Wholesaling, Retailing, and Physical Distribution

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Wholesaling, Retailing, and Physical Distribution
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Channels of Distribution

• Channel of distribution (marketing channel)
• A sequence of marketing organizations that
  directs a product from the producer to the
  ultimate user
• Middleman (marketing intermediary)
• A marketing organization that links a producer
  and user within a marketing channel

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Direct Channel

• Producer to consumer
• No intermediaries
• Used by all services by some consumer goods
• Producers can control quality and price, do not
  have to pay for intermediaries, and can be close
  to their customers
• Examples Dell Computer, Mary Kay

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Retailer Channel

• Producer to Retailer to Consumer
• Producers sell directly to retailers when
  retailers (Wal-Mart) can buy in large quantities
• Used for bulky products where additional handling
  would increase selling costs (furniture, cars),
  and for perishable or high-fashion products that
  must reach consumers quickly

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Wholesaler Channel

• Producer to Wholesaler to Retailer to Consumer
• The traditional channel
• Used when a producers products are carried by so
  many retailers that the producer cannot deal with
  them all
• Used when retailers order is small compared to
  productions economical output

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Merchant wholesalers

• Middlemen that purchase goods in large quantities
  and then sell them to other wholesalers or
  retailers
• Operate in warehouses where they receive, take
  title to, and store goods

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Agent/Broker Channel

• Producer to agent to wholesaler to retailer to
  consumer
• Agent - middlemen that do not take title to
  products and are compensated by commissions paid
  to the producers
• Often used for services, real estate, and by
  producers that do not have their own sales forces

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Channels for Consumer Products

• A manufacturer may use multiple channels
• 1) To reach different market segments
• I.e.- same product is sold to consumers
  businesses
• 2) To increase sales or capture more market
  share
• In store and online

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Channels for Consumer Products
Direct
Retailer
Wholesaler
Agent/Broker
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How do you choose which channels to use?Market
Factors
Market FactorsThat Affect ChannelChoices
Customer Profiles
Consumer or Industrial Customer
Size of Market
Geographic Location
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Marketing Intermediaries Retailers

• Retailers The final link between producers and
  consumers
• Approx. 2.6 million retail firms in the U.S.
• 90 have sales of less than 1 million

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Classes of In-Store Retailers by Ownership

• Independent retailer
• A firm that operates only one retail outlet- one
  owner of one store
• Chain retailer
• A company that operates more than one retail
  outlet -one owner of many stores
• Franchise
• A company that leases some of its retail outlets
  - many owners of many stores

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Classes of In-Store Retailers by Merchandise
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Non-Store Retailing

• Purchase products without visiting a store
• Catalog marketing
• make selections place orders by mail or
  telephone
• Online retailing
• Presenting and selling products through computer
  connections
• Automatic vending
• The use of machines to dispense products
• Direct Selling (sometimes called door-to-door)
• Selling through face to face presentations