Place: Types of Distribution Channels (CIE IGCSE Business)

• Place in the marketing mix refers to where customers purchase a businesses products and the distribution channels used to move the product from producer to consumer
  
  
• In a competitive environment, location and distribution decisions can give a company a competitive advantage
  • Businesses could locate themselves in areas with high foot traffic to achieve high sales volumes
  • They may use innovative online channels to reach customers who prefer to shop online
    
    
• Changing consumer needs can impact the way businesses distribute their products
  • E-commerce makes it easier for consumers to shop online and have products delivered to their doorstep
    • Many businesses have therefore invested in their online presence, offering convenience and fast delivery to meet customer needs

Types of Distribution Channels

• Distribution channels refer to the intermediaries through which products move from the business to the end customer 
  

Diagram of the Different Distribution Channels

E-Commerce

• Distribution channels have been impacted by social trends such as the growth of e-commerce and the shift from product-based businesses to service-based businesses
  
  
• Businesses have adjusted their distribution strategies to better meet the needs of customers and stay competitive 
  
  

 The Growth of E-commerce

• The choice of distribution channel chosen by a business depends on a variety of factors
  
  
• The following questions are worth considering when establishing a distribution channel
  • Do consumers want to speak to a salesperson?
  • Will customers want to handle the product before they make a purchase?
  • Would they prefer to purchase it conveniently online?
    
  • Does the product require special handling, such as protective packaging or quick delivery?
    

Diagram of Factors Affecting the Choice of Distribution Channel 

Getting the distribution channel right will increase sales revenue and profit

Factors affecting the choice of channel

Type of product

• If sold to producers of other goods, distribution is likely to be direct or via a specialist wholesaler 
  • E.g. JCB sells excavators directly to construction companies
  • Specialist wholesalers such as France's Bricoman sell consumable building supplies such as nuts, bolts and cement to builders

Frequency of purchase

• If the product is bought on a daily basis, retail stores provide convenience for consumers
  • E.g. Milka chocolate is sold in most EU-based supermarkets

The price of the product

• If the products is an expensive luxury good, it would be best sold through a few specialist high-end outlets
  • E.g. Rolex watches are sold in high-end jewellery stores

The durability of the product

• Perishable product like fruit and vegetables are distributed through retailers, sometimes via wholesalers, to be sold quickly

Proximity of customers

• If customers are located over the world, e-commerce is likely to be a suitable distribution channel

Competitors distribution channels

• Products need to be sold where competitors are selling so that a business can compete effectively
  • E.g. Nestlé cereals are sold alongside Kelloggs cereals in a wide range of retail outlets

Technicality specifications

• If technical information needs to be passed to the customer, direct selling or a retailer is usually preferred
  • E.g. Apple Store staff provide focused advice to customers purchasing its range of phones, computers and entertainment devices