The market structure is changing as shares shift in the channels of distribution
Symptom: The market structure is changing as shares shift in the channels of distribution.
Implications for the market:
Distribution channels will continue to consolidate, perhaps at an increasing rate. Large channel customers will grow even larger, while small and medium channel customers will shrink.
This consolidation will change the relative profitability of the distribution channels, making large channel customers ever more important. When looked at by traditional methods, large customers tend to be unprofitable in hostile environments because they can demand very low prices. On the other hand, they provide growth as well as the base load of volume that supports the supplier's business and market infrastructure.
Successful suppliers will need to carry out a delicate balancing act. In hostile times, the key to good returns is the ability to become a strong supplier to fast-growing large channel customers, and then also to serve selected medium and smaller customers, balancing the better prices that they offer against the higher costs to serve them.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.