Distribution Channels and Supply

chain
UNIT 5
 Distribution Channels
• Distribution--one of the primary elements in the marketing mix --is key in
determining how and when to respond to competitive pressures in the
promotion of goods and services. An alternative term is distribution channel or
'route-to-market'. It is a path or pipeline through which goods and services
flow in one direction (from vendor to the consumer), and the payments
generated by them flow in the opposite direction (from consumer to the
vendor).
A marketing channel can be short, extending directly from the vendor to the
consumer; or may include several interconnected (usually independent but
mutually dependent) intermediaries such as wholesalers, distributors, agents,
retailers. For example, merchants are intermediaries that buy and resell
products. Agents and brokers are intermediaries that act on behalf of the
producer but do not take title to the products. Each intermediary receives the
item at one pricing point, and moves it to the next highest pricing point until it
reaches the final buyer. This grouping of organizations is often referred to as
 Distribution Channels
• ‘Marketing channels refer to an organized network of interconnected organizations
and agencies involved in the process of making a product or service available to
consumers.’

• Philip Kotler opines Channel of Distribution as that “It is a set of independent

organizations involved in the process of making a product or service available for use
or consumption”.

• Richard M. Clewett views as – “it is the pipeline through which a product flows on its
way to the consumers. The manufacturer puts his product into the pipeline or
marketing channel and various marketing people move it along to the consumers at
the other end of the channel”.

• The marketing channels are the independent business organizations. They are also
known as the middlemen, intermediaries. There are various forms of these
intermediaries. They bear variety of names. They act as an interface between the firm
and its customers. They facilitate the producers and ensure a smooth flow of
products/services to the customers.
 Supply Chain vs. Marketing Channels
• The supply chain and marketing channels can be differentiated in the following ways:
1. The supply chain is broader than marketing channels. It begins with raw materials and delves deeply
into production processes and inventory management. Marketing channels are focused on bringing together
the partners who can most efficiently deliver the right marketing mix to the customer in order to maximize
value. Marketing channels provide a more narrow focus within the supply chain.
2. Marketing channels are purely customer facing. Supply chain management seeks to optimize how
products are supplied, which adds a number of financial and efficiency objectives that are more internally
focused. Marketing channels emphasize a stronger market view of the customer expectations and
competitive dynamics in the marketplace.
3. Marketing channels are part of the marketing mix. Supply chain professionals are specialists in the
delivery of goods. Marketers view distribution as one element of the marketing mix, in conjunction with
product, price, and promotion. Supply chain management is more likely to identify the most efficient
delivery partner. A marketer is more likely to balance the merits of a channel partner against the value
offered to the customer. For instance, it might make sense to keep a channel partner who is less efficient but
provides important benefit in promotional strategy.
• Successful organizations develop effective, respectful partnerships between the marketing and supply chain
teams. When the supply chain team understands market dynamics and the points of flexibility in product
and pricing, they are better able to optimize the distribution process. When marketing has the benefit of
effective supply chain management—which is analyzing and optimizing distribution within and beyond the
marketing channels—greater value is delivered to customers.
• Distribution channel definition: (Michael D. Hutt, 2010)
• The link between the manufacturer and the customer is called the Channel of
Distribution.
• The channel accomplishes all the tasks necessary to get the product/service to
market
• Tasks can be performed by the manufacturer or be delegated throughout the
channel
• Distribution channel is a set of interdependent organizations that ease the transfer
of ownership as products move from producer to business user or consumer.
• The distribution of products involves 2 main elements:
• The management of the tangible or physical aspects of moving a product from the
producer to the end user (part of supply chain management).
