4.6: Place

what is a distribution channel

route taken from the producer to the customer

methods of distribution

- retailer
- wholsaler
- agent

retailers

- bulk breaking
- sell in locations convenient to customers
- add value to products by providing other services

features of common retailers

- independents
- supermarkets
- department stores
- chain stores
- hypermarkets
- kiosks
- market traders
- online retailers

independents

relatively small outlets owned by sole traders

supermarkets

- large stores selling many product lines
- cheaper than independents as they can afford to buy in bulk from manufacturers
- located on cheap land with readily available parking

department stores

- large stores split into distinct selling departments
- aim to provide good quality products with customer service

chain stores

one owner opens multiple stores selling the same range of goods in many different locations regulated by the same central office with standardised:

* products
* pricing
* store front
* store layout
* staff uniform
* staff training and wages

they specialise in all sorts of product lines by bulk buying direct from manufacturers for low cost of sales

hypermarkets

* very large
* located on the outskirts of town
* sell a wide range of goods
* fewer staff
* wide product range
* cheaper than supermarkets

kiosks

* small
* limited range of foods
* fast food, confectionary, newspapers
* low set up costs
* minimal overheads
* price depends on location

market traders

* small time businesses selling goods from market stalls
* common
* low overheads
* cheaper than retailers
* some move from one market to another

online retailers

buy goods from manufacturers and sell them online

2 types of e-commerce

* business to consumers
* business to business

business to consumers (B2C)

* ordered online and delivered
* click and collect

business to business (B2B)

* businesses selling to other businesses
* cheapest supplier

B2C - benefits to consumers

* cheap due to low costs
* 24/7
* variety and choice
* can shop from anywhere

B2B - benefits to businesses

* no costs of operating stores
* low start up costs
* low costs of transaction
* less paper needed
* payments can be made through online systems
* wider market
* 24/7
* choice when locating operations

disadvantages of e-commerce

* increased competition
* lack of human contact
* heavy dependency on delivery services
* technical problems
* security risk and malware
* poor aftersales
* customers without internet access and cards are excluded
* fake traders are difficult to identify

other distribution methods

* direct selling
* wholesaling
* agents

direct selling

producers market products directly to consumers

methods of direct selling

* shopping parties
* telephone selling
* mail order catalogues
* door to door selling
* direct response adverts
* direct mail
* internet

wholesaling

buy from manufacturers and sell to retailers

* some break bulk, repack goods, redistribute smaller quantities, store goods and provide delivery services
* stocks goods produced by many manufacturers

wholesaling - cash and carry stores

customers come, buy goods, pay cash and take goods

agents

link buyers and sellers

when are manufacturers most likely to use agents

when exporting, as agents reduce risk by knowing the market

what to look at when choosing distribution channels

* nature of the product
* cost
* market
* control

nature of the product

different types of products require different distribution channels:

* services sold directly to customers
* fast-moving consumer goods
* high quality ‘exclusive’ products
* products needing demonstration

cost

* businesses choose the cheapest distribution channels
* prefer direct channels
* intermediary take share of the profit
* bulk buy = lower prices

market

* when selling to mass markets - use intermediaries
* when targeting smaller markets - target customers directly
* overseas markets - use agents
* selling to other businesses - use direct channels

control

some producers like to have complete control over distribution

large businesses

* more important
* greater quantities of produce
* benefitted from online selling

small businesses

* benefitted from online selling
* find it easier to sell to global markets