Distribution(1.3.4) Flashcards
What is distribution?
refers to making products/services available to customers when and where they need it
What is retailing?
selling good/service in a physical shop
What is e-tailing?
retailing through the internet
What are channels of distribution?
the route a product takes from producer to consumer
What are the types of channels of distribution
four stage distribution channel
three stage distribution channel
two stage distribution channel
Four stage distribution channel
producer—>wholesaler—>retailer—>customer
e.g. factory—>Costco—>Morrisons—>customer
Three stage distribution channel
producer—retailer—>customer
eliminates wholesaler stage so producer sells directly to retailer
often used for products with high demand or where the cost of distribution is high
often used for products with high profit margins where the producer can afford to sell directly to retailer and still make profit
Two stage distribution channel
producer—>customer
eliminates wholesaler and retailer with producer selling directly to consumer
commonly used for products that are sold online or through direct sales channels
Wholesalers
buy in large quantities from producers
break into smaller quantities to sell to retailers
reduce producers transport costs ( fewer journeys to wholesalers than many journeys to retailers)
What are intermediaries?
business between producer and the consumer in a distribution channel
e.g. wholesalers and retailers
What is a producer?
an individual, business or organisation responsible for creating goods or services to satisfy consumer needs and wants
What is a wholesaler?
business or intermediary that purchases goods in bulk from producers or manufacturers and resells them in smaller quantities
What is a retailer?
business that sells goods or provides the service directly to consumers for personal use
are the final link in the distribution chain connecting producer or wholesaler to end customer
Four stage distribution
traditional physical channel
a traditional channel consists of four stages producer wholesaler retailer and then consumer
is commonly used for products such as groceries clothing and electronics
Traditional distribution channel
many producers use this method of distribution
this method of distribution allows smaller firms to achieve a wide distribution across many outlets this happens because at the wholesalers and retail stages they will add their own mark up on the product
Factors that influence distribution
type of product, services directly to consumers, exclusive/designer chose outlets carefully
speed, perishable goods
cost
distance
Direct to retailer
three stage
involves the producers’ bypassing wholesalers and selling products directly to retailers
the retailer then sells the goods to the final consumer through their outlets. This approach eliminates one intermediary in the supply chain, making the process more streamlined
however this opens the producer up to tougher negotiations from retail outlets in terms of price and potential credit terms
direct to retailer advantages
faster delivery to consumers, products reach retailers more quickly improving supply chain efficiency and allowing products to be available to consumers quickly
improved profit margins, by cutting out the wholesaler both the manufacturer and retailer can potentially enjoy higher margins due to less price inflation as wholesalers have not added their markup to the product
Be your retailer
allows producers complete control over how products are sold
producers will then be able to showcase key strengths of their products and distribute their product to the consumers in what they believe would be the best ways possible
however there is a large initial outlay of capital in order to create these stores as well producers also taking on the high running costs of a physical store
Be your own retailer advantages
complete control over the brand, can control ow brand is presented to consumers
higher profit margins, by cutting out intermediaries business can retain full profit from the sales
direct customer relationships, business can interact directly with customers, gaining valuable insights into wants needs and behaviour
Direct online
producers can set up own websites
consumers can buy directly from producer
allows producers to keep full selling price paid by consumer
however setting up a website can come with significant cost
however some consumers could be uncomfortable buying products online without having inspected the product physically
Direct online advantages
lower operation costs, no need to maintain physical store reducing overhead costs
wider market reach, can sell globally without constraints of physical location, available 24/7
higher profit margins, lower costs allow the business to retain all profits and reduce costs at the sane time
Online retailer
for small producers allows them to sell products globally but without large capital outlay required to build and market a website
however selling products through eBay and Amazon will mean with each product sold through their platforms the small business will incur a small fee per item sold
Changes in distribution to reflect social trends
changes in distribution have been impacted by social trends such as the growth of online retailing and the shift from product-based businesses to service-based businesses
by understanding these trends businesses can adjust their distribution strategies to better meet the needs of their customers and stay competitive in the marketplace
