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Distribution direct to the final consumer

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Direct selling cuts out the intermediary and allows the manufacturer to deal directly with consumers. This is the fastest-growing method of distribution in the UK. Direct selling methods include:

Mail-order advertisement: many firms specialise in selling direct to the consumer through advertisements placed in newspapers, specialist magazines, and other publications, or by sending mailshots direct to potential customers. Products such as computers, cameras and camcorders, even garages, can be ordered simply by telephoning the firm and quoting a credit card number, or by filling in a printed form and sending it off with a check.

‘Factory’ sales: these are organised by the manufacturer direct to final consumers, either by allowing customers into factories every now and again to sell off surplus or old stock at 'knock-down prices', by opening up a shop on site, or by mail order. For example, many farms have opened farm shops to sell their produce. Similarly, customers can buy cars 'straight off the production line' at the showrooms at Ford Motors in Dagenham, Essex.

Retailing through the ‘World-wide Web’. Business is making increasing use of the ‘web’ of connections to the world-wide Internet. In 1994, sales generated in the USA by the Internet were around $100m. By the year 2005, analysts expect it to account for around 30% of the huge US retail market. At present anyone with a personal computer and a modem link to a telephone line can receive information downloaded through the Internet. At present, most users are business or academics exchanging financial, economic, and business news. However, this is about to change as business organisations begin to sell video films, computer games, music, multimedia books and magazines, and provide dating agencies, home shopping, and banking facilities over the Internet.

TV and radio sales: an increasing number of mail-order adverts are appearing on TV and radio with the benefit of sound and vision. With a growing number of commercial radio stations and cable or satellite TV channels, the cost of advertising via these media has fallen.

Mail-order catalogues: companies such as Littlewoods and Kays which operate mail-order catalogues are simply large wholesalers who deal direct with the general public, splitting bulk into individual items, and allowing the consumer to pay in instalments. The cost of credit and home delivery, which can often take up to 4 weeks, tends to be reflected in higher prices. As a result, the importance of mail-order catalogues in total sales has declined in recent years.

Personal selling: this involves personal contact with the consumer by company sales representatives, either over the phone (telesales), or face-to-face at meetings and 'on the doorstep'. Experienced sales teams can explain how the product works, give demonstrations, and tailor their marketing approach to suit the individual requirements of each consumer. However, personal contact can be expensive, and often consumers react adversely to ‘doorstep’ sales or being bothered on the phone.

Pyramid selling or multi-level marketing (MLM): this system is used successfully by a number of companies, notably the American company Amway, who produce a wide range of products including soap, jewellery, and perfumes from their factories in the USA. These products are sold directly to consumers in many countries. The principle of pyramid selling is that individuals agree to make regular purchases of a company’s products to sell on to other consumers – often their family and friends – in their spare time. At the same time, each new salesperson aims to recruit others who are willing to buy products in bulk from them, in order to sell on to other consumers. The incentive to recruit new salespeople is that the person recruiting will earn a percentage of the sales they make. Clearly, the salesperson at the top of the pyramid stands to make the most money by earning a percentage of the sales of each person below him or her. Salespeople at the bottom of the pyramid often make little money, as people are not always willing to buy products such as cleaning liquids and soaps in bulk for their own use, and on a regular basis – especially from companies they do not know. Selling to friends and family can also be awkward. The result is that the goods bought by sales recruits to sell on to other consumers often remain their own.


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