distribution Flashcards
(33 cards)
A channel of distribution is:
the route a product takes from the manufacturer or producer to the consumer
A product usually passes through:
Intermediaries on the way from producer to customer - e.g. retailers, wholesalers and agents
Retailers:
Shops who sell to consumers. They’re usually the final stage in the distribution channel.
Examples of retailers:
Tesco, Argos and Amazon. Retailers can be physical shops or online “e-tailers.”
Wholesalers make life:
Easier for retailers and manufacturers
Wholesalers buy:
Goods from manufacturers in bulk and sell them in smaller quantities to retailers. This is called “breaking bulk”
Breaking bulk:
A wholesaler takes the goods off the manufacturer’s hands and pays for the whole lot. Manufacturers don’t have to wait for customers to buy the goods before they see any cash
Wholesalers make:
Distribution simpler. Without a wholesaler, the manufacturer would have to make separate deliveries to lots of retailers, and send each and every retailer an invoice. Selling to one wholesaler cuts down the paperwork and the number of journeys
Wholesalers can:
Store more goods than a retailer can - they act as the retailers storage cupboard
Agents, such as travel agents:
Sell products to customers on behalf of businesses. They’re often paid commission for the products that they sell
A business will look at:
The product, the market and the size of the business when deciding which distribution channel to use
Different channels of distribution:
Direct selling (Two stage channel): Manufacturer -> consumer
Indirect selling (Three stage channel): Manufacturer -> Retailer -> Consumer
Indirect selling (Four stage channel): Manufacturer -> Wholesaler -> Retailer -> Consumer
Direct selling (Two stage channel): Manufacturer -> Consumer
The internet has made it easier for producers to sell directly to the consumer. Buying and selling on the internet is called e-commerce. This allows access to a worldwide market. For small firms, a low-cost option is to sell goods using electronic marketplaces (e.g. eBay).
Indirect selling (Three stage channel): Manufacturer -> Retailer -> Consumer
This is a common distribution channel for recreational items such as clothes, shoes and homeware. Retailers are usually in places that are convenient for the consumer, such as shops on the high street
Indirect selling (Four stage channel): Manufacturer -> Wholesaler -> Retailer -> Consumer
This is a traditional distribution channel used for groceries, e.g. by supermarkets. However, because those at each stage of the distribution channel want to make a profit, it can increase the cost to the consumer
Multi-channel distribution:
When businesses sell through more than one method, e.g. online and in-store.
What does multi-channel distribution do:
Gives flexibility for customers and wide market coverage for manufacturers
Supermarkets and fashion retailers which have high street stores as well as an internet store are using a:
Multi-channel strategy. This may lead to added costs, but it allows them to target a wider market
Stores which only sell online may have:
Cheaper costs, because they use a single channel of distribution.
Problems with stores that only sell online:
Can have problems establishing brand loyalty. Also, customers often like to see and feel goods before they buy them, which is a limitation of e-commerce
Online distribution means:
Firms can provide services instead of products
Online distribution is:
The streaming or downloading of media content (like games, films, music and books) via the internet
The consumer is purchasing the:
Right to download the media content as opposed to buying a good - they’re purchasing a service instead of a physical product
Delivery via online distribution is:
Direct and almost immediate once an item has been purchased. In certain markets, the traditional distribution channels are being replaced by online distribution
