Growth of Channel Relationships and Partnership
Big retail organizations which want to broaden their marketing and sales base across the country appoint channel partners. Channel partners include consigned agents, dealers, distributors, sole selling agents, project marketing personnel who are willing to work with common pursuit of mutual goals. The term partnership brings a message of mutual objectives, trust and cooperation.
The benefits of this strategy accrue on mutual basis. The growth of channel relationships transforms to partnership arrangements as well. It represents a radical change and a sudden shift in the culture of the organization. Channel partnership is seen as extension from a single transaction to a long-term supply chain partnership with a high degree of trust.
Factors responsible for growth of Channel relationships and partnership
The following factors have contributed to the growth of channel relationships and partnership.
1. Interrelated power relationships: Supply chain includes manufacturer or supplier, wholesalers and retailers. The retail industry provides a market for a combination of different products and services. It may range from small local convenience stores to the larger high street chains like major food retailers, banks or building societies.
The relationship between the channel persons is affected by the concentration of market share. So, there is a need for mutual dependence among channel persons for the successful distribution networks.
2. Competitive pressure in the retail market: A channel’s success depends upon the degree to which the supply chain is improved. Regardless of the margins and practices involved, the channel should deliver added value for customers. So, all parties involved in the channel should be committed to invest in continuous improvement. Then only the working relationships will be fruitful and provide the service and economies required.
3. Channel competitiveness: Channel competitiveness is an important focus for successful retailing. Uneconomic channels are characterized by unhealthy support of the existing traditional practices. The channel competitiveness focuses on the importance of information and the need to share it. It calls for entrepreneurial ideas regarding innovation, renewal and development of the new product ideas.
4. Benefits in closer working relationships: Retailers and Suppliers have understood their role and have realized the degree of mutual understanding between their own objectives. In the past, supply chain relationships have been only adverse, exhibiting a high degree of rigidity. But during 1990s, there has been a recognition that there are benefits in closer working relationships.
Conflicts among channel persons impose additional costs on trading arrangements. The channel partnerships aim at reducing the level of conflicts and increasing cooperation so that costs are reduced and quality improves.
5. Entrusting the replenishment administration activity to suppliers: With the trend of using EDI technology, the replenishment administration activity is entrusted to suppliers. Inventory management includes scanning of merchandise at the time of checkout. Sales for all outlets are collated and communicated to the supplier. The suppliers ensure that fresh supplies arrive at the retail outlets to replenish stock.
6. Spirit of openness: The transformation to partnership arrangement represents a radical change. In the absence of partnership arrangement, there is relatively a low level of trust. In such a situation, organizations in the supply chain are only aligned opposed to one another. But channel partnerships enable the partners to adopt a cooperative pursuit of mutual goals. Such changes require a fundamental shift in the culture of the organizations. When they occur, it leads to a spirit of openness in the channel operations.