Market expert's view on attempts by manufacturers of children's shoes to monopolize the market
10.12.2019 7713

Market expert's view on attempts by manufacturers of children's shoes to monopolize the market

Manufacturers of children's shoes in Russia often consciously refuse to choose their target audience and, trying to win over as much market share as possible, strive to work with all parts of the distribution chain. What such a policy can lead to, says Alexander Borodin, an expert on the regional market for children's shoes, who manages Mila - Wholesale Shoes.

Alexander Borodin Alexander Borodin - Manager of the Mila company - shoes wholesale. ” In the shoe business - more than 20 years. During this time, he went from retail to wholesale. “Mila” - wholesale shoes ”was founded in 2000, at the same time specialization was chosen - children's shoes. At present, the company annually brings thousands of pairs of children's shoes for wholesalers to the Urals 700. The breakthrough for the company was the 2009 year when an online store was launched, in which for the first time wholesale prices were published on the Russian market in the public domain. Alexander is actively working in the direction of establishing information exchange between participants in the trading process, is engaged in the development of projects: the virtual shopping center “Centipede”, a small wholesale online store “Delenka”, and a custody warehouse.

In the segment of children's shoes, I do not know a single manufacturer who could unambiguously answer the question of who is his target audience (CA). Today, all manufacturers are trying to cooperate with all parts of the distribution chain: large and small wholesalers, retailers, and even with end users.

Marketing claims that a manufacturer’s collaboration with a low-level link kills high-level links. This law is universally confirmed by practice: the manufacturer’s work directly with the store (first distribution level) bury all types of wholesale, and working directly with the consumer (zero distribution level) kills retail. Retailing remains only to the manufacturer with volumes equal to the volumes of the retail store. CA overtakes its seller.

After killing high-level links, the manufacturer is feverishly looking for ways to maintain sales. With the advent of offline and online networks, the illusion is born that these channels will save the manufacturer.

Let us analyze the structure of any network. In no network does the product from the manufacturer go directly to retail stores. Initially, it goes to distribution centers, and from them to retail stores. But what is a “distribution center”? This is a center that performs the same functions as a regular wholesaler, and network retail stores are similar to ordinary retail stores. Another example: some manufacturers, not wanting to become dependent on networks, create their own vertical network, which, like third-party networks, has representative offices (read: wholesalers) and company stores. Obviously, between the manufacturer and the consumer, there are still two links in the classic distribution chain.

But why are volumes not growing? The fact is that there are few such networks, and each of them is trying to monopolize the market through exclusive and dumping. As a result, only one network will remain at the disposal of the manufacturer. But no matter how powerful this network may be, it is not able to provide the level of sales required by the manufacturer. And dependence on one buyer makes the producer a hostage.

Manufacturer - breeding ground for the growth of monopolies

If the manufacturer has not decided on Central Asia and is trying to reach all customers (wholesalers, small wholesalers, retailers, consumers), then its distribution chain begins to develop according to the following scenario:

  • first, all buyers — wholesalers, retailers, and sometimes consumers — purchase goods at wholesale prices, taking into account volume discounts;
  • one of them goes to large volumes and due to the discount can offer the buyer lower prices than wholesale (this is an attempt to enter into competition with the manufacturer);
  • volumes begin to grow, including due to luring part of the manufacturer’s buyers;
  • then discounts from the manufacturer increase, which leads to an even greater reduction in its prices relative to wholesale;
  • if the volume of sales to the buyer becomes more than 20-30% of the total sales of the manufacturer, then the latter loses economic security and becomes dependent on the buyer.

Monopolization is another side effect of the refusal of the manufacturer to choose his target audience. Some manufacturers are trying to prevent the monopolization of their product by prohibiting trading at prices lower than they set. But, firstly, this is no longer a market tool, and secondly, the buyer, not wanting to compete with the manufacturer, abandons its product. So wholesalers and then retail begin to burn out. The manufacturer has no choice but to trade himself, that is, turn into a regular retail store.

Manufacturers of children's shoes in Russia often consciously refuse to choose their target audience and, trying to win as much market share as possible, strive to work with all the links ...
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