Channels of distribution

A channel of distribution refers to the route a producer uses to reach the final consumer of the product.

There are two main types of distribution channel:

Direct from the product producer or service provider to the consumer. Direct sale methods include:

· factory sales

· telesales

· personal selling

· TV and radio sales

· pyramid selling

· mail/phone/fax order.

Indirect through an external organisation, such as a wholesaler, retail outlet, distributor, or agent. These organisations are known as intermediaries.

Distribution channels can be either national or international, involving sales to consumers and other organisations overseas. In some cases, a distribution channel can be made exclusive by restricting the number of outlets at which a product can be sold. For example, Dixons has an exclusive deal with Sanyo to sell one of their popular camcorder models.

Some producers distribute directly to the consumer from their factories or to their own retail outlets. For example, a bakery will need to get its products into the shops very quickly before they pass their sell-by date. To guarantee that shops stock their goods, some manufacturers will often own their own chains of retail outlets, and deliver direct. For example, many breweries own public houses. This gives them the advantage of a guaranteed outlet for their beers. It also allows the manufacturer to take all of the profit.

Other manufacturers may prefer to concentrate on making the product, and leave storage, selling, and distribution to outside specialist firms.

Indirect distribution via intermediaries

Wholesalers buy in bulk from manufacturers and are prepared to sell in smaller quantities to local retailers. This can be to the advantage of both the manufacturer and the retailer.

Advantages to the manufacturer:	Advantages to the retailer:
The wholesaler will: · Buy in bulk and pay for storage · Bear cost of transport to customers/retailers · Relieve manufacturers of the cost of administering orders to many customers over a wide geographical area · Provide a source of market research information from contact with retailers	The wholesaler will: · Allow the retailer access to a wide range of products from different manufacturers · Provide a delivery service · Provide information on new product lines · Sometimes help with storage and give credit

The disadvantages of using a wholesaler

Use of a wholesaler adds to the cost of the final product and so raises the price charged to the consumer. This also reduces the share of profit for the manufacturer and retailer. Because of this, wholesaling has gone into decline in recent years as manufacturers have tried to keep the wholesalers’ share of the profit for themselves by selling direct to retailers or straight to the final consumer.

Retailers

The retail sector consists of shops and stores who often provide the final link in a chain of distribution from the manufacturer to the final consumer. Retail outlets may either buy products direct from the producer or from a wholesaler, before adding their own mark-up on prices to charge the final consumer in order to cover their overheads and for profit.

A growing number of manufacturers now prefer to use their own distribution networks to sell directly to large retail outlets such as Sainsbury’s, Marks & Spencer, and WH Smith. Some retail chains are so large that they take on many of the functions of the wholesaler themselves. They also buy and stock in bulk, splitting up stock for distribution to their stores all over the country, or even the world. These large chains can reach many millions of consumers in different markets, and so are often able to influence manufacturers, demanding high product quality and guaranteed delivery times.

Дата добавления: 2015-12-08