Learning Intentions / Success criteria
Learning
Intentions
Place
Success Criteria
Learners should be able to describe and discuss:
• the costs and benefits of using wholesalers
• the costs and benefits of using different types of
retailers
• the costs and benefits of using direct sales
• the costs and benefits of different distribution
methods
• the overall channels of distribution available to
businesses
• the use of, and costs and benefits of, e-commerce.
2
Place
• Place is about getting the product to the
customer and where it is sold.
• Changes to where the product can be bought
and how it gets to the customer may attract
new customers.
3
Channels of Distribution
• Channel of distribution is the route a product
will follow to get from the manufacturer to the
customer.
• The route always starts with the manufacturer
and ends with the customer.
4
Factors Determining Channel of
Distribution
Factor Description
Finance available A manufacturer may not have the finance available to set up
e-commerce or print catalogues to sell direct, so using
wholesalers or retailers are the only options.
Desired image for the
product
Certain products have images that dictate where they can be
sold, e.g. Hugo Boss only sell in retailers that have built up a
good reputation over at least 5 years.
Shelf life of the
product
Some products need to be shipped to retailers fast as they
will go out of date quickly, e.g. fresh fruit.
Legal restrictions Some products can’t be sold through certain channels, e.g.
prescription medicines need to be sold through pharmacies.
Stage of the product
life cycle
Products may only be sold in exclusive outlets at the
beginning of a product’s life cycle, but may be sold in
discount stores during their decline stage to encourage sales.
Technical qualities of
the product
Highly technical products may need to be demonstrated,
which means personal selling is the ideal channel. 6
Direct Selling
• This is selling direct to the
consumer from the
manufacturer.
• This is the shortest channel of
distribution and means there
are less ‘middle men’ taking a
cut of the profits.
• Businesses also retain control
of how their product is
marketed.
Methods of direct
selling a business
could use:
• e-commerce
• mail order
• direct mail
• personal selling
• online shopping
channels.
7
E-commerce
A business sells its products using the internet, e.g. ASOS.
Advantages Disadvantages
• Customers in the global
market can be reached,
24/7.
• An entire range can be
shown online.
• Online discounts can be
offered to attract
customers.
• Product information and
customer comments can
sway purchasing decisions.
• It can take a lot of time and expense
to design attractive, high-quality
websites.
• Customers might be wary of
providing their personal details
online.
• Customers need to have access to
the internet.
• Customers need to wait for products
to arrive and may have to pay
delivery costs. 8
Mail Order
A business sells its products using a catalogue, which is usually
sent directly to the customer, e.g. M and M Direct.
Advantages Disadvantages
• Credit facilities are often offered
to customers.
• Customers can browse for
products and place orders from
home, at a time that suits them.
• Mail-order-only companies save
money on staffing and store
costs.
• Glossy catalogues can be
expensive to produce.
• Producing catalogues is
not environmentally
friendly and may not
meet CSR aims.
• A level of bad debt might
be incurred.
9
Direct Mail
A business posts letters, leaflets and brochures directly
to the customer.
Advantages Disadvantages
• Specific market segments can
be targeted, e.g. by inserting
supermarket recipe cards
inside cookery magazines.
• A wide geographical area can
be targeted by placing leaflets
inside newspapers and
magazines.
• Customers can perceive this
as ‘junk mail’ and simply
throw it away.
• Customers mailing lists can
quickly become out of date,
meaning a business may
target the wrong people and
waste money.
10
Personal Selling
A salesperson sells products directly to the customer, often
by going ‘door to door’ or over the phone (telesales).
Advantages Disadvantages
• Allows a
demonstration or
explanation of the
product to be given.
• Feedback on products
can be gathered from
customers.
• Customers can find this type of
selling a nuisance and may not
be keen to listen.
• Staffing costs and commission
make this method expensive
and increasingly unpopular
with businesses.
11
Online Shopping Channels
A business sells products on the TV using dedicated
shopping channels, e.g. QVC.
Advantages Disadvantages
• Customers can see
products being modelled
and demonstrated.
• Customers can be
encouraged to buy on
impulse due to short-term
bargain prices.
• Customers need to switch
on to the channel before
they can be targeted.
• Customers need to wait for
products to arrive and may
have to pay delivery costs.
12
Retailers
Manufacturers selling products through a retailer have the following
advantages and disadvantages.