• The management of the intangible aspects or issues of ownership, control and
flows of communication between the parties responsible for making the offering
accessible to the customer (channel management).
 Rationale for Marketing Channels
1. Intermediaries bring the buyers and sellers together, simplify and facilitate the transactions.
2. Intermediaries are the independent business organizations. These are the private and professional institutions with the
objective of profit making. Hence, it is easier and economical to work through their extensive and established network.
3. Intermediaries create time, place, form and possession utilities for the customers by making the products/services available at
the convenient place, time and in convenient form.
4. Every time producers cannot deal directly with the ultimate consumers especially when the consumers are scattered over a
wide geographical area.
5. Many producers tack the financial resources and expertise to carry out direct marketing. Hence they prefer marketing
channels.
6. For the small producers having very limited budget for the promotion, it is quite difficult to create the awareness, interest and
desire to buy the products among the customers. In this case, intermediaries being closer to the customers and having direct and
regular interaction with them, can effectively promote and sell the products. They can sell unpackaged commodities more
effectively and economically compared to the producers.
7. Intermediaries through their contacts in the market, experience, specialization, infrastructure, relations and rapport with the
customers can do selling activities more profitably compared to that of done by the producers on their own.
8. If the producers delegate distribution to the intermediaries, they can increase their investment and can focus more on their
main business activities.
9. Intermediaries play important role in bridging the gap between the customers’ quality, quantity and variety expectations and
producers’ offerings.
10. Intermediaries reduce the number of transactions thereby reducing the efforts and cost.
Important functions of the channels
1. Facilitation – Bringing the buyers and sellers together and facilitating both the parties in closing the deal.
2. Information – Giving the information about the products/services to the customers.
3. Promotion – Promoting the products/services, i.e., building and promoting the producers’ brands.
4. Negotiation – Negotiations on behalf of the manufacturer with the customers on the prices, terms of delivery, etc.
5. Transfer of the title and ownership – They help in transfer of the title or ownership from one party, i.e. sellers to other party, i.e. buyers.
6. Holding inventory and sharing risk – Channels hold the stock of ready products with them, thus they share the risk and cost associated with
holding the inventory.
7. Finance – Channels keep deposit with the manufacturers, book the orders in advance, and keep the stock of ready products. Thus they reduce
the manufacturers’ financial burden.
8. Providing pre-sale and post-sale services – Channels provide pre-sale and post-sale services, maintenance services, etc. to the customers on
behalf of the producers as they cannot personally reach to the individual customer.
9. Change agents – Channels inform the customers about the changes in product and price. They tell the customers about the new or additional
features introduced. They can create a positive, favourable opinion about these changes among the customers, as they are closer to customers
and they directly and regularly interact with their customers. Thus, they act as ‘Change Agents’.
10. Warehousing and transportation – Channels provide the warehousing facility and arrange transport facility from the warehouses to the
markets/retailers/end users.
11. Market feedback and intelligence – Channels provide valuable and authentic information about the customers, competitors, market changes
and trends and market conditions to the manufacturers. They also maintain the sales records and database of the customers, which can be useful
to the manufacturers in future decision-making.
 Business Marketing Utilities
• Form Utility:The utility of form refers to the appeal of a finished product. Companies often do market research to get a sense of
which version of finished products consumers like best. While large companies may use pricey market research companies to
find out this type of information, you can conduct market research easily by asking your customers which version of a product
you sell they like the best. For example, say your small business specializes in hand-forged knives. You could set up a display,
ask customers to pick which handle styles and blades they would buy, and invest in marketing the knives customers like the
best.

