Distribution channel: which a product is passed from the place of production to the customer.
Distribution channel 1: direct to consumers
Advantages:
Very simple
Suitable for products such as organic food
Lower price
can be sold via internet
Disadvantages:
High shipping fee
All storage costs must be paid for by the producer
Not suitable for products which that are not delivery easily
Distribution channel 2: using a retailer as the only intermediary
Advantages:
Sells large quantities
Reduced distribution costs
Disadvantages:
No direct contact with customer
Price of product increase as the retailer has to cover its costs
Distribution channel 3: using a wholesaler and retailer as intermediaries
Advantages:
Wholesaler saves storage space for small retailer and reduce costs
Small retailers can purchase fresh products from wholesaler
Wholesaler may give credit/advice to retailer
Saving transport costs
Reduce paperwork for the company
Disadvantages:
Expensive for small shop to buy from wholesaler than manufacturer
Wholesale may not have full range of products to sell
Take longer and may not as good quality
Price of products increase as wholesaler and retailer make a profit
Distribution channel 4: using an additional intermediary such as agent
Agent: an independent person or business that is appointed to deal with the sales and distribution of a product or range of products
Advantages:
Be aware of local conditions and will be best position to select the most effective place to sell
Know the best way to sell product in other markets
Disadvantages:
Producer have less control over the way the product is sold
Method of distribution:
Department stores: large stores in cities, sell a wide range of products from suppliers
Chain stores: 2 or more stores have the same name and characteristic
Discount stores: retail stores
Superstores: large out of town stores
Supermarkets: retail grocery stores
Independent retailers: single shop, high price small store
Direct sales: distribution channel 1
Mail order: through catalogue, magazine or order can be through telephone,internet
Internet/e-commerce: business website
Selecting the distribution channel to use
What type of product it is?
Is the product very technical?
How often is the product purchased?
How expensive is the product?
How perishable is the product?
Where are the customers located?
Where do the competitors sell their product?
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