distribution of goods.

8) State any five differences between wholesalers and retailers.

9) Describe the different types of fixed shop retail trade.

10) Explain any two functions of wholesaler.

20.9 Key to Intext Questions

20.1 (i) channel of distribution, (ii) middleman, (iii) indirect, (iv) direct, (v) retail stores

20.2 (i) False, (ii) True, (iii) True, (iv) False, (v) False

20.3 A. i. R

ii. W

iii. W

iv. W

v. R

B. i. Any two of the followings:

a) fire or theft of goods

b) deterioration in the quality of goods as long as they are not sold out.

(c) change in fashion and taste of consumers

ii. a. Help in marketing by assembling and display of goods.

b. They bear risks that would otherwise have been borne by producers.

c. They supply information to producers about the tastes and preferences

of consumers.

iii. From that shop which

a. charges reasonable price

b. provides after sales services

c. provides variety in goods according to our tastes and preferences

d. provides facilities like credit sales, home delivery etc.

Business Studies

80

20.4 (i) d

(ii) e

(iii) a

(iv) c

(v) b

Activity For You

In your own locality, find out :

􀁺

Where can you buy goods directly from producers?

􀁺

Which shops get the goods from the wholesalers?􀁺 Which retailers stock the goods of only one producer?

POPULARITY of etailing

e-tailing, or e-commerce can be described as transactions that are conducted over an electronic network, where the buyer and merchant are not at the same physical location, for example plastic card transactions via the internet.

According to a recent study:

• Presently there are 4 million Internet users in India and the number is growing.
• Computer Hardware, cinema, Books, Music cassettes /CDs, travel tickets and gifts are sold through the net in a big way.

POPULARITY
Reasons for e-tailing becoming a hot opening can be attributed to many factors viz.

• No real estate costse-tailers do not have to maintain expensive showrooms or warehouses in prime locations, they operate through their web sites and thus save drastically on the real estate costs. The real estate costs in the metropolitan cities are sky high. Besides this, maintenance costs of a virtual store vis-à-vis a physical store is much less.
   
• Easy and comfortablyEasy and comfortably -obtained info is another advantages that shopping on the Net offers. On the Internet, product information is just a few clicks away, all accessed in the comfort of a home. Traditional retailing stands out in stark contrast: the consumer searches frantically, runs up and down, grills a poorly trained store assistant who is unable to help him out. In the bargain, valuable time is lost. Simply put, shopping on the Internet for, say 15 minutes could save a two-hour trip to the mall. Consumers prefer to save this time so that they can devote more time for their professional and domestic priorities.  
• Better interaction with the customersThe greatest benefits of online commerce is its ability to establish interaction en-masse. Interaction refers to the ability of reaching customers on an individual basis and react appropriately to responses of individual customers. Interaction is a vital tool for mass customization. Examples are many and include online marketing of flowers, software books and education. This has also led to greater satisfaction among the online buyers. According to a research agency, 82% of the online buyers have been found to be satisfied with their purchases.
   
• Mass MediaA supermarket has limited area of operation. It caters to customers of a city (and/or its suburbs), but a web site can be accessed from any part of the country or for that matter from any part of the world, thus increasing the potential customer base.

The hurdles

Most of the e-tailing ventures have not been as profitable as they were expected to be, the reasons being: -

• One estimate is that India has a mere 4 million Internet users, mostly are from metros. According to web analysts many areas of retailing, Internet is unlikely gather a sizable slice of market. And that could be several years to come. , Especially in businesses where margins are thin.
   
•  Despite a higher Internet penetration, cities like Mumbai or New Delhi might not be a haven for an e-tailer. Reason: for things like grocery, there is a shop out there at every nook and corner. All that an individual has to do is just make a phone call and the goods are delivered at his doorstep. Thrown in along with free home delivery is a month's credit.
   