• Time Utility:The utility of time, or timeliness, takes into consideration everything that goes into making products or services
available to consumers right when they’re ready to buy. Business that are good at making products or services available to
consumers in a timely manner have an easier time convincing them to buy. Factoring in the utility of time connects to inventory
management and involves inventory and operations planning such as product manufacturing and shipping. For example,
Amazon addresses the value of time utility with its Amazon Prime membership program, which offers members free two-day
delivery to get their purchases fast. And to illustrate what happens when a business doesn’t consider the utility of time, consider
that a taxi company might not be very successful if its marketing materials mentioned it being closed during rush hour.

• Place Utility: Place utility addresses convenience, an element of the marketplace that is increasingly important to busy
consumers. A business can create increased place value by leasing stores in convenient locations. For example, if you run an
interior design business, you may get a lot of business if you set up shop near a furniture store and market that fact to potential
customers. Place utility can also apply to online businesses. Having a mobile-friendly website gives you access to the millions of
consumers who buy goods and services from their smart devices.

• Possession Utility:The utility of possession simply means the satisfaction a consumer feels from buying a product or service. For
example, you can boost the possession utility by marketing a product 's many uses as a benefit. You can also increase utility of
possession by offering financing, which allows a consumer to enjoy the product or service immediately while paying little or no
money for it. There are endless ways to market products and services to make them more appealing to consumers. Highlighting
features to communicate the values in the utility marketing model can help attract more customers and increase sales.
 Types of Intermediaries
• The industrial middlemen are the intermediaries used by the manufacturers to deliver their
products to the end users. They are categorized based on the number and the extent to which
they specialize in the performance of certain functions.
• 1. Manufacturers Representatives The manufacturer’s representatives (sales agents or
manufacturers’ agents) are very commonly seen middlemen who secure orders from existing
and potential customers. They provide relevant information on market conditions to the
manufacturers as well as customers. They are paid a certain amount of pre-specified
commission on sales and other tasks performed to make the sales. Generally small and
medium-sized industrial firms use the services of agents in territories with low market
potential. Agents are cost-effective for them because commission is paid as per the orders
generated. The agents particularly have good knowledge about the product, their target
market besides having excellent contacts with the buyers.
• 2. Brokers: Brokers are the middlemen who represent either the buyer or the seller. They
help the manufacturer to find potential buyers and vice versa and take the commission when
sales process is complete.
• 3. Commission Merchants They deal with large quantities of items like raw materials. They
are paid commission by the manufacturers when they perform certain functions. Their
general functions include getting the raw materials inspected, negotiating during sales and
finally close the sales. They receive the commission based on the net sales value as is
compensated to agents and brokers
• . 4. Industrial Distributors Industrial Distributors are the important and most
preferred middlemen that are typically small and independent serving narrow
geographic markets. They perform functions like buying, transportation and
warehousing, promotion and selling, and offering credit. Because of such varied
functions, they are sometimes referred to as full function intermediaries. They
are offered trade discounts on the price list of the products as their
compensation.
• 5. Value-added Resellers (VARs) They add some value or feature to an existing
product and sell to end-users as a new package. This is found often in the
computer industry, where a company purchases computer components and
builds a fully operational personal computer. By doing this, the company has
added value above the cost of the individual computer components. Customers
would purchase a computer from the reseller to either save time or if they do
not have the skills to build a unit themselves.
• 6. Jobbers They get orders from the customers and pass them to the
manufacturers. Though they do not handle the goods physically in any form,
they take the title to the products they sell. Jobbers specialize in marketing
bulky products like coal, iron ore etc, that are transported in huge quantities and
do not require assorting or grouping of products.
• 7. Drop Shippers When an online marketer has certain concerns like
where to get the goods from, where to store them until they are sold,
and what amount to charge for shipping the goods to the customers,
then drop shippers come to the rescue of such marketers who work
with merchants to move the products. Drop Shipping is generally
used by web site owners (like amazon.com), shop owners and mail
order firms who do not stock inventory of the products sold for future
delivery through mail order, catalogue and internet advertising.
• Middlemen send single unit orders for products to manufacturers, or
major stocking distributors, who in turn drop ship the merchandise
direct to the customers of the middlemen
Channel structure
 Direct is when the manufacturer performs all the marketing functions without the use of any
intermediaries.
Indirect is when some type of intermediaries sells or handles the product

Direct distribution Indirect distribution

Products are complex Markets are fragmented and widely dispersed

Solution are highly customized

Large quantity sales Small quantity sales

Complex end-user customer purchasing

Simple end-user customer purchasing
decisions; multiple functions and high-level
decisions
executives
Choosing Marketing Channels

• Cost, flexibility and quick adaptation to changing markets and demand are usually
the top factors sellers consider when assess and choosing distribution channels.
The types vary and heavily depend on product category and target market. These
distribution types include:
Intensive distribution - this channel allows the producer's products to be stocked in
major, mainstream outlets. This strategy is common for basic supplies, snack
foods, magazines and soft drink beverages.
• Selective distribution - producers rely on a few intermediaries to carry their
product. This strategy is commonly observed for more specialized goods that are
carried through specialist dealers. For example, brands of craft tools, or large
appliances would fall into this marketing channel.
• Exclusive distribution - producers select only very few intermediaries. Exclusive
distribution is often characterized by exclusive dealing where the reseller carries
only that producer's products at the exclusion of other products. This strategy is
typical of luxury goods retailers.
Business Channel Design Process and
Strategy
• Designing an appropriate industrial channel and managing it is a
tough and continuing task. A well designed channel structure helps to
achieve the desired marketing objectives. A channel structure
consists of types and number of middlemen, terms and conditions of
channel members, number of channels. The various steps that are
involved in channel design are given in the following figure.
• 1. Analyzing the Needs of the Customer
• When a marketer designs a marketing channel, he must understand the service output levels
desired by the target customers. Different customers have different levels of service requirements.
A high potential customer needs to be offered effective and professional service backup, ensured
availability of varied products compared to the low potential customer. The marketing channel
designer has to know at this stage itself that providing superior service output means increased
channel costs and higher prices for customers.

