Distribution
The “Place” Decision
Distribution
Intermediaries
Intermediaries reduce the number of transactions required by manufacturers
to reach their final customers. What expenses of doing business are lowered
by this reduction in transactions?
Distribution – How It Works
I.
Channel of Distribution – the path a
product takes from producer or
manufacturer to final user
A.
Channel Members → Intermediaries
1. Wholesalers – obtain goods and
services from manufacturers and resell
them to industrial users, other wholesalers
and retailers
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Rack Jobbers – manage inventory and merchandising for
retailers by counting stock, filling it when needed, and
maintaining store displays
Drop Shippers – own the goods they sell but do not
physically handle the products
Distribution – How It Works
2. Retailers – sell goods to the final consumer
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Retail Stores – sell goods to the customer from their
own physical stores
Ex: Department stores, Specialty stores,
Supermarkets, Drugstores, Convenience stores, and
Discount stores
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Nonstore Retailing – sell goods through other
avenues
Ex: Vending machines, Telephone & mail orders,
Door to door, and E-tailing
Distribution – How It Works
3. Agents - intermediaries that bring buyers
and sellers together
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Manufacturers’ Agent – sells similar products for
several noncompeting producers
Broker – brings buyers and sellers together
II. Direct and Indirect Channels
A.
Direct Distribution – goods or services
are sold from the producer directly to the
consumer
B.
Indirect Distribution – selling the goods
or services involves one or more
intermediaries between the producer and
consumer
Distribution Intensity
Channels of Distribution
Manufacturers / Producers
Agents
Wholesalers
Retailers
Consumers
III. Distribution Intensity
A. Exclusive Distribution – selling through
only one middleman in a particular
geographic area
B. Selective Distribution – selling through
only those middlemen who will give the
product special attention
C. Intensive Distribution – selling a product
through all responsible and suitable
middlemen who will stock the product
Interactive Exercise: Ideal Market Exposure
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Purchasing
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Organizational buyers – people who buy goods for
business purposes, usually in much greater
quantities than the average consumer
Wholesaler and retail buyers – people who
purchase goods for resale: they forecast customers’
needs and buy the necessary products to meet
those needs
Six-month merchandise plan – the budget that
estimates planned purchases for a six-month period
Open-to-buy (OTB) – the amount of money left for
buying goods after all other expenses have been
considered
Planning Purchases
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Centralized Buying – buying for all branches
in a central location, such as company
headquarters
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Decentralized Buying – local store
managers or their designated buyers are
authorized to make special purchases for
their individual stores
The Buying Process
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New-task Purchase
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Modified Re-buy
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Want slips – customer requests for items that are
not carried in the store
Resident buying offices – retailers’
representatives in a central market
Straight Re-buy
Selecting Suppliers
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Production capabilities
Past experiences
Special buying arrangements
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Consignment buying – goods are paid for only after they
are purchased by the final consumer
Memorandum buying – the supplier agrees to take back
any unsold goods by a certain date
Special services
Negotiating Terms
Internet Purchasing