Channels of Distribution

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  • Created on: 18-06-14 09:16
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Type and main Example of products Possible benefits Possible drawbacks
features or services
1. Direct selling: no - mail order from - no intermediaries, so no - all storage and stock
intermediaries. Can be manufacturer mark-up or profit margin costs have to be paid for
- airline tickets and hotel taken by other by producer
referred to as
accommodation sold businesses - no retail outlets limits
"zero-intermediary" over the internet by the - producer has complete the chances for
channel service providers control over marketing consumers to see and try
- farmer's markets ­ mix ­ how product is sold, before they buy
selling produce directly to promoted and priced to - may not be convenient
consumers consumers for consumer
- a bakery, vans online, - no advertising or promotion paid for by
intermediaries and also
no after-sales service
offered by shops
2. One-intermediary - holiday companies - retailer holds stocks and - intermediary takes a
channel. Usually used selling holidays via travel pays for cost of this profit mark-up and this
agents - retailer has product could make the product
for consumer goods
- large supermarkets that displays and offers more expensive to final
but could also be an hold their own stocks after-sales service consumers
agent for selling rather than using - retailers often in - producers lose some
industrial products to wholesalers locations that are control over marketing
businesses. - where the whole convenient to consumers mix
country can be reached - producers can focus on - retailers may sell
using the one-level route, production ­ not on products from
e.g. a small country selling the products to competitors too, so
- Tesco, Viajes Ecuador, consumers there's no exclusive
Wal-Mart outlet
- producer has delivery
costs to retailer
3. Two-intermediaries - in a large country with - wholesaler holds goods -another intermediary
channel. Wholesaler great distances to each and buys in bulk from takes a profit mark-up ­
retailer ­ many consumer producer may make final good
buys goods from
goods are distributed this - reduces stock-holding more expensive to
producer and sells to way, e.g. soft drinks, costs of producer consumer
retailer. electrical goods and - wholesaler pays for - producer loses further
books transport costs to retailer control over marketing
- Guess, Tommy Hilfiger, - wholesaler `breaks bulk' mix
Coca Cola by buying in large - slows down the
quantities and selling to distribution chain
retailers in small
- may be the best way to
enter foreign markets
where producer has no
direct contact with


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