Channels of Distribution
Unit 2, Lesson 3
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Channels of Distribution
 Goals
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Students will understand the channels of distribution.
Students will evaluate a distribution plan.
Students will identify physical distribution activities.
Students will determine costs associated with distribution.
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Channels of Distribution
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Terms to know
Channel of Distribution
Intermediaries
Direct Distribution
Indirect Distribution
Exclusive Distribution
Franchises
Integrated Distribution
Selective Distribution
Intensive Distribution
E-Commerce
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 Methods of
Transportation
For-Hire Carrier
Contract Carrier
Small Package Carrier
Bus Carrier
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Channel Members
 The channel of distribution is the path that a product takes from producer to final user.
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Channel Members
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Intermediaries are those involved as the product moves from producer to consumer.
Merchant Intermediaries take possession of the product (wholesalers and retailers).
Agent Intermediaries do not take possession.
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Channels of Distribution
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Wholesalers – Buy large quantities, store them and then resell them to other businesses.
Rack Jobbers – Wholesalers who manage inventory, stock when needed and provide racks for displays.
Drop Shippers – Own the goods but do not physically handle the products.
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Channels of Distribution
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Retailers sell goods to the final consumer for personal use.
Brick and Mortar Retailers – Have a physical store from which they sell their products.
Vending Services – Buy goods and sell through vending machines.
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Channels of Distribution
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Direct Mail and Catalog – Can be brick and mortar selling goods to customers while they are at home, or Internet sites with out a physical store.
Television Home Shopping Networks –
TV stations that sell products to consumers.
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Channels of Distribution
 E-Tailing – Retailers selling products over the Internet. Some are an extension of brick and mortar business and some are only found on the
Internet.
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Channels of Distribution
 Brokers – Paid a commission based on a percentage of the sale price.
They negotiate the sale and then look for other customers. Used often in seasonal products such as food.
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Channels of Distribution
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Independent Manufacturer’s
Representatives – Represent several related but not competing manufacturers. Work independently running their own business.
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Channels of Distribution
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Direct Distribution – When goods and services are sold directly to the customer from the manufacturer.
Indirect Distribution – Involves one or more intermediary between customer and manufacturer.
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Channels of Distribution
 Exclusive Distribution – Only select distributors are allowed to sell the product.
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Prestige
Image
Channel control
High profit margin
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Channels of Distribution
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Franchises are also an example of exclusive distribution. Only licensed franchises can sell the product.
Integrated Distribution – When the manufacturer acts as wholesaler and retailer for their own products.
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Channels of Distribution
 Selective Distribution – A limited number of outlets in a geographic are allowed to sell the product. Those selected must:
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Be able to maintain an image
Be a good credit risk
Be aggressive marketers
Be good inventory planners
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Channels of Distribution
 Intensive Distribution – Products are distributed through all suitable outlets. Goal is to sell to as many customers as possible.
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Channels of Distribution
 E-Commerce – Products sold to customers and industrial buyers via the Internet.
 Cyber Monday sales topped $1.25 billion in
2011.
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Online travel increasingly popular.
Many retailers moving to B2B websites to sell products to industrial customers.
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Channels of Distribution
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Methods of transporting goods
Rail – Piggyback and fishyback.
Air – Public and private carriers.
Truck – Public and private carriers.
Water – Intracoastal and internal waterways.
Pipeline – Used primarily for oil and gas.
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Channels of Distribution
 For-Hire Carrier – Transportation company that moves products for business and charge a fee for transportation.
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Common Carrier – Transports products on a specific schedule and according to government regulations.
Contract Carrier – Carrier that provides equipment and drivers to transport products according to negotiated contract.
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Channels of Distribution
 Small Package Services
 U.S. Postal Service – Usually ships packages meeting certain size and weight restrictions.
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Freight Forwarder – Transportation company that pools many smaller shipments together to take advantage of lower rates.
Express Carrier – Transportation that specializes in delivery of small, lightweight packages and high-priority mail. Shipments are usually less than 150 lbs.
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Channels of Distribution
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Bus Carrier – Usually packages weighing less than 100 lbs via a scheduled bus route.
Can make same-day or next-day delivery to small towns and cities.
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Picture Sources
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 http://www.sxc.hu/photo/1114152 http://www.sxc.hu/photo/1342188 http://www.sxc.hu/photo/1257832 http://www.sxc.hu/photo/551841 http://www.sxc.hu/photo/1331497 http://www.sxc.hu/photo/1157173
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