DISTRIBUTION UNIT

• Diagnostic - pre-test

• 3/10 – Explain the concept of Distribution• Understand basic distribution concepts and channels• Identify multiple types of distribution and the channel

members

Marketing Co-OpDistribution

What is Distribution?

• Making the “place” decision • Getting the product into the

customers hands

Concepts of Distribution:• In order for distribution to occur,

marketers must decide on their “channels of distribution” or how they will get the product to the customer

What is Channel Distribution?

Channels of distribution:• The path a product takes

from its producer (manufacturer to the final user (the customer)

Intermediaries

• Move products from the manufacturer to the final user

• Also known as middlemen

• Classified based on whether or not they take ownership of the product

• Merchant Intermediaries – take ownership

• Agents – do not take ownership

Channel Members

Wholesalers – business that buy large quantities of goods from manufacturers, store the goods, and then resell them to other businesses

Channel Members

• Rack Jobbers – wholesalers that manage inventory and merchandising for retailers by counting stock, filling it in when needed, and maintaining store displays

• Ex: potato chips, CDs, greeting cards

Channel Members

• Drop Shippers – own the goods they sell but do not physically handle the actual products

• EX: coal, lumber, chemicals

Channel Members

Retailers – sell goods to the final consumer for personal use

Channel Members

Brick-and-Mortar – traditional retailers that sell goods to the customer from their own physical store

Channel Members

Non-store Retailing• Automatic Retailing

(vending machines)• Direct Mail• Catalog Retailing• E-tailing (online

retail)• TV home shopping

Agents

• Agents – do not own the goods they sell. They bring buyers and sellers together

Channels in the Consumer Market

Channel A

Manufacturer/Producer Directly to Consumer

Direct distribution – sales of goods or services directly to the customer, with no intermediaries

Ways to sell directly to customers1. Selling products at the production site

Luck Stone – sell stone directly from quarry2. Having a sales force call on consumers

telemarketing3. Using catalogs

Victoria’s Secret4. Using the internet

Channel B

Manufacturer to Retailer to Consumer

• Most commonly used channel for merchandise that dates quickly or needs servicing

Ex: clothing, automobiles, produce

Indirect Distribution- using one or more intermediaries

Channel C

• Manufacturer/Producer to Wholesaler to Retailer to Consumer

• Most common distribution method for staple goods, which are items that are always carried in stock and whose styles do not change frequently

EX: flowers, non-perishable food items, candy

Industrial Market

Industrial Market –buy products to use in their operations; also called the business-to-business market

Industrial users have different needs than retail users• Direct distribution (the least

common channel in the consumer market) is the most common in the industrial market

Assignment

Read through Chapter 21.1 in the textbook and complete the following questions

Page 453 – questions 1-3Page 459 – questions 3, 4, 5

Use each of these words in a sentence that illustrates your understanding of its definition

Channel of Distribution WholesalersRack Jobbers Direct DistributionDrop Shippers Indirect DistributionBrick and Mortar retailers Industrial markete-tailing Intermediaries

Distribution Review

1. In your own words what is distribution?2. What’s the difference between rack jobbers and

drop shippers?3. What are three different channels a product

could take to get to the consumer?4. Explain the difference between merchant

intermediaries and agents.5. Provide an example of a brick and mortar

retailer and what makes it a brick and mortar store?

Distribution Test Review

1. Explain the difference between direct and indirect distribution.

2. Provide an example of a product that one would buy in an industrial market vs. a consumer market.

3. Define: 1. FOB Destination2. FOB Factory Freight Prepaid3. FOB Shipping Point4. FOB Destination Charges Reverse23

4. What is the key difference between a rack jobber and drop shipper?