•  Cheap labour Thanks to easy availability of domestics at an affordable wage bill, quite a few of the rich customers hire them for doing domestic chores, which include shopping. The usual Indian aversion to use credit cards. Thanks to low penetration of credit cards and the lack of popularity of debit cards, e-tailing might find it an uphill task to catch on.
   
• Mounting competitive pressures
  The market for online buying is still at a nascent stage. The turnover of the sector is relatively small and many players have already entered into it. Thus many e-tailers are eyeing a small market, exerting more pressure on operating margins.
   
• Shopping is still a touch--feel--hear experience
  Unlike the Americans, Indians do not suffer from 'time-poverty' and shopping is still considered to be a family outing. Hence this type of an environment creates a problem of customer retention.
  
  In e-tail, customer retention by 5% leads to increase in profits by 25%. Most people buying on the net do it out of curiosity and a repeat purchase is unlikely.
   
• Inadequate information provided when the customers discerns it certain products like clothes, cosmetics etc. involve higher customer involvement. Most customers are comfortable buying books and music on the Internet because the information required making a purchase decision is simple.
  
  But not so when a customer has to buy, say a blue Trouser. Here the customer wants to know: Which shade of blue is it? How does it feel on skin? How easily does it crease? This problem does not crop up in traditional retailing. In cyber space, on the other hand, the buyer is normally starved of crucial information. Only the seller knows about the true quality of trouser. This is a clear case of " information asymmetry".

What Next?

What kind of retailing model is going to deliver the goods in the Indian scenario?

• For an answer, consider the following. The most important cost advantage of     e-tailing comes from whittled down shop front costs and elimination of intermediaries and economical distribution. For example, book e-tailing means giving out with big shops replete with slow-moving stock. Consider the case of Amazon.Com, where the orders go straight to the wholesaler. That means the working capital costs are cut down drastically. Not just that, an e-tailer is paid before he pays his distributor. The implication: need for lower working capital.
   
• Collaborative commerce ( e-commerce)
  An e-tailer may collaborate with some manufacturers and suppliers. Something that Easybuymusic.com has done. It has hooked up with warehouses of music companies and their distributors. So every time an order is placed with easybuymusic.com, it scans the warehouse closest to the customer. In most cases the distribution costs are substantially lower since fulfillment is done locally
   
• Create economic value
  E-tailers should create economic value for the customer rather than a curiosity value. They should find out reasons, as to why customers should buy from a web site rather than a brick and mortar store and try to communicate this reason effectively.
   
• According to the KSA annual consumer outlook, the consumers are more comfortable buying certain items. An illustrative list with a percentage of the consumers are: books and music 47 per cent, home furnishing 29 per cent, sports apparel 25 per cent, casual clothes 21 per cent, shoes 14 per cent, groceries 9 per cent and tailored clothes 9 per cent.

e-tailing in India can be a success if the e-tailers change their business models and understand their customers more. 

etailing

E-tailing (less frequently: etailing) is the selling of retail goods on the Internet. Short for "electronic retailing," and used in Internet discussions as early as 1995, the term seems an almost inevitable addition to e-mail, e-business, and e-commerce. E-tailing is synonymous

Learn More

• Storage

with business-to-consumer (B2C) transaction.
E-tailing began to work for some major corporations and smaller entrepreneurs as early as 1997 when Dell Computer reported multimillion dollar orders taken at its Web site. The success of Amazon.com hastened the arrival of Barnes and Noble's e-tail site. Concerns about secure order-taking receded. 1997 was also the year in which Auto-by-Tel reported that they had sold their millionth car over the Web, and CommerceNet/Nielsen Media reported that 10 million people had made purchases on the Web. Jupiter research predicted that e-tailing would grow to $37 billion by 2002.
E-tailing has resulted in the development of e-tailware -- software tools for creating online catalogs and managing the business connected with doing e-tailing. A new trend is the price comparison site that can quickly compare prices from a number of different e-tailers and link you to them.

