Place 

Place is the point where products are made available to customers. A business has to decide on the most cost-effective way to make their products easily available to customers. 

Distribution Channel 

The following marketing intermediaries most often appear in the distribution channel: 

Agents and brokers: Agents are sales representatives of manufacturers and wholesalers, and brokers are entities that bring buyers and sellers together. Both agents and brokers are usually hired on commission basis by either a buyer or a seller. Agents and brokers are go-betweens whose job is to make deals. They do not own or take possession of goods. 

Wholesalers: Wholesalers are firms that sell finished goods to retailers, manufacturers, and institutions (such as schools and hospitals). Historically, their function has been to buy from manufacturers and sell to retailers. 

Advantages and disadvantages of a wholesaler 

Advantage 

Breaks bulk. 

Reduces storage costs for retailers and producers. 

Fewer transactions are needed for the producers. (only a few wholesalers) they no longer need to do as many deliveries. 

Disadvantages 

More expensive for small retailers. 

May not have the full range of products to sell. 

Takes longer for perishable products to reach the retailer. 

Retailers: Retailers are firms that sell goods to consumers and to industrial users for their own consumption. 

This involves selecting the best channel of distribution. Potential methods include using: 

• Retailers – Persuading shops to stock products means customers can buy items locally. However, using a middle man means lower profit margins for the producer. 
• Producers – can opt to distribute using a wholesaler who buys in bulk and resells smaller quantities to retailers or consumers. This again means lower profit margins for the manufacturer. 
• Telesales and mail order – Direct communication allows a business to get products to customers without using a high street retailer. This is an example of direct selling.
• Internet selling or e-commerce – Online selling is an increasingly popular method of distribution and allows small firms a low cost method of marketing their products overseas. A business website can be both a method of distribution and promotion. 

The main features of some common retailers are outlined below. 

➢ Independents 

➢ Supermarkets 

➢ Department Stores 

➢ Multiples or Chain stores 

➢ Superstores or Hypermarkets 

➢ Kiosks and Street Vendors 

➢ Market Traders 

➢ Online Retailers 

The most important new trend in distribution in recent years is probably the development of online distribution. It is often called e-commerce or e-tailing because it involves the use of electronic systems to sell goods and services. There are two main types. 

BUSINESS TO CONSUMERS 

Business to consumers (B2C) is the selling of goods and services by businesses to consumers. Most e-tailing involves ordering goods online and taking delivery at home. However, new ‘click and collect’ services are being developed where people order goods online and then pick them up from a store or a central hub. In London, UK, underground stations are being used as sites for hubs. Most large retailers now have online services. 

Other examples of B2C e-commerce include: 

➢ Tickets for air, rail and coach travel 

➢ Tickets for sports events, cinemas, theatres and theme parks, such as Alton Towers in the UK 

➢ Holidays, weekend breaks and hotel rooms 

➢ Access to online audio and film broadcasts 

➢ A wide range of goods on eBay and other auction sites 

➢ Agent or broker intermediary that brings together buyers and sellers 

➢ Financial services such as banking and insurance. 

BUSINESS TO BUSINESS 

Business to business (B2B) involves businesses selling to other businesses online. Businesses can also use specialist software to purchase resources. The software helps to find the cheapest supplier and carries out all the paperwork. 

E-commerce 

E-commerce refers to the buying and selling of goods and services online. It includes any transactions between businesses carried out online. 

E-commerce therefore covers a wider range of online transactions compared to e-tail since e-tailers only sell to the public. 

E-tailers 

An e-tailer is a retailer that sells products and services to customers using an online store. E-tailers do not need to own or rent physical shops, although some choose to do so. 

A producer distributes a product to an e-tailer, which then offers it for sale to its customers on its website. Customers visit the e-tailer’s website in order to purchase the product, and the product is delivered to the customer. 

Examples of e-tailers include Alibaba and Amazon. They have a number of advantages and disadvantages compared to retailers.

Advantages of e-tailers: 

• they can offer a wide range of products as they are not limited by the size of a shop 
• they may allow small producers to sell through their website for a fee 
• their prices are often lower, as they do not have to pay for a physical shop 
• customers can shop whenever and wherever they want, as e-tailers are open 24 hours a day, 7 days a week 

Disadvantages of e-tailers: 

• customers need to have internet access 
• customers cannot pay by cash 
• goods need to be delivered, so customers must be willing to wait 
• items cannot be seen in person before purchasing them 

Benefits to consumers of online distribution

• It is cheaper because online retailers often have lower costs
• Consumers can shop 24/7
• There is generally a huge amount of choice
• People can shop from anywhere if they have access to the internet

Benefits to businesses of online distribution

• E-tailers may not have to meet the costs of operating stores
• Lower start-up costs – both fixed and variable costs are lower
• Lower costs when processing transactions – many systems are automated
• Less paper is needed for documents such as invoices and receipts
• Payments can be made and received online using credit cards or online payment systems
• B2C businesses can offer goods to a much wider market – for example, global
• Businesses can serve their customers 24/7
• Businesses have more choice when location their operations

Others Distribution Methods 

➔ Direct Selling – where businesses sell their products directly to consumers.

➔ Wholesaling – Some producers use wholesalers to help distribute goods. Wholesalers usually buy from manufacturers and sell to retailers. Some wholesalers are called cash and carry stores. 

➔ Agent or Brokers – The role of an agent or broker is to link buyers and sellers. 

THE NATURE OF THE PRODUCT 

Different types of products may require different distribution channels. Some 

examples are given below. 

➔ Most services are sold directly to consumers. It would not be appropriate for window cleaners, gardeners and hairdressers, for example, to use intermediaries. 

➔ Fast-moving consumer goods, such as breakfast cereals, confectionery, crisps and toilet paper, cannot be sold directly by manufacturers to consumers. Wholesalers and retailers play an important role in the distribution of these goods because they break bulk. 

➔ Businesses producing high-quality ‘exclusive’ products, such as perfume and designer clothes, will choose their outlets very carefully. The image of their products is important so they are not likely to use supermarkets, for example. 

➔ Some products need explanation or demonstration. 

COST 

Businesses will choose the cheapest distribution channels. They will also prefer direct channels. This is because each time an intermediary is used they will take a share of the profit. Large supermarkets will try to buy direct from manufacturers. This is because they can bulk buy and get lower prices. 

Independents are more likely to buy from wholesalers and so have to charge higher prices as a result because the intermediary needs to take a ‘cut’, or a payment for their service, and the independent needs to recover that cost. 

Many producers now sell directly to consumers from their websites, which helps to keep costs down. 

THE MARKET 

Producers selling to mass markets are likely to use intermediaries. In contrast, businesses targeting smaller markets are more likely to target customers directly. For example, a building contractor in a small town will deal directly with customers. Producers selling in overseas markets are likely to use agents because the agents will know the market better. Businesses selling goods to other businesses are likely to use more direct channels. 

CONTROL 

For some producers, it is important to have complete control over distribution. For example, producers of exclusive products do not want to see them being sold in ‘down market’ outlets because this might damage their image.