Understanding Distribution Channels: The Role of Retailers and Wholesalers in Marketing

1. PLACE Marketing

2. Place • Refers to how product is taken from the production line and made available to consumers. • Two parts: • Channel of distribution • Type of retailer or outlet that will sell product to customer • Important influence on public perception of the product • Not an easy decision and failure to choose most appropriate channel will damage sales. PLACE

3. CHANNELS OF DISTRIBUTION How the product gets to the market PLACE

4. Methods of distribution • Direct selling • Retailer • Wholesaler • Agent • Importer/Exporter PLACE

5. Direct Selling • Principle: by cutting out middle-men, organisation can sell goods at competitive prices. • Manufacturer sells directly to public e.g. factory shop • Mail order e.g. ordering through catalogues, i.e. Argos. • Direct response advertising e.g. ads in papers or mags • Telephone selling e.g. double glazing, insurance • Television selling e.g. QVC • Where products are highly technical e.g. machines made for another manufacturer. • E-commerce e.g. Dell, Tesco on line etc PLACE

6. Place Task 1 • Describe different forms of direct selling available to organisations. (4 marks) PLACE

7. Solution • Organisations can use e-commerce to sell directly to consumers or customers. This method involves purchasing the product online and then the organisation sending it directly to the consumers chosen address. • Mail order- this is when companies sell goods through agents or through members of the public ordering from catalogues. • Direct response advertising is a number of producers place advertisements in newspapers or magazines describing the product being offered together with an illustration • Television selling is when there are shopping channels where manufacturers present there products in an informative way. During this time viewers can use a free phone telephone number to order something and pay by quoting their credit card. PLACE

8. Retailer • Local outlet for business’s products. Perform 4 functions: • breaks down bulk supplies for sale to public • provides information to consumers through advertising, displays and trained sales personnel • stores goods and prepares them for sale by displaying and pricing • physically sells goods to consumers and offers range of related services - credit, HP, delivery PLACE

9. Types of retailer • Independent retailer • E.g. local corner shop. Almost 80% of all retailers. • Multiple chain stores • Specialist e.g. River Island or variety e.g. Boots, M&S etc. • Supermarkets/Hypermarkets/Superstores • Tescos, Sainsburys, Asda • Consumer Cooperatives • Owned by ‘members’ • Department stores • House of Fraser, John Lewis, Selfridges • Specialist Stores • Comet, B&Q, IKEA • Franchises • McDonalds, Body Shop etc. PLACE

10. Wholesaler • General function is to buy goods from the manufacturer and sell them on to the retailer. • Good source of advice to manufacturer, being the middleman of the process they are in a position to know what is selling well. • Wholesaler has to make a profit • Has to play a part in marketing strategy PLACE

11. Advantages of using a wholesaler • Buys in bulk which relieves manufacturer of cost of making large number of small deliveries - cuts costs of transportation, sales staff and paperwork • Bears risk of holding large stocks. Manufacturer does not need to tie up capital in holding stocks. • Breaks down bulk supplies and offers smaller quantities to retailer. • May finish off packaging and labeling • Provides advice to manufacturer - what is selling, what to produce, what not to produce etc. • Provides advice to retailer - what to buy, what not to buy PLACE

12. Advantages of NOTusing a wholesaler • Manufacturer can maintain greater control over marketing of products. • Going direct to retailer allows manufacturer to coordinate the efforts of sales force with advertising, promotion and in-store merchandising • Growth in large supermarket chains and improvement in road haulage make it easier to deliver direct to retailer. PLACE

13. Marketing Task • Wholesalers buy goods in large quantities directly from manufacturers. Discuss the advantages and disadvantages to a manufacturer of using a wholesaler. 5 marks HBM Exam 2008 PLACE

14. SolutionMUST discuss both adv and disadvantages – should be answered in paragraph format. Advantages • Saves on a number of smaller deliveries. • Administration costs are reduced. • Less money tied up in stock. • Less stock goes obsolete. • Wholesalers may label the product. • Wholesalers break product down into smaller more saleable size. • Wholesalers can give market research direct to manufacturer. Disadvantages • Loss of control of how the product is presented. • Less profits as wholesaler makes profit, ie using middle men. • Costs involved in producing point of sale merchandising for wholesalers PLACE

15. Agent • Provide link between buyer and seller in exchange for commission. • E.g. estate agents, travel agents etc. • Often used to enter a foreign market - knowledge of markets inc. local customs or legal requirements PLACE

16. Importer/Exporter • Identify new/potential markets around the world • Good knowledge of markets inc. legal requirements • Similar to agents PLACE

17. Marketing Task • Explain the factors that an organisation should consider when deciding on a channel of distribution for its finished stock. (5 marks) PLACE

18. Factors affecting choice of distribution channel • The product • Probably most important factor - is it perishable, new, premium? • The market • Is the market large and spread throughout country or small and local? • Legal requirements • Goods sold through licensed premises or authorised outlets e.g. alcohol, drugs, Post Office • Buying habits • Growth in out-of-town shopping centres PLACE

19. Factors affecting choice of distribution channel • The business • Own distribution networks, mail order, television shopping, door-to-door selling • Cost and speed of transport available • If product is perishable, may be cost-effective to use air transport • Projected level of demand • Seasonal fluctuations PLACE