• 2. Establishing Channel Objectives

• Channel objectives are a part of and result from the company’s marketing objectives that need to
be stated in terms of targeted service output levels. Profit considerations and asset utilization must
be reflected in channel objectives and the resultant design. It should be the endeavor of the
channel members to minimize the total channel costs and still provide with the desired level of
service outputs. Channel objectives keep varying depending on the characteristics of the products.
For example, while a customized non-standard product requires company sales force to sell
directly, products like HVAC (Heating, Ventilation and Air-conditioning) are either sold by the
company or its franchised dealers.
 • 3. Considering Channel Constraints
• The industrial marketer develops his channel objectives keeping into consideration various
constraints like the company, competition, the environment, product characteristics and the
level of service output desired by the target customers.
1. Company: If a company has financial limitation as constraint, then it may restrict its
direct distribution approach through company sales force to few high potential
customers.
2. Competition: If a competitor has been very successful through direct service then it
may force all other firms also to adopt the same strategy of direct selling.
3. Environment: Economic conditions, legal regulations are the environmental factors
that affect channel design. During recession, producers use economical ways to sell
the products to avoid additional costs. Similarly, the law looks down upon those
channel arrangements that tries to build a monopoly market or minimize competition.
4. Product characteristics: As already mentioned, complex and non-standard products
require direct distribution without any intermediaries. Eg. If an industrial marketer is
providing customized machinery to his customer, then he deals directly with him rather
than involving any intermediary to understand the customer needs better.
5. Customer: The industrial marketers depends on intermediaries to offer services to
customers who are either giving less business or are located at far-off places and
prefers to serve the nearby or high potential customers by themselves.
• 4. Listing Channel Tasks
• The industrial marketers have to creatively structure the necessary tasks or
functions to meet customer requirements and company goals. They have
to first make a list of various tasks to be performed, identify the critical
tasks, take objective and realistic decisions on which tasks can be
effectively performed by the company and which cannot be performed
due to certain constraints. The careful analysis of customer needs,
establishing objectives, considering constraints and listing the channel
tasks form the backbone of channel design process. Once these aspects
are delineated individually, the next step of identifying and evaluating
channel alternatives starts.
• 5. Identifying Channel Alternatives
• There are four issues that are involved in identifying the channel alternatives. They are: the types of
business intermediaries, the number of intermediaries, the number of channels and the terms and
responsibilities of each channel members.
• The types of business intermediaries: There are different types of intermediaries that the industrial
marketers should identify. They have to consider various factors like the tasks to be performed,
product and market conditions before selecting either manufacturer’s representatives or agents,
industrial distributors, brokers, commission merchants or value-added resellers. The marketers
should search for innovative or combination of marketing channels.
• Number of intermediaries: The manufacturers have to settle on the number of intermediaries they
wish to use in their channel structure. They may either go for intensive, selective or exclusive
distribution.
• Intensive distribution: In this strategy, standard products that are purchased more frequently and
have less unit value like raw materials and other convenience goods are distributed intensively i.e.
products are stocked in numerous outlets so as to make them available to varied customers on
demand.
• Selective distribution: The industrial marketer selects few intermediaries to distribute the products
to the target customer. This gives the marketer to develop a good working relation with the selected
intermediaries, have better control, incur less costs and finally expect a better than average selling
effort.
• Exclusive distribution: This strategy helps to enhance the product image and is more prevalent in
consumer markets where some intermediaries exclusively deal and distribute the products of one
manufacturer. They are not allowed to handle the competitor’s products. The manufacturer expects
aggressive selling by the intermediaries and tries to have control over their pricing policies,
promotion strategy, credit terms and other services.
• Tesla is vertically integrated. Therefore, the company runs and operates
the Tesla’s plants where cars are manufactured and the Gigafactory which
produces the battery packs and stationary storage systems for its electric
vehicles, which are sold via direct channels like the Tesla online store and
the Tesla physical stores.
• in business, vertical integration means a whole supply chain of the
company is controlled and owned by the organization. Thus, making it
possible to control each step through consumers. in the digital world,
vertical integration happens when a company can control the primary
access points to acquire data from consumers.
• Number of channels: Industrial marketers need to serve various market segments.