Types of retailers: hypermarkets and superstores, convenience
supermarkets, out-of-town retail parks, online retailers and discount
stores.
Advantages Disadvantages
• Retailers are located close to
customers.
• Retailers often promote the
product for the manufacturer.
• Retailers employ sales
assistants to help sell the
product.
• Larger retailers buy in bulk.
• Retailers take a cut of the profits.
• Retailers may alter the price of
the product and so have an effect
on the image of the product.
• The product will face
competition from other products
stocked by the retailer.
13
Hypermarkets and Superstores
There has been a growth in massive supermarkets,
which sell many goods and services under one roof. The
largest of these are known as Hypermarkets, e.g. Tesco
Extra.
Advantages Disadvantages
• Most hypermarkets open
24/7.
• A huge range of products
are offered to customers.
Lack of competition from
high-street stores can lead to
poorest quality products.
14
Convenience Supermarkets
Due to changing work patterns and lifestyle changes, there has
been a growth in smaller supermarkets appearing in convenient
locations, such as M&S Simply Food or Little Waitrose in city
centres, near transport hubs or on forecourts.
Advantages Disadvantages
• Cater for the changing needs
of customers so are
guaranteed footfall.
• Prices can be slightly higher
than larger supermarkets
due to the convenience
factor.
• Limited choice of products
due to smaller store sizes.
• There can be high levels of
waste as it is harder to predict
customer numbers than it is
for larger, more traditional
supermarkets.
15
Out-of-town Retail Parks
Out-of-town (OOT) retailing is now found on the outskirts of
most major towns in the UK, with good infrastructure such as
road links and free car parking, e.g. Glasgow Fort.
Advantages Disadvantages
• Infrastructure attracts customers.
• Often near amenities such as
restaurant chains and cinemas,
which can increase footfall.
• Larger store sizes mean a good
product range for low prices due
to bulk buying by OOT retailers.
• Limited choice of stores
compared to high-street
shopping or more
traditional shopping
malls.
• Only suitable for
customers with access to
transport.
16
Online Retailers
Amazon is the biggest online retailer (dubbed ‘e-tailor’)
in the UK. Rather than setting up their own e-commerce
site, some manufacturers will sell through retailers like
this.
Advantages Disadvantages
• Products can be sold to a
world-wide market by
online retailers.
• Products can be sold 24/7.
• Customers can’t try or
touch the product before
buying.
• Delivery charges may put
some customers off.
17
Discount Stores
In response to the recession, discount stores have become
popular in the UK over the last few years, e.g. Poundland
and B&M Homestores.
Advantages Disadvantages
Products are sold for rock-
bottom prices, which
attracts customers looking
for value.
• Limited product range
compared to other retailers.
• Some customers don’t like
the image of discount stores.
18
Wholesalers (1)
Manufacturers can sell goods to Wholesalers to distribute to smaller retailers
or, direct to customers. Using a wholesaler has the following advantages and
disadvantages for manufacturers:
Advantages for manufacturers Disadvantages for
manufacturers
• Packaging and displaying of goods is carried
out by the wholesalers, saving the
manufacturer time and costs.
• Wholesalers buy in bulk, saving manufacturers
from making lots of smaller deliveries.
• Wholesalers can promote products to retailers,
which saves the manufacturer promotion costs.
• The wholesaler carries the risk of products
going out of fashion as manufacturers get rid
of stock as soon it is produced.
• Manufacturers makes
less profit as a cut is
taken by wholesalers.
• The manufacturer
loses control of how
the products is
marketed.
• The manufacturer
loses control of which
retailers the product is
sold to. 19
Wholesalers (2)
There are also advantages and disadvantages of using a wholesaler for
retailers:
Advantages for retailers Disadvantages for retailers
• Retailers can save on storage
facilities by buying smaller
quantities from wholesalers than
they would get from manufacturers.
• Retailers can benefit from
promotions offered by wholesalers
that they may not get direct from
manufacturers.
• Retailers can trial smaller orders of
newer products and not be left with
large amounts of unsold stock.
• It is more expensive than going
directly to manufacturers as
wholesalers add on a margin of
profit.
• Wholesalers offer the same
products to retailers’
competitions, so other areas of the
marketing mix have to be relied
on.
• The retailer may miss out on
exclusivity deals by not going
direct to manufacturers. 20