Question

The automotive industry has witnessed substantial changes in channels of distribution. What are the fundamental reasons such as consumer behavior, competition, or technology (or others) for this change? Of the fundamental reasons stated for the changes to channels of distribution, what do you see as being the most significant and why?

Answer 1

Give an example of industry that has witnessed substantial changes in channels of distribution.

Retail industry is undergoing a sea-change in its’ channel of distribution specially in the developing countries like China, India, South east Asia etc. in the previous era, the distribution was traditional in the form of wholesaler, retailer, hype-local retailer. However with the digital revolution all around and smartphones enabling as a very effective hardware to interact digitally, the etail channel eliminating all the middlemen has gained a big traction. Although the current sales through etail channel is small but the growth rate in excess of 100% every year gives it an incredible momentum and would become a major channel in next 5-10 years.

What are the fundamental reasons such as consumer behavior, competition, or technology (or others) for this change?

Fundamental reasons are 1) Decreasing cost of smartphones and internet charges which help to interact with the digital world 2) Increased congestion and commute issues in big cities 3) Low cost model of e-commerce firms due to elimination of the channel partners thereby increasing the margins (in the long run) 4) Wide assortment of products under a single portal/point of interaction 5) Lower prices 6) ease of returns 5) ease of comparison 6) availability of the portal 24/7 thus buying can happen anytime as per customer’s choice

Of the fundamental reasons stated for the changes to channels of distribution, what do you see as being the most significant and why?

All the reasons are contributing equally but we would still pick up one and that would be the technological advancements in Smartphones and internet connectivity which has brought the new channel to fruition. The need was slowly growing stronger but it was the technological change which finally made it possible and then everything about the supply chain/ distribution operations was built around it.

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