Distribution (Paper 1)

Question 1

Define distribution

Answer 1

Distribution refers to the location where consumers can buy products from.

Question 2

Define distribution channel

Answer 2

The route taken by a product from the producer to the customer.

Question 3

What are three different distribution channels?

Answer 3

1) Manufacturer —> consumers
2) Manufacturer —> retailers —> consumers
3) Manufacturer —> wholesalers —> retailers —> consumers

Question 4

What is direct selling?

Answer 4

When producers market their products directly to consumers without the use of intermediaries.

Question 5

What are 3 examples of producers selling directly to consumers?

Answer 5

Services such as plumbers, taxis and hairdressers.

Question 6

What are 3 methods of direct selling?

Answer 6

• The internet - having own websites.
• Door-to-door selling - salespeople visit households inviting people to buy products or services
• Direct mail - promotions sent/posted to customers

Question 7

What is the main advantage of direct selling?

Answer 7

Intermediaries are not required —> lower costs —> increase profits

Question 8

What is the main disadvantage of direct selling?

Answer 8

With some methods, people can’t physically see the products until purchased.

Question 9

What are retailers?

Answer 9

Retailers are businesses that buy goods and sell them straight to consumers.

Question 10

What are two common features of retailers?

Answer 10

• They buy large quantities from manufacturers and sell them in small quantities (breaking-bulk).
• They sell in locations that are convenient to consumers. E.g. most supermarkets are conveniently located.

Question 11

What are wholesalers?

Answer 11

Wholesalers usually buy from manufacturers and sell to retailers.

Question 12

What is the role of agents or brokers?

Answer 12

The role of agents and brokers is to link buyers and sellers. E.g. travel agents sell holidays and flights for holiday companies.

Question 13

What is the main advantage of using agents?

Answer 13

Agents can reduce risk of selling overseas because they have knowledge of the country and the market.

Question 14

What factors influence our choice of the appropriate distribution channel?

Answer 14

-The nature of the product- e.g. most services are sold directly to consumers.
-Cost- Normally go for cheapest. E.g. supermarkets try to buy from manufacturers- bulk
buy —> lower cost.
-The market- Producers selling to mass markets are likely to use intermediaries. Businesses targeting smaller markets are more likely to target customers directly.
-Control- For some producers it is important to have complete control over distribution. E.g. producers of exclusive products don’t want to see them being sold in ‘downmarket’ outlets as this might damage their image.

Question 15

What are two examples of changes in distribution to reflect social trends?

Answer 15

• A huge growth in online shopping.

- A growth in the use of TV shopping channels.

Question 16

What are the two types of online distribution?

Answer 16

• Business to consumers (directly)- It is generally ordering goods online/deliveries.
• Business to business- Suppliers selling to businesses.

Question 17

What are two benefits to consumers of online distribution?

Answer 17

• Consumers can shop 24/7.

- People can shop from anywhere in the world.

Question 18

What are three benefits to businesses of online distribution?

Answer 18

• Lower start-up costs.
• Wider market of customers.
• Can serve customers 24/7.

Question 19

What are three drawbacks of online distribution?

Answer 19

• There is increasing online competition as it is a relatively cheap method of distribution.
• Lack of human contact- some customers dislike.
• Heavy reliance on delivery services.

Question 20

Give an example of when businesses have had to adapt to changes in technology and consumer buying habits.

Answer 20

People used to buy music on CDs, now it’s streamed/downloaded on mobile phones, etc.