UPS Stores operate “pack and ship” stores on a franchise basis granted by the franchisor, UPS Inc. The stores not only provide pack and ship services but offer a variety of other products and services such as office supplies, copying, and notary services. The stores are also required by the franchisor to provide “drop off” services to customers. This refers to customers who do their own packing and then go online to purchase and pay for shipping labels directly from UPS. The customers then visit any UPS store to “drop off” their boxes at no charge to customers. UPS pays the UPS store $1 for each dropped off box. Many of the UPS Stores franchisees do not like this policy. They argue that the online, direct to consumer channel is undermining the packing and shipping part of their business which accounts for the largest portion of their sales. Instead of bringing the items to be packed, weighed, and shipped at the UPS stores, customers can do this themselves. The UPS Stores franchisees argue that the $1 per box paid to them by UPS for drop-offs is not nearly enough to offset the lost revenue for its in-store packing and ship- ping. The franchisor sees the situation very differently. UPS argues that the drop-off policy helps to bring in new customers to UPS stores that would not have come before. This increased store traffic provides an opportunity for UPS Stores franchisees to sell these customers other products and services when they visit the stores. So, according to the franchisor, the drop-off program should be a net positive for franchisees. Do you think the differing points of view between the franchisor UPS and the UPS Stores franchisees on the drop-off policy is a communications problem in the channel? Why or why not?
Answer to relevant QuestionsHow does channel strategy relate to marketing strategy? Delineate and comment briefly on the six basic distribution decisions most firms will need to consider at one time or another. How does channel positioning relate to channel design and in turn to differential advantage via channel design? Movie studios are in something of a dilemma lately when it comes to planning their future channel strategy for distribution of their films. Electronic distribution is very profitable because, of the typical $4.99 cable ...Briefly describe the major categories of variables that should be considered when evaluating alternative channel structures.
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