The basic model of distribution

Mediaries Distributor is a link between the manufacturer to retailer. The reason to use a distributor for manufacturers also are common, such as:

1. The manufacturer can focus on its core business.
2. Product delivery making its availability spreads according to the marketing area that has been agreed.
3. Billing functions, so the manufacturer does not deal with many hundreds, even thousands of accounts that have transactions.
4. Risk factors for losses that may arise in the process of delivery, storage, doubtful accounts, delayed payments, management of human resources and infrastructure are so many.

While the value stream distributor fee only comes from the margin distributed products. So that a clearer distinction between distributors with the services offered by 3rd party logistics. In this case the distributor does not have the authority in pricing.

Industry situation

Macroeconomic factors like oil prices, commodities, labor unrest is not stable having an impact on both long and short-term profitability of the company. Start a free market with the entry of foreign investors in the same industry, usually not by establishing a new company but with the acquisition of companies that have the potential. Industry also does not seem appealing, especially if the government too much "set" in a regulation-regulation. As the highest retail pricing, distribution rules, bidding mechanisms, and so forth.

 

Service substitution

The presence of 3rd party logistics which started providing value-added solutions, a bit much to take in part the role of distributors such as warehousing and transportation. Software developers also offer application solutions more easily, allowing simple management of accounts and transactions in the most effective and efficient. The banking industry also began to provide financial solutions for transactions, ranging from payment facilities, credit, and innovative financing. Distribution fee that had been issued by the manufacturer to the distributor can be transferred to third parties had a lower cost and moreover can be controlled in accordance with the wishes of the manufacturer.

Conditions of Competition
Demands for economies of scale, the smaller the constriction. Advantages that can be offered by smaller players is flexibility in the deal. Not having a complex bureaucracy, and much of the oversight regulator.
Free market with the influx of foreign investment into the distribution industry is still considered attractive by a large volume of business.

Buyer Perspective
The presence of retailers and a growing number of them have to compete hard, and the road most often taken is to price competition. So that factors that tend to suppress the distributor to provide more discounts to retailers. Retailer sufficient capital or a consortium to develop the opportunity to get the package even more attractive price. Opens up opportunities for its sub-distributors, so the price competition in the market is becoming increasingly dominant.