This necessitates them to use more than one channel for distributing and marketing
their products. This multi-channel approach helps them not only to increase their
market share but also reduce their costs. However, the industrial marketers need to
take care of possible channel conflicts like proper demarcation of territory to
channel members to sell and serve the customers in their respective areas.
• Terms and responsibilities of Channel Members: There are various terms and
conditions which the industrial marketer must make clear to the participating
channel members like the responsibilities and tasks, conditions of sale and territorial
rights that would enable both of them to enhance their performance.
• Responsibilities and tasks: In order to avoid any future disagreements, there should
be clarity in the roles of both the industrial marketers and the channel partners.
Each should comply with the commitments about their individual responsibilities
and tasks to be performed.
• Conditions of sale: It should be clearly mentioned well in advance about the
discounts offered by the manufacturers to the distributors, the commission to be
paid to the agents or brokers. Other terms relating to warranty period, replacement
of defective parts also should be appropriately stated.
• Territorial rights: The territory between the distributors should be well demarcated
so as to avoid any future confusion that may lead to legal issues
• 6. Evaluating Alternate Channels
• There are several channel alternatives available to the industrial markets. They have to determine the best
among the alternatives by evaluating them based on the following criteria:
• Economic Performance: Different channel alternatives generate different levels of sales and incur different
levels of costs. An industrial marketer has to pose a question whether sales generation would be more by
direct selling through company sales force or through the channel members. Many of the industrial
marketers believe that sales will be more from company sales force as they exclusively concentrate on
company’s product, they are given proper training to sell the product, they show more aggressiveness as
their career depends on company’s success and finally customers prefer to deal with the company directly.
But it may also happen that the intermediary can sell more than the company sales force. The possible
reasons for this could be the agency having many sales people with it or its sales force are much motivated
with the commission offered by the company or the customers prefer to deal with agents who have
extensive contacts. The marketing manager has to similarly estimate the total costs of selling through
different channel members.
• Degree of control: This is another important factor while evaluating the channel alternatives. An industrial
marketer exercises different levels of control over different channel members. The degree of control is
more on company sales force and least on distributors. The distributor may concentrate more on those
products that earn him high products rather than following the instructions of the manufacturer to push
less preferred products. Similarly an agent entertains his potential customers most rather than
concentrating on manufacturer’s product.
• Degree of adaptability of channel members: With the market changing dynamically,
the channel members should have the capacity to adapt themselves to the changing
environment. The industrial marketer must be able to control as well as modify the
channel structure. Each channel member should be committed to the agreement
they have with other members.
• For example, a Tyre Company who is trying to enter into US market is a manufacturer
of safety systems for vehicle tyres whose products allow the vehicle to continue to be
driven even if the tires burst or are shot out. The main customers for the systems are
police forces, security companies, emergency services like ambulance and fire service,
armies, trucking companies, and even the general public. The organization cannot
serve all types of customers through a single distribution channel, so depending on
the size of the market, value and the level of usage, the market for safety systems can
be divided into three segments.
• Government Organizations (Ambulance, fire services, armies),Private sector (Original
equipment manufacturers like Trucking companies & vehicle manufactures),General
public.In the above scenario, channel 1 comes under direct distribution channel
where the organizations directly deal with the customers. This distribution channel
does not have any intermediaries like distributors, wholesalers, retailers etc. Direct
distribution channel the manufacturer’s own sales force deals directly with the
customer segments, and the manufacturer has the complete responsibility for
performing all the required channel tasks. Channel 2 and channel 3 come under
indirect distribution channels. Indirect channel distribution uses one or more
intermediaries like distributors, retailers, sales representatives etc..
• Marketing Channels versus Supply Chains
• In the past few decades, organizations have begun taking a more holistic look at their marketing
channels. Instead of looking at only the firms that sell and promote their products, they have begun
looking at all the organizations that figure into any part of the process of producing, promoting, and
delivering an offering to its user. All these organizations are considered part of the offering’s supply
chain.
• For instance, the supply chain includes producers of the raw materials that go into a product. If it’s a
