1.3.4 Distribution

Question 1

What is Distribution?

Answer 1

The process of getting the right product or service to the consumer in the right place

Question 2

What are 3 Distribution Channels?

Answer 2

• 4 Stage Distribution - manufacturer - wholesaler - retailer - consumer
• 3 Stage Distribution - manufacturer - retailer - consumer
• 2 Stage Distribution - manufacturer- consumer

Question 3

Describe 4 Stage Distribution

Answer 3

• Manufacturer sells in bulk to the wholesalers
• Wholesalers break bulk order into smaller quantities that Retailers buy stock from
• Retailers sell to consumers
  Benefit of a wholesaler is they can offer trade credit terms to the smaller retailer

Question 4

Describe 3 Stage Distribution

Answer 4

• E.g. electrical good such as toasters and kettles
• Applies to MOST MASS MARKET PRODUCTS such as juice, cornflakes, tea bags
• Most manufactures like to sell into a retailer. As the retailers are spread all over the country it gives the manufacturer the distribution and volume of sales they’re looking for

Question 5

Describe 2 Stage Distribution

Answer 5

• Products are bought by the consumer direct from the manufacturer
• NO INTERMEDIAIRIES
• E.g. holiday companies that don’t use agents and factory outlets
• Direct Marketing
• Means products are sold directly from the manufacturer to the consumer

Question 6

What are 3 changes in distribution to reflect social trends

Answer 6

• ONLINE DISTRIBUTION - benefit is niche products can reach a wider audience, can cater for a greater geographically dispersed market, many transactions happen solely online, Amazon
• CHANGING FROM PRODUCT TO SERVICE - the concept that you don’t have to own something to be able to use it
• CHOUCE OF DISTRIBUTION CHANNEL - choice of channel and method of getting the products to the consumer depend on : nature of product, the market , nature of the business and the size of the business

Question 7

What are 2 PROS of ONLINE DISTRIBUTION

Answer 7

• Access WIDER MARKET + Easier - Going Beyond Locality , OPEN 24/7 , Export - Globalised, Strong International Demand
• REDUCES OVERHEADS and FIXED COST - No Outlet, NO RENT, Lower BE Output, Increase MOS, WAREHOUSE in a CHEAPER LOCATION

Question 8

What are 3 CONS of ONLINE DISTRIBUTION

Answer 8

• WEBSITE - COST of Creation, Maintenance, Skilled Developed, High Wage, Training
• CUSTOMER SERVICE - HARDER to PROVIDE , therefore improve Website Functionality
• CANNOT TRY ONLINE , e.g. Shoes, Sales therefore decrease

Question 9

What are 1 PRO of 2 STAGE DISTRIBUTION

Answer 9

• NO WHOLESALER or RETAILER Involved - NO CUT TAKEN from them , therefore can CHARGE LOWER PRICES, MORE DEMAND, MORE SALES

Question 10

What are 2 CONS of 2 STAGE DISTRIBUTION

Answer 10

• Likely Consumer BUY SMALLER QUANTITIES, means HIGHER DISTRIBUTION COSTS
• NO ONE is AWARE, LOW REACH, therefore More MARKETING and COSTS

Question 11

What are 1 PROS of 3 STAGE DISTRIBUTION

Answer 11

• Way to OVERCOME MARKETING ISSUE, RETAILERS have HIGH REACH, WELL KNOWN

Question 12

What are 2 CONS of 3 STAGE DISTRIBUTION

Answer 12

• Manufacturer WON’T RECEIVE FULL PRICE that Consumer Pays ( RETAILER MARGIN
• SELLING Too MANY RETAILER = BIG DISTRIBUTION, LOGISTIC COSTS

Question 13

What are 2 PROS of 4 STAGE DISTRIBUTION

Answer 13

• WHOLESALER BUYS in BULK , HIGHER SALES & LESS DISTRIBUTION COSTS
• INCLUDES RETAILER, LESS MARKETING COSTS

Question 14

What are 2 CONS of 4 STAGE DISTRIBUTION

Answer 14

• BOTH RETAILER + WHOLESALER , ( SEEK MARGIN) - Price Increasing from Stage 1 to 4, HIGHER PRICE means LESS SALES for CONSUMER
• LESS ABLE to Provide EFFECTIVE CUSTOMER SERVICE to CONSUMER - Manufacturer further away from Consumer