M2 Unit 29
Different retailing businesses have very different distribution methods based on the types of product that they sell, some arguably more effectively than others.
As mentioned in an earlier assignment, there are three main types of distribution channels. The first is the channel that goes from the producer, then to the wholesaler, then to the retailer or sells to the consumer. The second channel starts with the producer who sells straight to the retailer, who then sells to the consumer. The third channel goes directly from the producer to the consumer. Channels one and two are classed as indirect marketing channels, whereas channel three is a direct marketing channel as it goes straight from producer to consumer.
All of the distribution channels start with a producer who will create the products, for example the person that milks the cows to get milk.
For the first channel, the producer makes the product and then sells it to a wholesaler, such as Costsco who will purchase a huge quantity of products from them. They would do this to make sure that they have enough to sell onto retailers. They would keep a large amount of the product, for example some kind of confectionary, in there warehouse so they’re in a suitable environment to be kept until they’re sold on. Next, the retailer, who could be a small store or a larger store, who would want to purchase a specific amount of products from the wholesalers, not in as bulk form as the wholesaler would have purchased them in. This method would typically be used by used by smaller, more personal stores, that don’t need to buy in such bulk.
This channel is effective for confectionary products for example, as Costco can get sweets such as Dairy Milk bars, or Skittles, at an incredibly low price for huge boxes. It is good because it means that the businesses further down the chain will have confidence that