The Channels of Distribution

1. The Channels of Distribution

2. What is distribution? The process of getting products from production to the consumer

3. The Two Components of Distribution • Selecting, developing and managing distribution channels • Physically distributing goods and services through those channels Problems in doing these things: • Which channel to select? Advantages and Disadvantages • Logistics – how does the product physically get there

4. Different options Consumer Producer Retailer Consumer Producer Importer and/or Wholesaler Retailer Consumer Producer Specialty Channel Producer Consumer

5. Distribution Policy • Policy regarding how a business wants its products distributed to consumers • There are four types

6. Intensive Distribution • try to get the product sold in as many different places as possible • Advantages • Increase sales • Increase recognition • Disadvantages • Lack of control of retail locations • Intensive competition • Product examples: Coke, Gum, others?

7. Selective Distribution • Try to control the distribution of product but not exclusively • Advantages • Some control over where product is sold • Can still cover a large area • Disadvantages • Legal implications – purchase minimums • Missing out on possible sales • Examples?

8. Exclusive Distribution • Exclusive distribution contracts with one or two businesses in a certain area • Advantages • Control over image • Favourable agreements • Disadvantages • Can severly limit sales • Geographical problems • Examples?

9. Integrated Distribution • When business owns both distribution and manufacturing • Advantage • Total control of product • Keep sales revenue • Disadvantage • Handle all expenses • Handle all difficulties • Examples?

10. Types of Channels • Direct Channels • Product goes directly from producer to the consumer • Examples • Trade Services • “Lemonade stand” • Integrated distribution • Marketing agents Consumer Producer

11. Types of Channels • Indirect Channels • Use distribution intermediaries who make a profit off holding on to the product Retailer Consumer Producer Importer and/or Wholesaler Retailer Consumer Producer

12. Indirect • Examples • Importers • Foreign made product goes to exclusive importer who sells to retail outlets in a geographical area • Wholesaler • Buy products from domestic manufacturers and sell them to retail stores and other businesses • Retailers • Sell product to consumers

13. Advantages of the Wholesaler for the Retailer • Buy in bulk – lower costs per unit • Warehousing – hold on to greater amount of product in case needed • Risk bearing – retailer has less risk for owning large quantitiy of a product with unknown or changing demand • Financing – retailers don’t have to borrow money to pay for extra stock, they can use previous sales of smaller quantities to buy more • Buying – saves the time and effort of finding mulitple suppliers • Transporting – Wholesalers usually deliver without charge (in the price of the product) • Managing – Wholesalers will provide advice on inventory management and play a major role in controlling inventory levels for their customers • Promoting – wholesalers pass on free promotional materials • Providing market information – they know whats hot, what not and what is on the horizon

14. Specialty Channels • Any distribution that does involve a retail store Specialty Channel Producer Consumer

15. Types of Specialty channels • Vending machines • The Internet • Catalogues • Telemarketing • Television Sales Questions for you to answer • For each of the above, list one product that you could sell effectively using that specialty channel • What is an advantage of each of the specialty channels mentioned? What is a disadvantage? Discuss with a partner and use pages 301-306 to help.

16. Channel Captains • When one company controls the relationship in the distrubtion chain due to volume and/or sales • Wal-mart example