Channels of Distribution Unit 2, Lesson 3 Copyright © Texas Education Agency, All rights reserved.

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Channels of Distribution Goals  Students will understand the channels of distribution.  Students will evaluate a distribution plan.  Students will identify physical distribution activities.  Students will determine costs associated with distribution. Copyright © Texas Education Agency, All rights reserved. 3

Channels of Distribution Terms to know  Channel of Distribution  Intermediaries  Direct Distribution  Indirect Distribution  Exclusive Distribution  Franchises  Integrated Distribution  Selective Distribution  Intensive Distribution  E-Commerce  Methods of Transportation  For-Hire Carrier  Contract Carrier  Small Package Carrier  Bus Carrier Copyright © Texas Education Agency, All rights reserved. 4

Channel Members The channel of distribution is the path that a product takes from producer to final user. Copyright © Texas Education Agency, All rights reserved. 5

Channel Members Intermediaries are those involved as the product moves from producer to consumer. Merchant Intermediaries take possession of the product (wholesalers and retailers). Agent Intermediaries do not take possession. Copyright © Texas Education Agency, All rights reserved. 6

Channels of Distribution Wholesalers – Buy large quantities, store them and then resell them to other businesses. Rack Jobbers – Wholesalers who manage inventory, stock when needed and provide racks for displays. Drop Shippers – Own the goods but do not physically handle the products. Copyright © Texas Education Agency, All rights reserved. 7

Channels of Distribution Retailers sell goods to the final consumer for personal use. Brick and Mortar Retailers – Have a physical store from which they sell their products. Vending Services – Buy goods and sell through vending machines. Copyright © Texas Education Agency, All rights reserved. 8

Channels of Distribution Direct Mail and Catalog – Can be brick and mortar selling goods to customers while they are at home, or Internet sites with out a physical store. Television Home Shopping Networks – TV stations that sell products to consumers. Copyright © Texas Education Agency, All rights reserved. 9

Channels of Distribution E-Tailing – Retailers selling products over the Internet. Some are an extension of brick and mortar business and some are only found on the Internet. Copyright © Texas Education Agency, All rights reserved. 10

Channels of Distribution Brokers – Paid a commission based on a percentage of the sale price. They negotiate the sale and then look for other customers. Used often in seasonal products such as food. Copyright © Texas Education Agency, All rights reserved. 11

Channels of Distribution Independent Manufacturer’s Representatives – Represent several related but not competing manufacturers. Work independently running their own business. Copyright © Texas Education Agency, All rights reserved. 12

Channels of Distribution Direct Distribution – When goods and services are sold directly to the customer from the manufacturer. Indirect Distribution – Involves one or more intermediary between customer and manufacturer. Copyright © Texas Education Agency, All rights reserved. 13

Channels of Distribution Exclusive Distribution – Only select distributors are allowed to sell the product.  Prestige  Image  Channel control  High profit margin Copyright © Texas Education Agency, All rights reserved. 14

Channels of Distribution Franchises are also an example of exclusive distribution. Only licensed franchises can sell the product. Integrated Distribution – When the manufacturer acts as wholesaler and retailer for their own products. Copyright © Texas Education Agency, All rights reserved. 15

Channels of Distribution Selective Distribution – A limited number of outlets in a geographic are allowed to sell the product. Those selected must:  Be able to maintain an image  Be a good credit risk  Be aggressive marketers  Be good inventory planners Copyright © Texas Education Agency, All rights reserved. 16

Channels of Distribution Intensive Distribution – Products are distributed through all suitable outlets. Goal is to sell to as many customers as possible. Copyright © Texas Education Agency, All rights reserved. 17

Channels of Distribution E-Commerce – Products sold to customers and industrial buyers via the Internet.  Cyber Monday sales topped $1.25 billion in  Online travel increasingly popular.  Many retailers moving to B2B websites to sell products to industrial customers. Copyright © Texas Education Agency, All rights reserved. 18

Channels of Distribution Methods of transporting goods Rail – Piggyback and fishyback. Air – Public and private carriers. Truck – Public and private carriers. Water – Intracoastal and internal waterways. Pipeline – Used primarily for oil and gas. Copyright © Texas Education Agency, All rights reserved. 19

Channels of Distribution For-Hire Carrier – Transportation company that moves products for business and charge a fee for transportation.  Common Carrier – Transports products on a specific schedule and according to government regulations.  Contract Carrier – Carrier that provides equipment and drivers to transport products according to negotiated contract. Copyright © Texas Education Agency, All rights reserved. 20

Channels of Distribution Small Package Services  U.S. Postal Service – Usually ships packages meeting certain size and weight restrictions.  Freight Forwarder – Transportation company that pools many smaller shipments together to take advantage of lower rates.  Express Carrier – Transportation that specializes in delivery of small, lightweight packages and high-priority mail. Shipments are usually less than 150 lbs. Copyright © Texas Education Agency, All rights reserved. 21

Channels of Distribution Bus Carrier – Usually packages weighing less than 100 lbs via a scheduled bus route. Can make same-day or next-day delivery to small towns and cities. Copyright © Texas Education Agency, All rights reserved. 22

Picture Sources Copyright © Texas Education Agency, All rights reserved. 23