Business of Culture in India

Business of Culture in India

S. Ananth

Research Fellow

Krisani Knowledge Resources

Hyderabad

Project Commissioned by Culture: Industries and Diversity in Asia (CIDASIA)

Research Programme

Centre for the Study of Culture and Society

Bangalore

May 2008

CONTENTS

1. Introduction

2. Newspaper Industry in India

3. Filmed Entertainment Market in India

4. Film Distribution – Multiplex Phenomenon

5. Funding the Film Business

6. Overseas Market for Indian Films

7. Home Video Market

8. Television Market in India

9. Cable TV Market in India

10. DTH Market in India

11. IPTV Market in India

12. Radio Market in India

13. Music Market in India

14. Internet Usage in India

15. Gaming Market in India

Global Gaming Market

16. Animation Sector in India

17. Amusement Parks in India

18. Retail Market in India

19. Luxury Market in India

Luxury Watch Segment in India

Luxury Car Segment in India

20. Wedding Market in India

21. Gambling Market in India

22. Advertising Market in India

23. Out of Home Advertising Market in India

24. Art Market in India

25. Sports Market in India

Horse Racing In India

26. Entertainment Companies in India

27. Emerging Trends in the Culture Industry

28. Select Bibliography

2

Business of Culture in Contemporary India

Introduction

This report titled the ‘Business of Culture in India’ attempts to compile statistical

information as well as analyse the most important business trends in Culture Industry of

contemporary India. The report is meant to provide a snapshot of the major components

of the culture industry, the economics of the various components as well as a brief sketch

of the regulatory environment in the industry. The report lays more emphasis on the

market trends, the size of the market as well the latest developments rather than an

analytical analysis of the nature of the culture industry. Wherever possible, the report has

tried to understand the largest segment of a particular business rather looking at each and

every component. This is focus on the larger segments of a particular business is

essentially meant to retain the focus on the culture industry but also to avoid looking at

too many small segments. In short the report attempts to understand the business and

business dynamics rather than (re)interpret the culture industry in India. An

understanding of the business dynamics has become essential as the famous business

adage ‘price is what you pay, value is what you get’ becomes important in the business.

The Indian media segment, especially the film business, has grown after it was

accorded the status of industry in 2001. New business and revenue models have replaced

the traditional models. The recent economic boom has not only blurred the lines on which

a particular price can be placed in a particular industry. The boom has also replaced a

number of traditional valuation models with the industry now laying more emphasis on

‘valuations’ rather than cash flows as an important barometer for understanding the

businesses that comprise the culture industry.

Newspaper Market in India

The newspaper market like the television market is becoming more stock market

oriented in its ownership. This trend is more like most of the western countries, where

stock market ownership is an important feature of the newspaper market. India is

estimated to have 393 newspapers

Readership Survey 2006 claims that the number of readers increased from 206 million to

222 million over the previous year. Dailies continue to grow, adding 12.6 million readers

from last year to reach 203.6 million while there has been a drop of 7.1 million magazine

readers

any newspaper in India

Seven of 10 of the world’s 100 best selling dailies are now published in Asia.

China, Japan and India account for 60 of them. The five largest markets for newspapers

are: China, with 98.7 million copies sold daily; India, with 88.9 million copies daily;

1 and more than 200 million readers2. The National3. It has been pointed that there are another 360 million readers who do not read4.

1

http://www.wan-press.org/worldpresstrends/articles.php?id=22 (Last Visited 14 February 2008).

2

2008).

http://www.guardian.co.uk/media/2007/feb/05/pressandpublishing.business (Last Visited 14 February

3

February 2008).

http://www.thehindubusinessline.com/2006/08/30/stories/2006083004170500.htm (Last Visited 14

4

“Adding Pages”, Business Standard, 12 January 2007, p.13.

3

Japan, with 69.1 million copies daily; the U

Corporate Management Committee

The ITC Profile