Unit 4 Distribution Importance of Distribution Intermediaries Wholesalers

Unit 4 “Distribution” Importance of Distribution Intermediaries Wholesalers Retailers Types of Channels Transportation Methods

Distribution (Place) Getting products to the customers. Helping customers find and get products. Purpose: Location, transportation, storage, product handling, and customer service. When distribution works well, nobody notices. When it doesn’t work well, consumers don’t have what they want, when they want it and are very unhappy. Will they come back?

The Importance of Distribution Most complex and challenging of 4 P’s. Matches supply with consumer demand. Accounts for up to 50% of marketing costs. Directly affects and utility. (empty shelf, perishable & seasonal goods) – the path a product takes from producer/manufacturer to consumer.

Manufacturer – make or process raw materials into products Producer – grow or raise organic materials or livestock Goal of producers is to have products: • • • In some cases, selling directly to the ultimate consumers. In other cases, this means using intermediaries.

Manufacturers & Producers If they sell directly: • They must perform all necessary functions and incurs all the costs. BUT. . . • They earn all of the money from sales. If they use intermediaries: • Costs can be passed on to others. • Profits could decrease since income must be shared. • Income might be higher if the intermediaries are able to sell more than the producers can on their own.

What is an Intermediary? A middleman handles the product on its way from roducers & manufacturers to final consumers. Types: • • Agents – set up manufacturers with retailers & vice versa; but never own goods • Wholesale Clubs – wholesale/retail hybrid •

How Intermediaries Help (Buy Big and Sell Small) • Buy large quantities of goods from producers. • Sell smaller quantities to other intermediaries or consumers. • By placing large orders with producers, they’re able to reduce the per-unit cost for goods, allowing them to make a profit and/or pass some of the savings along to other intermediaries or consumers.

How Intermediaries Help Develop an Assortment of Goods • Most producers make more than any consumer will purchase at one time. • Intermediaries collect goods from a variety of producers and divide them into quantities/assortments consumers want. • Consumers are then able to get the desired amounts/types of goods.

How Intermediaries Help Transport and Storage • Hold onto products until buyers need them. • Saves buyers money & store space. • Minimizes risk for buyers.

How Intermediaries Help Perform Other Functions: • • Provide market information to producers Promote product deals to retailers Sell on credit to retailers Provide management services Plan inventories and store layouts

Intermediaries Adjust Differences Between Manufacturers’ Production & Consumers’ Needs • • Producers make huge quantities of products. Consumers only buy 1 or several at a time. Producers specialize in a limited variety. Consumers want a variety of products. Producers are located around the world. Consumers want to buy local & conveniently. Producers operate year-round. Consumers don’t use all products year-round.

Intermediaries Untangle Distribution Retailers

Wholesalers Buy bulk from many, different Manufacturers. They then own the goods and assume all risk. Break down, regroup, repackage & resell to retailers. Provide storage and inventory management. Inventory management info for retailers: What products are in inventory? What quantity of each are available? How long has each been there? “Turnaround” time identifies good sellers.

Retailers Sells products to final consumers; provides convenience of location. Retail Categories Convenience stores Limited-line stores Box stores Department stores Superstores Specialty stores Non-store retailing Shopping centers Malls (from kiosks to anchor stores)

Summary: Intermediaries (or middlemen) Help. . . From the Differences in Producers’ Adjust the To the Consumers’ Quantity Assortment Location Timing Production Consumption (perishables & seasonals)

4 Types of Channels Direct – Indirect – Reverse – Linked –

Typical Marketing Channels for Consumer Products

Transportation Methods Railroads – large qty, slow, cheap, limited Trucks – most flexible, limited only by water Ships – cheap, any size, slow, risk of loss Airplanes – anything, fast, expensive Pipelines – gas, oil, water; expensive Combining methods – Fed. Ex, UPS, etc.