Selling & Distribution

1. Selling & Distribution GCSE Business Studies tutor2u™ Revision Presentations 2004

2. Things to Think About • How can businesses ensure that their product or services reach existing and potential customers? • What is the route that the product normally takes between the start of production and finally being “consumed” or used by the customer? • What are the main advantages and disadvantages of the various options for “distribution”?

3. Distribution Channels • Products reach customers via a “distribution channel” • The channel is the link between seller and buyer – but it may have more than one stage in between; for example… Producer Producer Producer Wholesaler Distributors / Agents Retailer Customer Customer Customer

4. Wholesalers • Wholesalers “break bulk”: • They buy in large quantities from producers • Then break them into smaller quantities to sell to retailers • Advantages • Reduce the producer’s transport costs (fewer journeys to the wholesaler rather than many journeys to retailers) • Retailers can order in smaller amounts from wholesalers • Wholesaler makes his money by buying at a lower price from the producer and adding a profit margin onto the price paid by the retailer

5. Wholesalers - Example Sale of Daily Newspapers Newspaper Publisher – e.g. The Sun, The Times – who send bulk print runs of newspapers to large depots run by wholesalers Producer Wholesaler (e.g. John Menzies) packs newspapers into bundles for retailers (e.g. newsagents) Wholesaler Retailer Retailer (e.g. newsagent; petrol station) displays newspaper in store and delivers to homes Customer Customer = newspaper buyer

6. Distributors / Agents • Distributors • Distributors distribute (sell on) products and serve as a local sales point • Usually specialise in a particular market • Usually offer products from several / many producers – so that their customers enjoy greater choice • Agents are an example of a kind of distributor • Examples of Agents • Estate agents • Travel agents • Export/import agents Producer Distributors / Agents Customer

7. Direct Marketing • Involves a producer selling directly to the end customer – i.e. there are no other parts to the distribution channel • Various Methods: • Direct mailing • E-commerce • Telemarketing (telephone selling) • Door to door selling • Examples • QVC (TV Selling) • Boden (clothes from catalogue) • Sunday Times Wine Direct (wine through flyers in newspaper) Producer Customer

8. Why Use Direct Marketing? • Advantages • No intermediaries (e.g. retailers) to take part of profits • Producer can control own marketing • Chance to reach customers who would not have gone to shops • Don’t use “mass marketing” techniques such as advertising – which can save money • Disadvantages • Costs of distribution of promotional material • Costs of making distributional material (e.g. catalogues for Next) • Can still be very expensive if customers do not respond to the direct marketing materials (i.e. a low “response rate”

9. Sales Promotion • Sales promotion is a term used to describe various methods aimed at persuading customers to buy • Often used as part of other promotional activities such as an advertising campaign • Examples • Money off coupons (widely used by supermarkets) • Competitions • Discount vouchers (e.g. three for the price of two) • Free samples (e.g. washing tablets, shampoo sachets) • Gifts with purchase (e.g. CDs on the front of magazines) • Point of sale material • Frequent user / customer loyalty schemes (e.g. Nectar, Air Miles)

10. Why Use Sales Promotion? • Advantages • Short term boost to sales • Can attract customers away from other brands • All about “action” – encouraging customers to buy rather than encouraging them to think about it! • Disadvantages • Reduces profit margin on each product (depends on how much is given away in the “promotion”) • Usually only effective in short term, will need a longer term tactic to boost overall sales • Customers may come to expect sales promotions – and so wait until the next one comes along!

11. Customer Loyalty Schemes • A kind of sales promotion used by retailers • Encourage customer to return to retailer • Low cost of discounts given can be offset by profits generated by sales made • Loyalty cards also provide information about shopping habits of customers: • Where do they shop • When do they shop • What do they buy • Examples • Nectar • Air Miles • Boots Advantage Card

12. Retailing • Retailer – part of the distribution channel • Retailer is the final step in the chain – deals directly with the customer • Focused on consumer markets • Various kinds of retailer: • Multiples – chains of shops owned by a single company (e.g. Sainsbury’s or Body Shop) • Convenience stores (e.g. Spar, Londis, Costcutter) • Independents – a shop run by an owner

13. Exporting • Exporting = selling overseas • An important option for a business to grow: • UK markets may be too small or in decline • Product or service may be attractive to customers in other countries • Challenges faced by exporters: • Exchange rates • Language barriers • Different cultures • Trade barriers (e.g. quotas, tariffs, legislation) • Successful exporters need to have a detailed understanding of overseas markets

14. E-Commerce • Two kinds of business websites • Marketing sites • Promotes a business and its products or services to potential and existing customers • Trading sites • Promote a business • Allow customers to purchase online • Many Advantages of Selling Online • Website gives a business new ways of marketing and selling its products or service • Provides an opportunity for its to build relationships with customers • Effective and lower risk way of selling in international markets • Increasingly an essential part of doing business • Not a replacement for traditional marketing activities - website should complement and support them