Causes Of Risks In Garment Marketing Channel

Target differences of garment manufacturers

The middleman and the clothing middleman have their own business objectives, and there are always big differences between them, which may cause the operation decisions and behaviors of a certain channel member to influence or even obstruct the realization of other channel members' goals.

In modern economic system, most garment enterprises are realized through clothing middlemen (wholesalers, agents or retailers), thus forming a loose interest group between garment enterprises and garment middlemen.

Theoretically, they should work hand in hand to jointly promote the stable and efficient operation of the product distribution channel, so as to maximize the overall channel profit.

However, clothing enterprises and distributors are rational economic people. Their behavior, whether competition or cooperation, is the result of interest oriented.

Garment enterprises bear huge cost and manufacturing costs of product development. The goal they pursue is economies of scale and long-term benefits. Therefore, the market must be bigger and longer.

Relatively speaking, dealers only bear the marketing cost, the capital preservation point is low, and the choice of supply sources is large, so they tend to pursue immediate short-term interests. Of course, dealers' pursuit of short-term interests does not mean rejecting long-term interests, but the short-term interest oriented behavior is the basic factor leading to horizontal competition and vertical conflict.

From the point of view of game theory, because garment enterprises and distributors are two independent legal entities, they all have the right to pursue their own interests. Dealers do not have the responsibility and obligation to sacrifice their own interests to meet the needs of manufacturers' interests. Therefore, the conflict and risk of channels are inevitable.

Prisoner's dilemma between dealers

In addition to garment enterprises

Because of the difference between the target and the channel risk, dealers will also bring risks to the channel.

The most common ones are the price dumping competition among sellers, the "fleeing" and "dumping" between different regional markets, and the price confusion caused by competing customers in the same market.

We can use the prisoner's dilemma to understand these behaviors among distributors.

It is assumed that the dealers who are in the same clothing business have no difference in the commodities they manage. The only tactic to compete for the market is to reduce the price directly or indirectly.

Assuming that everyone does not reduce the price, everyone can get a profit of 50 thousand yuan. Obviously, if other dealers do not reduce their prices, they will be able to earn more profits if they reduce their prices, assuming that they are 80 thousand yuan, when the profits of other dealers will be reduced, assuming that they will be 10 thousand yuan (the total market profits are less than those of both sides). If both sides reduce prices, the profits of each dealer will be thinned, but it will be better if the price is lower than that of the other parties, and if they do not reduce their price, they will be better, assuming that each is 20 thousand yuan.

The game pattern between the two dealers is shown in Figure 1.

The only Nash equilibrium of the game is (price reduction, price reduction), the corresponding payment vector is (2,2), and the strategic combination that can bring 50 thousand yuan profit to both sides (no reduction or no reduction) is not a stable result, and the dealer enters the "prisoner's dilemma".

Isolation of channel management in garment enterprises

It is an integral part of the entire marketing system and can not look at an independent part alone.

In some garment enterprises, the process of channel management is often isolated.

First of all, it does not match the needs of the other three elements, thereby wasting resources for channel construction and management. Secondly, these garment enterprises do not regard other partners and marketing channel operation environment as the elements of the clothing enterprise marketing channel system, ignoring the mutual influence in the system.

This method not only makes it difficult to achieve channel goals, but also ultimately leads to the collapse of the foundation of the channel management system because of the failure of the entire marketing goal.

From a systematic perspective, channel risk is rooted in the characteristics of marketing channel system.