Channels of Distribution
Chapter 21
Ch 21 Sec. 1 -- Distribution
What you’ll learn
• The concept of a channel of
distribution
• Who channel members are
• The different non-store retailing
methods
• How channels of distribution
differ for consumer and
business-to-business products
Distribution is Part of the Place Decision
• Distribution deals with the physical movement,
handling, and storage of goods and services.
• Place decision deals with where and how goods
and services will be distributed to consumers.
Channel of Distribution
The path a product takes from producer or
manufacturer to the final user.
Channel Members are called intermediaries
• Intermediaries provide value to producers
because they often have expertise in
certain areas in distribution producers do
not have.
• Intermediaries are experts in displaying,
merchandising, and providing convenient
shopping locations and hours for
customers.
Channel Members are called intermediaries
• Wholesalers – buy large quantities of
goods from manufacturers, store the
goods, then resell them to other
businesses
– Rack jobbers – manage inventory and
merchandising for retailers by counting
stock, filling it in when needed, and
maintaining store displays.
– Drop shippers –own the goods they sell
but do not physically handle the actual
products.
Retailers – sell goods to the final
consumer for personal use
– Brick and mortar retailers
– Automatic retailing – vending service
– Direct mail and catalogs
– TV home shopping
– E-tailing – online retailing
Agents – do not own the goods they sell. They bring
buyers and sellers together
Direct and Indirect Channels
• Direct distribution occurs when the
goods or services are sold from the
producer directly to the customer – no
intermediaries are involved.
– Example: A farmer sells corn at a
street market.
• Indirect distribution involves one or
more intermediaries.
DISTRIBUTION INTENSITY
Deals with how widely a product is
distributed.
Three Levels of Distribution Intensity
• Exclusive Distribution – Involves protected
territories for distribution of a product in a
given geographic area. (i.e. Rolex)
• Selective Distribution – Limited number of
outlets in a given geographic area are used to
sell product. (i.e. Nike)
• Intensive Distribution – Involves the use of all
suitable outlets to sell a product. (i.e. Coca
Cola)
Channels in the consumer markets
Channels in industrial markets