Distribution

Where do products come from?

Channels of Distribution

The path from manufacturer to the final user

Business – industrial user Person - consumer

Channel Members

Manufacturers – make the product Intermediaries – move / resell the product

WholesalersRetailersAgents

Consumers – use the product

Wholesalers

Buy large quantities of goods Resell the goods to another business Rack jobbers – manage rack and product

inside the store Drop shippers – buy product from

manufacturer, sell to retailer, and ship directly from one to the other (often raw materials)

Retailers

Sell goods to consumers Brick and mortar – physical building you

shop at Vending service – machine holds inventory Catalog or online – stores inventory

available from convenience of home

Agents

Do not own products Make money by connecting

manufacturers, wholesalers, or retailers to one another

Very common in the food industry

MANUFACTURERS

AGENTS

WHOLESALE

RETAILERS

CONSUMERS

Manufacturer to Consumer

Factory outlet or farmer’s market Home sales call, door-to-door sales Catalogs from manufacturers Telemarketing Online sales (manufacturer’s site)

MANUFACTURERS

AGENTS

WHOLESALE

RETAILERS

CONSUMERS

Manufacturer to Retailerto Consumer

Commonly used for merchandise that dates quickly or needs servicing

Fashion apparel and automobiles Large chain stores also use this method

MANUFACTURERS

AGENTS

WHOLESALE

RETAILERS

CONSUMERS

Manufacturer to Wholesalerto Retailer to Consumer

Items that are always carried in stock Items include, supermarket items, flowers,

candy, and stationary supplies

MANUFACTURERS

AGENTS

WHOLESALE

RETAILERS

CONSUMERS

Manufacturer to Agents to Wholesaler to Retailer to Consumer

Manufacturers who don’t want to bother with the selling process

Because of so many intermediaries, prices are higher

MANUFACTURERS

AGENTS

WHOLESALE

RETAILERS

CONSUMERS

Manufacturer to Agents toRetailers to Consumers

Again, manufacturers focused on production and not sales

Examples include expensive cookware, meat, cosmetics, and many supermarket items

Direct or Indirect Distribution

Direct – manufacturer to consumer Indirect – manufacturer to intermediary to

consumer

Distribution Planning

Control of product, sales terms, price Cost of storing, shipping, selling Market considerations – foreign markets,

e-marketplace, etc.

Distribution Intensity

Exclusive Distribution – protected area, one source

Selective Distribution – limited number of outlets

Intensive Distribution – product available at all suitable outlets