1. Edexcel A-level Business Theme 1 1.3 Marketing Mix and Strategy
1.3.4 Distribution
KEY TERMS:
B2C: The selling of goods and services by businesses selling direct to consumers
B2B: The selling of goods and services by businesses selling direct to other businesses
Distribution refers to the location where consumers can buy products from. If a business cannot get products in the right place at the right time they are not likely to be successful
Consumers, retailers, wholesalers and agents/brokers are also known as INTERMEDIARIES
Direct selling: selling direct to the consumer e.g.
The internet
Direct mail
Door to door
Mail order catalogues
Direct response adverts
Shopping parties
Telephone selling
Distribution channel: is the route taken from manufacturer to the consumer
Retailing: retailers (shops) buy good and sell direct to consumers. They provide a number of services:
Buy large quantities (break bulk) and sell in small quantities to customers
Sell in convenient locations
May add value by providing other services e.g. delivery and repair services
Wholesaling: Buy from manufacturers to help distribute goods who then sell on to retailers. A wholesaler will stock goods from many manufacturers, therefore retailers get a wide range of merchandise to purchase
Wholesaling: their role is to link buyers and sellers e.g. travel agents, estate agents. Using overseas agents when expanding abroad can increase the chance of success due to local expertise
Choosing the most appropriate distribution channel:
The nature of the product: (e.g. FMCG such as crisps, are better sold in bulk, not appropriate to sell direct from manufacturer)
Cost: firms will usually choose the cheapest channels to keep as much of the profit as possible
The market: e.g. mass markets likely to sell using intermediaries, niche more likely to use personal selling / agents
Control: e.g. Chanel only sell in department stores, not Boots/Superdrug like celebrity fragrances to keep their ‘upmarket’ image
The more intermediaries used, the less control the manufacturer has and the higher the final price becomes for the consumer
Changes in distribution to reflect social change:
A huge growth in online shopping e-commerce and m-commerce ($533bn in 2017 up 398% in 3 years)
Building of large US-style shopping malls
Sellers using call centres to sell products
Supermarkets opening for longer and extending their product ranges
Shopping becoming more of a leisure activity
Flourishing of charity shops
Changing from product to service:
In most Western economies, the tertiary sector has grown at the expense of primary and secondary sectors. This has meant businesses have had to focus primarily on tertiary sectors and are now selling services instead of products e.g.
CD’s – downloads
DVD – Netflix
Newspapers - subscriptions