Channels of Distribution

Cotton On a sheet of paper, list all the steps/processes a bole of cotton must go through before becoming a t-shirt. How many steps are there?

A new channel of distribution begins when the product changes form. Looking at the processes which the cotton must go through, how many different paths or channels of distribution are there?

Direct vs. Indirect Distribution Direct distribution occurs when the goods or services are sold from the producer DIRECTLY to the final customer. Indirect distribution involves one or more intermediaries.

Intermediaries Moves the product for the manufacturer or producer to the final user. Two types of intermediaries: Merchant intermediaries : Take possession and/or title to the product. Agent intermediaries: Do not take possession or title to the product.

Types of Intermediaries Wholesalers Retailers Agents

Wholesalers Buy large quantities of goods from manufacturers, store the goods, and then resell them to other businesses. Are also called distributors Take title or possession of the goods they buy for resale

Specialized Wholesalers Rack Jobbers Manage inventory and merchandising for retailers Count stock Filling stock when needed Maintain store displays Compact discs, hosiery, health products, beauty products Corporate Examples: Coke, Pepsi, Hallmark & Ambassador cards, Frito Lay

Drop Shippers Own the goods they sell but do not physically handle the actual products. Sell the goods to other businesses and have the producer ship the merchandise directly to the buyers. The products are owned, but never handled by the drop shipper. Deal in large quantities of items in bulk, such as coal, lumber, and chemicals that require special handling.

Retailers Sell goods to the final user for personal use.

Types of Retailers Brick & mortar retailers Sell goods to the customer from their own physical stores. Examples include: J Crew, Hollister, American Eagle, Abercrombie & Fitch Automatic Retailing (Vending Services) Direct Mail Catalog Retailing Home Shopping Networks

E-Tailing vs. E-Marketplace An individual store (retailer) selling their products on the internet using their own website. E-Marketplace Selling of common goods or services via the internet Search for airline tickets and it will give you results for American, Delta, Southwest, & other airlines.

Storage Holding goods until they are sold and shipped. Private Warehouse Public Warehouse Distribution Center Bonded Warehouse

Private Warehouse A facility designed to meet the specific needs of its owners. Used only by that business and for that business Coca-Cola Wal-Mart

Public Warehouse Offers storage and handling facilities to individuals or companies. Available to anyone Examples: Bear Creek Storage POD’s

Distribution Center A warehouse designed to speed the delivery of goods and to minimize storage cost. Products only move THROUGH a distribution center but are NOT stored there JCP receives a truckload of shoes from Nike Trainload of shoes brought into Dist. Ctr. Loaded onto conveyors in the dist ctr and sorted by are to which they will be delivered Trucks are loaded then sent to various JCP stores

Bonded Warehouses Store products that require the payment of a federal tax. Products cannot be removed from the bonded warehouse until the tax has been paid. Businesses save money because they only take the goods out of storage as they are needed.