1.3.4 Distribution Flashcards
What is the main objective of distribution?
To make products available in the right place at the right time in the right quantities
What is a distribution channel?
A chain of business’ or intermediaries that a good/service passes until it reaches the final buyer
What is an intermediary?
Each separate party/stage in a distribution channel
What’s a 4 stage channel?
Producer -> wholesaler -> retailer -> customer
(Producer sells in bulk to wholesaler, retailer buys stock and sells to customer
What’s a 3 stage channel?
producer -> distributor -> customer
(Producer sells to distributor , eg apple sell to curries and distributor sells to customer)
What is a 2 stage channel?
Producer-> customer
(Producer sells straight to customer eg, gym shark sell to customers through their website for clothes they make themselves)
How do wholesalers make money?
from buying stock at a low price from producer and adding a profit onto it which is paid by the retailer
What is break bulk
(Wholesalers do this)
Where wholesales buy in large quantities from the producer and then sell smaller quantities to retailers
What’s 2 advantages of wholesalers?
-Retailers can order in small amounts from wholesalers
-Reduces producers transport costs as they make fewer journeys to wholesale than they would often to retailers
What is the role of a distributor?
They purchase products from manufacturers and re sell them to retailers (cressco). They hold stock
What is an agent?
A specialised type of distributor that doesn’t hold stock who tend to sell and operate in services
They earn commission based on sales achieved
What are retailers?
The final step i the chain who deal with customers
What are the 6 various kinds of retailer?
1-Multiples-chain of shops owned by single company
2-Specialist chain-eg) perfume, fashion
3-Department stores (eg John
Lewis)
4-Convenience stores (spa, costcutter)
5-Independents (shop run by an owner)
6-Franchises
What are the 2 advantages of retailers?
-They create convenience for customers
-They hold stock
What is a direct distribution?
A channel where a producer and consumer deal directly with each other with no involvement of any intermediaries
Give an advantage and a disadvantage of direct distribution
A- complete control over supply chain so can control quality and price
D-high costs to store and transport goods
What is indirect distribution?
Involves the use of intermediaries between producer and consumer
Give an advantage and a disadvantage of indirect distribution
A- can access a larger market
D-Loss of control of the quality, time to be delivered and the promotion
What reasons could there be do use indirect distribution
(Give 2)
-Consumers may live too far to directly be reached
-the producers may lack retailing expertise
What 3 factors should we consider when choosing a distribution channel?
-the nature of the product (eg is it fragile or complex)
-The market (eg how big is it)
-The business (does it have an established distribution network)
What is a multi channel distribution ?
When a business uses more than one type of distribution channel (eg selling through Calvin klein itself and also through Amazon
What are 2 advantages of using a multi channel distribution?
- it allows more target market segments to be reached
-it enables higher revenue
What are 2 disadvantages of using a multi channel distribution?
-potential channel conflict, competing with retailer and also selling direct
-can be complex to manage
what are the 3 strengths of using online distribution?
-niche products can reach wider audiences with a small set up costs
-can reach larger audiences than a physical shop
-less staff needed as transactions happen solely
why are businesses changing from product to service?
to shorten the distribution channel as businesses can sell their product directly to consumers.
EG- amazon is a distributor of products from different producers. Amazon are offering the service of getting the product from producer to customer through online transactions