food product, the supply chain extends back through the distributors all the way to the farmers who
grew the ingredients and the companies from which the farmers purchased the seeds, fertilizer, or
animals. A product’s supply chain also includes transportation companies such as railroads that help
physically move the product and companies that build Web sites for other companies. If a software
maker hires a company in India to help it write a computer program, the Indian company is part of
the partner’s supply chain. These types of firms aren’t considered channel partners because it’s not
their job to actively sell the products being produced. Nonetheless, they all contribute to a product’s
success or failure.
• Firms are constantly monitoring their supply chains and tinkering with them so they’re as efficient as
possible. This process is called supply chain management. Supply chain management is
challenging. If done well, it’s practically an art.
 Channel Flows
• These five flows are discussed below:
• i. Physical Flow:
• A manufacturer selling the physical goods will require at least the above mentioned three to four intermediaries.
As it is not possible to move the physical goods from one place to another without the support of any
transportation services, the role of this intermediary is mentioned in the physical flow of the goods at all the
points wherever the movement of the physical possession of the goods is involved.
• Also, generally, the goods physically from the suppliers, through transportation to the manufacturers, get it
processed, move from the manufacturers as the finished products through transportation and warehouses
services to the dealers, who further moves the same to the customer, again through the transportation services.
• ii. Title Flow:
• When the goods move physically from one party to another, it is not necessarily that this physical movement of
the goods is accompanied by the movement of the title of the goods. The title of the goods is moved when the
goods are purchased by one party to another party that is from suppliers to the manufacturer, from manufacturer
to dealers and dealers to the customers.
• The other intermediaries like transporters and warehouses as mentioned in the physical flow, may possess the
goods physically but in no case will have the ownership rights on those goods.
• iii. Payment Flow:
• The movement of the goods physically involves various parties, intermediaries in the activity, but the ‘payment
flow’ moves among the parties involved in the movement of the title to the goods, connecting each party with the
other through the flow of the payment with the help of the banking services.
• Here, the payment flow refers only to the movement of the payment among the parties having the right to the
ownership to the distribution of the goods.
• iv. Information Flow:
• The movement of the information among the intermediaries flows two ways, i.e., in forward as well as in backward direction. The
information related to various aspects of the intermediaries flows from various parties to the other parties, each party has some
important information to share with the other party involved in the sale transaction.
• v. Promotion Flow:
• The manufacturer often undertakes various promotional efforts to promote the produces in the market, attracting a large number
of the potential consumers by attracting large number of the middlemen to make product available to the end-users. The
manufacturer may adopt the ‘Push Strategy’ or the ‘Pull Strategy’.
• Push strategy of the promotion refers to the influencing and persuading the middlemen to carry the company’s product, to carry
more of the company’s product, thus safeguarding the shelf-space for the company’s products.
• While, ‘Pull Strategy’ focuses on the first level communication about the product-related information and promotional campaigns
directly to the customer, and the customers themselves inquire about the product with the dealers for its purchase.
• Channels normally describe a forward movement of products from source to user, but there are also reverse-flow channels.
• These are important in the following cases- (1) to reuse products or containers (such as refillable chemical – carrying drums); (2)
to refurbish products (such as circuit boards or computers) for resale; (3) to recycle products (such as paper); and (4) to dispose
of products and packaging (waste products), Several intermediaries play a role in reverse-flow channels, including manufacturers’
redemption centres, community groups, and traditional intermediaries such as softdrink intermediaries, trash-collection
specialists, recycling centers, trash-recycling brokers, and central processing warehouse.
• A manufacturer selling a physical product and services might require three channels- a sales channel, a delivery channel, and a
service channel. Some of the common features in various functions of the channels are that, they use up scarce resources, their
performance can be enhanced by specialization and they can be shifted among the other channel members.
• Moreover, the producer’s cost and prices are lower when some functions of the intermediaries are shifted by the manufacturers,
but the intermediary does adds a charge to cover its work, as applicable. When, in case, the intermediaries are more efficient than
the manufacturer, prices to the consumers are lower, generally.
• Also, in case, where consumers perform some functions themselves, they should be provided an opportunity to enjoy even lower
prices. Thus, changes in channel institutions largely reflect the discovery of more efficient ways to combine or separate the
economic functions providing assortments of goods to target customers.