Chapter 12- Distribution

Question 1

Distribution

Answer 1

This can also be known as ‘place’ and refers to where consumer can buy products from.
• If producers cannot get right product in the right place at
right time = unlikely to be successful.
• If products not in convenient locations consumers may not
have the time to search for them.

Question 2

Distribution Channel-

Answer 2

The route taken by a product from the producers to the consumer.

Question 3

Direct selling

Answer 3

Channel where a producer and consumer deal directly with each other without the involvement of an intermediary.

Question 4

Indirect

Answer 4

Involves the use of intermediaries between the producer and consumer

Question 5

Intermediary

Answer 5

Business that provide links between producers and consumers = retailers and wholesalers.

Question 6

Advantages of Direct Selling:

Answer 6

• No intermediaries required, so producers can make more profit
• Producers can reach customers who don’t like going out to
shops

Question 7

Disadvantages of Direct Selling:

Answer 7

• There may be a need for expert sales force, to demonstrate
products, provide detailed pre-sale information and after-sales
service.
• People may not be able to see the product until it’s been
purchased and received.
• Some people may not be happy receiving direct mail, door to
door sales people and unwanted telephone calls

Question 8

Retailer

Answer 8

• A business which buys large quantities of goods from manufacturers + wholesalers + sells them in small quantities to the consumers (bulk-breaking). E.G. Independent stores, supermarkets, department stores, chains, online retailers, superstores, market traders, street vendors etc.
• They buy large quantities from manufacturers and wholesalers,
  and sell small quantities to customers – this is called breaking-
  bulk
• They sell in locations that are convenient to consumers e.g.
  supermarkets are conveniently located
• They may add value to the products by providing other services
  which might include help with packing or delivery, repair
  services, information about products, warranties and gift
  wrapping

Question 9

Wholesaler

Answer 9

They buy in large quantities from producers and break into smaller quantities to sell to retailers – break-bulk.

Question 10

Agent

Answer 10

Can also be called brokers, aim is to link buyers + sellers.
• Does not hold stock
• Tends to operate in tertiary sector – travel, insurance, property
• Earn commission based on sales achieved

Question 11

Choosing the Appropriate Distribution Channel:

Answer 11

Nature of product
Cost
The market
Control

Question 12

Choosing the Appropriate Distribution Channel: (nature of the product)

Answer 12

Services sold directly to consumers – not need for intermediary as no stock held.

Fast-moving consumer goods can’t be sold directly

Businesses producing high-quality exclusive products such as perfume and designer clothes, will choose their outlets very carefully. The image of their products is important so they are not likely to use supermarkets.

Question 13

Choosing the Appropriate Distribution Channel: (cost)

Answer 13

Businesses will normally choose the cheapest distribution channels.
Large supermarkets will try buy direct from manufacturers as they can buy in bulk and get lower prices

Question 14

Choosing the Appropriate Distribution Channel: (The market)

Answer 14

Larger markets use intermediary’s as its less hassle, but smaller markets have the knowledge of the locals etc.

E.g producers selling in overseas markets are likely to use agents as they know the market better

Question 15

Choosing the Appropriate Distribution Channel: (control)

Answer 15

For some producers it is important to have complete control over distribution – for example, producers of exclusive products do not want to see them being sold in ‘downmarket’ outlets as this might damage their image.

Some products such as heating systems, require expert installation and need to comply with health and safety regulation

Question 16

Changes in social trends in distribution channels

Answer 16

• Online distribution- because people are more likely to use it
nowadays
• Business to consumer (B2C) – selling of goods and services by
businesses directly to consumers
• Business to Business (B2B) - involves selling to other businesses
online

Question 17

Changes from product to service:

Answer 17

In most western economies the size of the tertiary sector has grown at the expense of the primary and secondary sectors

Consequently, businesses have had to focus more on the distribution of services – most services are sold directly to consumers, so businesses have to consider more carefully the range of direct distribution channels that are available.

In some cases, businesses that once sold products are now selling services – for example CDs, DVDs and Newspapers are now streaming services and online.