1. Place (Distribution)

2. What this topic is about
The meaning and purpose of place (distribution)
Different distribution channels
Factors to consider when choosing distribution channels

3. Think about…
How can a business ensure that its products reach existing and potential customers?
How and where do customers prefer to buy the product?
How important are factors such as stock availability, price, speed?

4. The Objective of Distribution
To make products available in the right place at the right time in the right quantities

5. What is a distribution channel?
A distribution channel moves a product from production to consumption

6. Channels can have various levels
Each party in a distribution channel is called an “intermediary”
Producer
Wholesaler
Distributors
/ Agents
Retailer
Customer

7. Main Types of Intermediary
Retailer
Wholesaler
Distributor
Agent

8. Retailers - Introduction
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 Next)
Specialist chains (e.g. fast fashion, perfume)
Department stores (e.g. Debenhams, John Lewis)
Convenience stores (e.g. Spar, Costcutter)
Independents – a shop run by an owner
Franchises (retail format operated by franchisee)

9. Key Trends in Retailing
Trend towards out-of-town stores
Decline in independents
Growth of retailer “own label” brands
Continued growth in franchising
Increase in international retailing within Europe
Increasing technology in retailing

10. Key Advantages of Retail Distribution
Convenience for customers
Often UK-wide reach to customers
Retailer chooses the final price
Retailer handles the financial transaction
Retailer holds the stock
After-sales support (e.g. returns)

11. Wholesalers Wholesalers “break bulk” Advantages
Buy in large quantities from producers
Break 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 money by buying at a lower price from the producer and adding a profit margin onto the price paid by the retailer

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

13. Distributors
Distribute (sell on) products and serve as a local sales point
Usually specialise in a particular industry
Examples – building supplies, electrical components, industrial clothing
Offer products from many producers = greater choice
Different from agents in that a distributor holds stock
Producer
Distributor
Customer

14. Agent Specialist type of distributor Does not hold stock
Tend to operate in tertiary sector (services)
Travel
Insurance
Publishing
Earn commission based on sales achieved
Producer
Agent
Customer

15. Functions of a distribution channel
Provide a link between production and consumption
To gather market information
Communicate promotional offers
Find and communicate with prospective buyers
Physical distribution - transporting and storing
Financing – other parties finance the stock
Risk taking – other parties take some risk

16. Channel strategy decisions
Channel length - direct or indirect?
Choice of intermediary
Use just one or several channels?
How to move the goods through the channel?
Control over the channel – e.g. who decides price, promotion, packaging?

17. Direct or Indirect Channels?
A business faces a choice of using direct (short) or indirect (long) channels
Direct
Channel where a producer and consumer deal directly with each other without the involvement of an intermediary
Indirect
Involves the use of intermediaries between the producer and consumer

18. Direct Channels Increasingly popular Various Methods: Examples
Direct mailing
E-commerce
Telemarketing (telephone selling)
Examples
QVC (TV Selling)
Boden (clothes from catalogue)
Direct Line (insurance online)
Producer
Customer

19. So why use intermediaries?
Geography- customers may live too far away to be reached directly or spread widely
Consolidation of small orders into large ones
Better use of resources elsewhere
Lack of retailing expertise
Segmentation - different segments of the markets can be best reached by different distribution channels

20. Short or long channels? Short distribution channels
Few if any intermediaries used
Greater control over the marketing of the product
Keeps greater proportion of profit
But means increased distribution costs
Long distribution channels
Reduced costs
Reduces the producer’s control over marketing

21. Factors to Consider (1) Nature of the product Perishable/fragile?
Technical/complex?
Customised
Type of product – e.g. convenience, shopping, speciality
Desired image for the product

22. Factors to Consider (2) The market The business
Is it geographically spread?
The extent and nature of the competition
The business
Its size
Its nature
Does it have established distribution network?

23. Short channels are used for…
Industrial products
Expensive and complex goods
Bulking products
Customized products
Services
Products sold in geographically concentrated market
Products bought infrequently by relative small numbers of customers

24. Long channels are used for…
Consumer goods
Inexpensive and simple goods
Small products
Standardised products
Goods sold in dispersed markets
Goods sold frequently and to many customers

25. Place (Distribution)