Place - Channel of Distribution

Question 1

What is Channel of Distribution?

Answer 1

Channel of distribution are the possible routes taken by a product to reach the consumer from the manufacturer.

Question 2

What is the Channel of Distribution stages?
e.g selling to OR through …..
….. - …. -….

Answer 2

Selling directly to customers:
Manufacturer - - - Customer

Selling through retailers:
Manufacturer - - Retailer - Customer

Selling through wholesaler:
Manufacturer - Wholesaler - Retailer - Customer
OR
Manufacturer - Wholesaler - - Customer

Question 3

What are the factors affecting the channel of distribution?

Answer 3

• Finance Available
• Desired image for the product
• Shelf life of the product
• Legal restrictions
• Stage of the product life cycle
• Technical qualities of the product

Question 4

What is the description of finance available?

Answer 4

A manufacturer may not have the finance available to set up e-commerce or print catalogues to sell direct, so using wholesalers or retailers are the only options.

Question 5

What is the description of desired image for the product?

Answer 5

Certain products have images that dictate where they can be sold.

Example: Hugo Boss only sell in retailers that have built up a good reputation over at least 5 years.

Question 6

What is the description of shelf life of the product?

Answer 6

Some products need to be shipped to retailers fast as they will go out of date quickly.

Example: Fresh fruit.

Question 7

What is the description of legal restrictions?

Answer 7

Some products can’t be sold through certain channels.

Example: Prescription medicines need to be sold through pharmacists.

Question 8

What is the description of stage of the product life cycle?

Answer 8

Products may only be sold in exclusive outlets at the beginning of the product’s life cycle but may be sold in discount stores during their decline stage to encourage sales.

Question 9

What is the description of the technical qualities of the product?

Answer 9

Highly technical products may need to be demonstrated, which means personal selling is the ideal channel.

Question 10

What are the advantages of Manufacturers selling to Wholesalers? (advantages for manufacturers!!)

Answer 10

• Packaging and displaying of goods is carried out by the wholesaler, saving the manufacturer time and costs.
• Wholesalers buy in bulk, saving manufacturers from making lots of smaller deliveries.
• Wholesalers can promote products to retailers, which saves the manufacture promotion costs.
• The wholesaler carries the risk of products going out of fashion as manufacturers get rid of goods as soon as they are produced.

Question 11

What are the disadvantages of Manufacturers selling to Wholesalers? (disadvantages for manufacturers!!)

Answer 11

• Manufacturers make less profit as a cut is taken by wholesalers.
• The manufacturer loses control of how the product is marketed.
• The manufacturer loses control of which retailer the products is sold to.

Question 12

What are the advantages of Retailers buying from a Wholesaler?
(advantages for retailers!)

Answer 12

• Retailers can save on storage facilities by buying smaller quantities from wholesalers than they would get from manufacturers.
• Retailers can benefit from promotions offered by wholesalers that they may not get directly from manufacturers.
• Retails can trail smaller orders of newer products and not be left with a large amount of unsold inventory.

Question 13

What are the disadvantages of Retailers buying from a Wholesaler?
(disadvantages for retailers!)

Answer 13

• It is more expensive than going directly to manufacturers as wholesalers add on a margin of profit.
• Wholesalers offer the same products to retailers’ competitors, so other areas of the marketing mix have to be relied on.
• The retailer may miss out on exclusivity deals by not going direct to manufacturer.