distribution

Question 1

A channel of distribution is:

Answer 1

the route a product takes from the manufacturer or producer to the consumer

Question 2

A product usually passes through:

Answer 2

Intermediaries on the way from producer to customer - e.g. retailers, wholesalers and agents

Question 3

Retailers:

Answer 3

Shops who sell to consumers. They’re usually the final stage in the distribution channel.

Question 4

Examples of retailers:

Answer 4

Tesco, Argos and Amazon. Retailers can be physical shops or online “e-tailers.”

Question 5

Wholesalers make life:

Answer 5

Easier for retailers and manufacturers

Question 6

Wholesalers buy:

Answer 6

Goods from manufacturers in bulk and sell them in smaller quantities to retailers. This is called “breaking bulk”

Question 7

Breaking bulk:

Answer 7

A wholesaler takes the goods off the manufacturer’s hands and pays for the whole lot. Manufacturers don’t have to wait for customers to buy the goods before they see any cash

Question 7

Wholesalers make:

Answer 7

Distribution simpler. Without a wholesaler, the manufacturer would have to make separate deliveries to lots of retailers, and send each and every retailer an invoice. Selling to one wholesaler cuts down the paperwork and the number of journeys

Question 8

Wholesalers can:

Answer 8

Store more goods than a retailer can - they act as the retailers storage cupboard

Question 9

Agents, such as travel agents:

Answer 9

Sell products to customers on behalf of businesses. They’re often paid commission for the products that they sell

Question 10

A business will look at:

Answer 10

The product, the market and the size of the business when deciding which distribution channel to use

Question 11

Different channels of distribution:

Answer 11

Direct selling (Two stage channel): Manufacturer -> consumer
Indirect selling (Three stage channel): Manufacturer -> Retailer -> Consumer
Indirect selling (Four stage channel): Manufacturer -> Wholesaler -> Retailer -> Consumer

Question 12

Direct selling (Two stage channel): Manufacturer -> Consumer

Answer 12

The internet has made it easier for producers to sell directly to the consumer. Buying and selling on the internet is called e-commerce. This allows access to a worldwide market. For small firms, a low-cost option is to sell goods using electronic marketplaces (e.g. eBay).

Question 13

Indirect selling (Three stage channel): Manufacturer -> Retailer -> Consumer

Answer 13

This is a common distribution channel for recreational items such as clothes, shoes and homeware. Retailers are usually in places that are convenient for the consumer, such as shops on the high street

Question 14

Indirect selling (Four stage channel): Manufacturer -> Wholesaler -> Retailer -> Consumer

Answer 14

This is a traditional distribution channel used for groceries, e.g. by supermarkets. However, because those at each stage of the distribution channel want to make a profit, it can increase the cost to the consumer

Question 15

Multi-channel distribution:

Answer 15

When businesses sell through more than one method, e.g. online and in-store.

Question 16

What does multi-channel distribution do:

Answer 16

Gives flexibility for customers and wide market coverage for manufacturers

Question 17

Supermarkets and fashion retailers which have high street stores as well as an internet store are using a:

Answer 17

Multi-channel strategy. This may lead to added costs, but it allows them to target a wider market

Question 18

Stores which only sell online may have:

Answer 18

Cheaper costs, because they use a single channel of distribution.

Question 19

Problems with stores that only sell online:

Answer 19

Can have problems establishing brand loyalty. Also, customers often like to see and feel goods before they buy them, which is a limitation of e-commerce

Question 20

Online distribution means:

Answer 20

Firms can provide services instead of products

Question 21

Online distribution is:

Answer 21

The streaming or downloading of media content (like games, films, music and books) via the internet

Question 22

The consumer is purchasing the:

Answer 22

Right to download the media content as opposed to buying a good - they’re purchasing a service instead of a physical product

Question 23

Delivery via online distribution is:

Answer 23

Direct and almost immediate once an item has been purchased. In certain markets, the traditional distribution channels are being replaced by online distribution

Question 24

There are:

Answer 24

Cost savings for the business because there is no need to spend money on producing boxed products, whereas there is for traditional distribution

Question 25

The price of downloads for the consumer can be:

Answer 25

Cheaper than actually buying a physical film or book, due to these reduced costs for the business

Question 26

Online distribution is more:

Answer 26

Environmentally friendly than the production of physical goods such as DVDs which contain non-biodegradable plastics

Question 27

Using online distribution also:

Answer 27

Reduces the pollution from transporting physical goods across countries

Question 28

Setting up online distribution can be:

Answer 28

Relatively easy and can be run from anywhere with an internet connection. The set-up costs are also low, which means that there are opportunities for fast growth and return

Question 29

However, online distribution requires:

Answer 29

A different set of skills to traditional distribution, so staff may need further training in IT skills

Question 30

Businesses can respond to:

Answer 30

Changing customer needs more quickly as goods do not need to be packaged and distributed but can instead be updated online ready for download

Question 31

These businesses will also have:

Answer 31

More working capital as it’s not tied up in stock, which also needs to be stored in distribution centres. This money that was previously invested in production and distribution can be invested elsewhere in the business

Question 32

Online distribution is becoming more popular because:

Answer 32

Buying through online distribution is easy and cheap, more and more consumers are buying online. To stay competitive, more businesses are moving to online distribution.
This has also led to changes in social trends. For example, many people now watch shows on streaming services, such as netflix, instead of on TV
Instead of needing to store CDs and DVDs in houses, all of the downloaded media content is stored on computers, mobile devices or virtual hard drives
This means there’s been a growth in third party service providers, such as Spotify and Amazon’s prime video, who provide downloadable or streaming services