Distribution - 4/4 Ps - Place. Flashcards
How do businesses get their products to their consumers?
This is through their channels of distribution which is the route a product takes from the manufacturer or producer to the consumer. A product usually passes through intermediaries on the way from producer to consumer - retailers, wholesalers and agents.
What are retailers?
Shops that sell to consumers. Usually the final stage of the distribution channel, they can be physical stores or online ‘e-tailors’.
What are wholesalers? What do they do? How do they make distribution easier?
Wholesalers buy goods from manufacturers in bulk and sell them in smaller quantities to retailers. Called ‘breaking bulk,’ when a wholesaler takes the goods off the manufacturers hands and pays for all of it. Manufacturers don’t have to wait for customers before they see any cash from the retailers.
They make distribution easier as they take all of the stick from manufacturers and store it in one place, whereas manufacturers would possibly have to distribute their products among many different retailers and send each one an invoice. Having the intermediary saves paperwork and journeys. Wholesalers can also store more goods than retailers.
What are agents?
They sell products on behalf of businesses - paid commission for what they sell (travel agents.)
What are the three different channels of distribution? How will businesses decide which one to use?
Direct selling (two stages), indirect selling (three stages) and indirect selling (four stages).
- A business will look at the product, the market and the size of the business, when deciding which channel to use.
What is direct selling? Why has it grown in prevalence? Who may use this?
This is when the product goes straight from the manufacturer to the consumer.
It has become more prevalent due to the internet; it’s easier for manufacturers to sell straight to consumers, creating e-commerce. This has allowed for a worldwide market to be created.
Smaller firms may use this as they can access digital marketplaces (eBay.)
Many services also use direct selling (Hairdressers, plumbers etc.)
What is indirect selling (3 STAGE)? When is this suitable, where are retailers found?
This is a common distributional channel for recreational items such as clothes, shoes and home wear. This is where products go from manufacturer to retailer to consumer.
Often suitable where consumers want to see the physical quality of their product before purchasing, particularly clothes and footwear where it is important to ensure they fit well before purchase.
Retailers are typically found in places that are convenient for consumers e.g. high streets.
What is 4 stage indirect selling?
Manufacturer - wholesaler - retailer - consumer.
This is a traditional channel used for food, however, each stage of the channel wants to profit so prices increase for the consumer.
What is multi channel distribution, who uses it?
This is typically used by retailers. It is when businesses sell through more than one method, e.g. online and in-store. It gives flexibility for customers and a wide market coverage for manufacturers.
Supermarkets and fashion retailers with high street stores and internet stores use this. This may increase costs but can see them target a wider market.
Stores which only sell online may have cheaper costs, because they also use a single channel of distribution, but can struggle with brand loyalty as people feel less of an experience or affiliation to a website.
How can online distribution provide services as well as products? Why are businesses and consumers switching to this method?
-Online distribution is the streaming or downloading of media content via the internet.
- The consumer is purchasing the right to download media content as opposed to buying it physically; thus buying a service.
- Delivery in this method is instantaneous most of the time once purchasing, which gives a convenience factor that is making many traditional distributions obsolete.
- This is cheaper for businesses that do not have to pay for distribution and packaging. It can also be cheaper for consumers due to the reduced business costs.
- It reduces waste, and is better environmentally as less physical goods are being transported around.
- It’s easy to set up and cheap, and can gain quick growth if done successfully. But does require sufficient IT skills.
- Businesses can respond to consumer demands quicker with updates instead of repackaging etc.
This increases businesses working capital as less is tied in stock and stored in distribution centres, which can increase profit margins.
Why is online distribution becoming more popular?
Cheaper and easier - can charge less - more demand.
Changes in social trends - many people now use streaming services like Spotify and Netflix instead of using traditional methods like TV or records.
More people buying kindles than books. (Amazon.)
Instead of having to store media, it can all be stored online - more convenient. - Has grown third party service providers like Spotify and amazon prime video.
