In Depth Notes on Distribution Channels and E-Commerce

Aims for the Session

• Identify and describe channels of distribution.
• Explain advantages and disadvantages of e-commerce to businesses and consumers.
• Recommend appropriate channels of distribution for specific situations.

Ethical Considerations in Distribution

• Ensure products reach existing and potential customers.
• Understand the preferences of customers regarding where and how to purchase products.
• Evaluate factors like stock availability, pricing, and speed, especially for major companies like Amazon.

Objective of Distribution

• The goal is to make products available:
  • In the right place
  • At the right time
  • In the right quantities.

What is a Distribution Channel?

• It refers to the pathway a product takes from production to consumer.

Key Questions for Choosing a Distribution Channel

1. Should products be sold directly to consumers or through a retailer?
2. How many intermediaries are necessary (length of the channel)?
3. Where should the products be available?
4. Is the internet a viable option?
5. What are the costs associated with maintaining stock levels?
6. How much control does the company desire over its distribution?
7. How will this channel complement the other elements of the marketing mix (4Ps)?

Levels of Distribution Channels

• Various intermediaries involved include:
  • Producer
  • Wholesaler
  • Distributors/Agents
  • Retailer
  • Customer.
• Each participant in the distribution channel is termed an "intermediary."

Main Types of Intermediaries

• Retailers
• Agents
• Wholesalers
• Direct sales
• Examples: Debenhams, Perry TD, etc.

Importance of Place in Distribution

• Effective distribution ensures products/services reach customers in a preferred format and timely manner.
• Distribution methods include:
  • Wholesalers (link producers to retailers)
  • Agents (facilitate sales without owning the product)
  • Retailers (link wholesalers to consumers)
  • Producers selling directly to consumers.

Distribution Channels for Consumer Products

• Types of channels include:
  • Direct Channel
  • Retailer Channel
  • Wholesaler Channel
  • Agent/Broker Channel.
• Structure:
  • Producer → Agents/Brokers → Wholesalers → Retailers → Consumers.

Factors Influencing Distribution Method

• Cost considerations
• Market size and distribution
• Product nature
• Consumer needs
• Competitive landscape
• Legal restrictions
• Role of technology
• Size of the producer
• Desired control degree.

Current Trends in Distribution

• Increased internet usage for direct selling (e.g., e-commerce and banking).
• Supermarkets acting as wholesalers and retailers simultaneously.
• Employing multiple distribution channels.
• Creating integrated service offerings (e.g., travel packages).

Short Distribution Channels

• Typically for:
  • Industrial products
  • Expensive and complex goods
  • Customized products/services
  • Products sold in concentrated markets
  • Infrequent purchases.

Long Distribution Channels

• Suitable for:
  • Consumer goods
  • Inexpensive/simple items
  • Small, standardized products
  • Frequently purchased goods.

What is E-commerce?

• E-commerce involves the buying/selling of goods online.
• Can include both B2C (business to consumer) and B2B (business to business) transactions.

Advantages of E-commerce

For Businesses:

• Cost reduction from physical presence.
• Access to global markets without geographical constraints.
• Extended operational hours.

For Consumers:

• Flexibility and ease of purchasing.
• Greater access to information and variety.

Disadvantages of E-commerce

For Businesses:

• Increased competition from international players.
• Dependency on robust delivery services.
• Need for strong online security measures.

For Consumers:

• Difficulty assessing product quality before purchase.
• Access requirements for payment methods (credit/debit cards, smartphones).
• Possible issues with product delivery.