Channels of distribution The route a product will follow to get from manufacturer to customer The method chosen must allow products to get to the customer as efficiently as possible
Factors which determine method chosen • The actual product eg fresh flowers may need to be sold directly to preserve freshness • The image and exclusivity the manufacturer wants the product to have • Availability of finance • Reputation and reliability of wholesaler and/or retailer • Legal restrictions • Logistics – manufacturers ability to transport and store the product
The wholesaler A wholesaler buys large quantities of items from manufacturers and then sells them on to retailers, or directly to the customer, in smaller quantities. Many larger retailers do not use a wholesaler as part of their distribution channel because they have their own warehouse and transport systems.
RETAILER • A Retailer distributes products to the customer on behalf of the manufacturer. Retailers generally stock a range of products from a number of manufacturers/ retailers. The retailer will decide on the quantity to order, price to be charged and how to display the products. Large retailers can take advantage of economies of scale (bulk buying discounts). • The Manufacturer will decide which retailer to use based on where the customers are and what extra services eg credit and delivery terms, they offer the customer. Some manufacturers will decide not to use a particular retailer because their products will face competition in store.
Types of retailers The changing business environment influences the popularity and growth of different retailers. Changes in retailing trends: Supermarkets: Mainly supply food and drink but have branched out into selling eghomeware, clothes and electrical items. Large supermarkets have put many smaller business out of business in some towns/cities Discount Retailer: provide non-branded items at a cheap price. These stores have grown in popularity due to the economic climate.
Types of retailers E-tailer – shopping online and having products delivered to you eg Amazon. This type of retailer often has lower overhead costs because they do not have to worry about having stores on the high street. Convenience Retailer – often referred to as the “corner shop”. This type of retailer is normally a small shop with a limited amount of products. Usually situated in busy residential areas and are normally more expensive than supermarkets.
Direct Selling Marketing and selling straight to the customer from a supplier, away from a fixed location (ie cutting out the middle man). Methods: • Internet selling • Personal sellling • Direct mail • Mail order • Shopping channels • Specialist magazines
Internet Selling(e-tailing/e-commerce) Internet selling/e-tailing = involves selling products through an internet website. The website can also be used to advertise products. S-commerce = use of social media
Internet Selling(e-tailing/e-commerce) A supplier can: • Reach a wider market/global market • Save additional costs of opening a shop • Keep in touch with customers • Earn more profit from a growing market • Provide people with more information by e-mail • Build a stronger reputation and customer loyalty • Carry out market research
A customer can: • Save money – many products are cheaper • Shop from the comfort of their own home • Save time – no parking problems, etc • Get goods delivered directly to their door • Obtain goods that are not stocked in shops • See goods before they buy – eg video clips, jpeg images • Check stock levels instantly and reserve products • Compare prices of products from a variety of suppliers
Drawbacks of using the Internet • Technical issues eg: computer breakdown, power cuts and transmission interruption • Time delay between ordering and receiving products • Items may be lost or damaged in transit • Lack of personal contact • Security risks eg credit and debit card fraud • Customer unable to handle products before ordering
Personal Selling • Involves a trained sales staff selling products directly to the customer • Allows demonstration or explanation BUT • Customers might feel pressurised into buying the product
Direct Mail • Leaflets sent directly to households • Targets a specific segment • Reaches wide geographical areas BUT • Customers may find volume of junk mail annoying
Mail Order • Buying through a catalogue • Offers credit facilities • Can be exclusive (only way to buy) • Saves cost of retail premises BUT • Involves high advertising costs • Incurs high levels of bad debts • Lack of personal service • Numerous goods returned
Shopping Channels • Expert description and demonstration of product • Most offer automated ordering • Possible membership benefits eg discount BUT • Time wasting • Often have to pay for return postage
Specialist Magazines • Describes/sells specialist products to enthusiasts • Order by phone or post • Target market – common interest BUT • Limited market