Distribution Channels Explained

Summary

This video explores the three main distribution channels in business: direct selling, retailing, and wholesaling. Direct selling allows manufacturers to reach consumers directly, offering more control but lower sales volume. Retailing involves selling to retailers who then sell to consumers, providing wider reach but lower profit margins per unit. Wholesaling involves large bulk sales to wholesalers who distribute to retailers, offering high sales volume but reduced control and profit. The video also introduces multi-channel distribution, where businesses combine these methods to optimize sales. Examples of companies like Gymshark, Nike, and Apple illustrate these channels in action.

Takeaways

• 😀 Distribution is a key marketing activity that links to the 'Place' P of the extended marketing mix, influencing both sales volume and profitability.
• 😀 Direct selling involves no intermediaries, allowing businesses to have full control over distribution, but often leads to lower sales volumes and higher distribution costs.
• 😀 Direct-to-consumer businesses like Gymshark, Boohoo, and Moonpig use direct selling via their websites, offering flexibility and higher profit margins per sale.
• 😀 Retailing allows businesses to sell products in bulk to retailers, which increases exposure and reduces marketing and distribution costs, but reduces profit per unit sold.
• 😀 Famous companies like Nike, Heinz, and Samsung use the retailing channel to reach a larger audience and gain more visibility through retailer networks.
• 😀 Wholesaling involves selling products in large quantities to wholesalers, who then distribute them to retailers, ensuring higher sales volumes and reduced distribution costs.
• 😀 By using wholesalers, manufacturers reduce their marketing expenses but lose some control over product placement, which could affect their brand image.
• 😀 Wholesalers and retailers make a profit, which means manufacturers usually get lower profit margins per unit sold compared to direct selling.
• 😀 Multi-channel distribution allows manufacturers to sell through various channels (direct, retail, wholesale) based on the product nature, cost, market, and control preferences.
• 😀 Apple is an example of a successful multi-channel distributor, selling through their website, physical stores, and third-party retailers, increasing market reach.

Q & A

What is the primary focus of the distribution in marketing?

The primary focus of distribution in marketing is ensuring that products are available at the right place, at the right time, and in the right quantities for consumers.

What is the meaning of 'distribution channels' in business?

Distribution channels refer to the various methods or routes businesses use to deliver their products to customers, such as direct selling, retailing, and wholesaling.

What are the key benefits of using direct selling as a distribution channel?

Direct selling allows businesses to have full control over distribution, higher profit per sale, and greater flexibility in pricing and promotional strategies.

What are the main challenges associated with direct selling?

Direct selling typically leads to lower sales volumes and higher distribution costs per sale, and businesses may need to invest significantly in marketing to attract consumers.

Which industries or businesses commonly use direct selling?

Service businesses like dentists, hairdressers, and solicitors, as well as product-based companies like Gymshark, Boohoo, and Moonpig, use direct selling.

How does retailing benefit businesses in terms of distribution?

Retailing helps businesses reach a wider audience, increase product visibility in multiple locations, reduce distribution costs by delivering in bulk, and avoid heavy marketing investments.

What are the drawbacks of using retailing as a distribution channel?

The main drawbacks of retailing are lower profit per unit because retailers buy at discounted prices and the manufacturer has to share profits with the retailer.

Why might a manufacturer choose wholesaling as a distribution method?

Manufacturers may choose wholesaling because it guarantees high sales volumes, reduces distribution costs, and benefits from the reach and exposure provided by retailers.

What are the disadvantages of using wholesaling for product distribution?

The main disadvantages of wholesaling are smaller profit margins due to the involvement of wholesalers and retailers, as well as the loss of control over which retailers sell the product, which could affect the brand image.

Can businesses use multiple distribution channels? If so, how?

Yes, businesses can use multiple distribution channels, known as multi-channel distribution. This allows them to leverage the benefits of direct selling, retailing, and wholesaling simultaneously, depending on the product and market needs.

What is a well-known example of a company that uses multi-channel distribution?

Apple is a well-known example, as it sells its products through its website, retail stores, and independent retail chains.