Types of Channels of Distribution
• Distribution – the decisions that need to be
made by a business to ensure that their
product/service makes their way to the
consumer
• There are 2 ways that a
company can do this
1) Direct Distribution
2) Indirect Distribution
Direct Distribution
• This type of distribution will connect the
consumer directly with the producer of the
product/service
• A relationship needs to be managed between the
manufacturer and the consumer
– Complaints & Concerns can be communicated faster
and more effectively
• Do businesses like this?
• Very common in the service sector
– Lawyers, Dentists, woodworkers, bakers, etc
Direct Distribution
• Integrated distribution policy is a version of
direct distribution
Direct Distribution
OTHER EXAMPLES?
Producer
Consumer
Direct Distribution
• Why Direct Distribution
– For the Customer
• Cheaper
• Talk directly to the manufacturer
– For the Business
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•
•
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Test products
Burn off inventory
Increase sales
Save on Costs
Indirect Distribution
• Use intermediaries, who take possession of
the goods and then resell them to the
consumer
– Will add a mark-up price
• Three types of intermediaries:
1) Importers
2) Wholesalers
3) Retailers
Indirect Distribution
• Importers
– Take products from a foreign manufacturer and
find a way to distribute it within Canada
– Will obtain exclusive distribution rights within a
country and take a % of the profit or add their
own mark-up
Indirect Distribution
• Wholesalers
– Acts as an intermediary between a manufacturer
and a small retailer
• This doesn’t make a lot of sense....
– Why wouldn’t the retailer not just deal directly
with the manufacturer?
Indirect Distribution
• This offers retailers a number of benefits
– Breaking Bulk where the minimum order size is
too large for the retailer
– Warehousing for the retailer who needs storage
space
– Risk Bearing and Financing where the wholesaler
takes the financial risk of purchasing
– Buying, Transporting, Managing, Promoting and
Providing Market Information
Indirect Distribution
• Wholesalers
– Very common for the following markets:
• Groceries
• Car Parts & Vehicles
• Computers & Software
Indirect Distribution
• Retailers
– The most common type of Indirect Distribution
– Selling of goods and services to the ultimate
consumer
• The last person who will buy the good
Retailers
• There are 5 important guidelines in
distribution in retail
1. The Right Merchandise Mix
2. The Right Price
3. The Right Time
4. The Right Place
5. The Right Quantities
Direct Vs Indirect Distribution
• Think of 10 stores in the BCI area – write them
down
• Beside each store – determine if they are:
– Direct
– Wholesalers
– Retailers
Types of Distribution
• Specialty Types of Distribution
– There are many non-traditional ways to get your
product to the consumer without the help of an
intermediary store a wholesaler or doing it
directly
Types of Distribution
• Catalogues
– Sears Catalogue
• Internet Sites
– Amazon
• Auction Sites
– Ebay
• Vending Machines
• Telemarketing
• Classified listings
– Newspaper, Craigslist, Kajiji
Types of Distribution
• Worksheet