Distribution is the process of getting a product from the producer to the consumer.
Main objective of distribution
To make products avaliable in the right place at the right time in the right quantities.
Distribution Channels
A distribution channel moves a product through the stages from production to final consumption.
Each party in a distribution channel is called an intermediary.
Wholesalers
- Break bulk
- Buy large volumes of products at a low price and resell smaller quantities at a slightly higher (but still cheaper than the market) price
- Retailers can order smaller amounts of product from wholesalers.
- A wholesaler makes money by buying at a lower price from the producer and adding their profit margin onto the price paid by the retailer.
Agents
- Specialist type of distributor
- Does not hold stock
- Tend to operate in the tertiary sector (services)
- Travel
- Insurance
- Publishing
- Earn a commission based on sales achieved
Direct vs Indirect Distribution channels
- Direct Distribution
- Channel where a producer and consumer deal directly with each other without the involvement of an intermediary
- Indirect Distribution
- Involves the use of intermediaries between the producer and consumer
Factors to consider
- Nature of the product
- Perishable/fragile
- Technical/complex
- Type of product
- Desired image for the product