1.3.4 Distribution Flashcards
Distribution
Concerned with getting the products to the right place for consumers and at the right time.
Distribution channel
The route taken by a product as it moves from the producer to the customers.
Producer
Organisations that take raw materials and process them into finished goods.
Wholesaler
Buy large quantities of supplies and sell them on in smaller quantities.
Retailer
An organisation that sells goods and services to the general public.
Consumer
End user of a product or service.
Direct channel of distribution
Producer –> Consumer
Benefits and drawbacks of a direct channel of distribution?
+ Maximise revenue and profit.
+ Cheaper goods for customers and fresher produce.
+ Control promotion of product.
- May not be available at outlets for customers to see.
Modern channel of distribution
Producer –> Retailer –> Consumer
Benefits and drawbacks of a modern channel of distribution?
+ Easier for producers to distribute their products.
+ More convenient for consumers to buy those products.
- Higher prices for consumer.
- Low profits.
- Less control over promotion of the product.
Traditional channel of distribution
Producer –> Wholesaler –> Retailer –> Consumer
Benefits and drawbacks of traditional channel of distribution?
+ Producer can concentrate on production and doesn’t have to worry about dealing with many different retailers.
+ Saves on storage and warehousing costs for producer.
- Reduces profit margin for business.
Factors influencing choice of channel
- Choice of intermediary – are you able to negotiate with a retailer.
- Desired control over channel.
- Multi channel or one channel.
- Nature of product.
- Target market.
- Size of the business.
- Personalisation.
- Infrastructure available.
- Business growth.
Changes to distribution to reflect social trends
- Online distribution
- Product to service – Businesses are changing from selling physical, tangible products to providing a service. E.g. downloadable materials.
