Channels of distribution

Question 1

Direct channel

Answer 1

Producer to Consumer

No wholesaler or retailer
- no ‘cut’ taken, can lower prices to increase demand

Consumers buy small volume
- higher distribution costs to each consumer

Less reach
- as brand awareness falls, need more marketing

Question 2

Modern channel

Answer 2

Producer to Retailer to Consumer

Benefits
- can overcome marketing costs as retailers have high reach (well known in multiple locations)

Negatives
- won’t receive full price that consumers pay, retailer takes a ‘cut’
- if many retailers, still have high distribution costs

Question 3

Traditional channel

Answer 3

Producer to Wholesaler to Retailer to Consumer

Wholsaler buys in bulk
- guaranteed high sales volume

Low distribution costs
- only supply to one wholsaler

Low marketing costs
- retailers are well known and havw high reach

Don’t receive full price that’s paid
- both wholesaler and retailer take a ‘cut’, may have to increase price which could lower demand

Less able to provide effective customer service

Question 4

Depends on

Answer 4

Marketing issues
- PRC

Distribution issues
- PWRC

Good marketing and distribution
- PC

Retailer’s reputation