1. Wholesaling, Retailing, and Physical Distribution

2. Channels of Distribution
Channel of distribution (marketing channel)
A sequence of marketing organizations that directs a product from the producer to the ultimate user
Middleman (marketing intermediary)
A marketing organization that links a producer and user within a marketing channel

3. Direct Channel Producer to consumer No intermediaries
Used by all services & by some consumer goods
Producers can control quality and price, do not have to pay for intermediaries, and can be close to their customers
Examples: Dell Computer, Mary Kay

4. Retailer Channel Producer to Retailer to Consumer
Producers sell directly to retailers when retailers (Wal-Mart) can buy in large quantities
Used for bulky products where additional handling would increase selling costs (furniture, cars), and for perishable or high-fashion products that must reach consumers quickly

5. Wholesaler Channel Producer to Wholesaler to Retailer to Consumer
The traditional channel
Used when a producer’s products are carried by so many retailers that the producer cannot deal with them all
Used when retailer’s order is small compared to production’s economical output

6. Merchant wholesalers
Middlemen that purchase goods in large quantities and then sell them to other wholesalers or retailers
Operate in warehouses where they receive, take title to, and store goods

7. Agent/Broker Channel
Producer to agent to wholesaler to retailer to consumer
Agent - middlemen that do not take title to products and are compensated by commissions paid to the producers
Often used for services, real estate, and by producers that do not have their own sales forces

8. Channels for Consumer Products
A manufacturer may use multiple channels
1) To reach different market segments
I.e.- same product is sold to consumers & businesses
2) To increase sales or capture more market share
In store and online

9. Channels for Consumer Products
Direct
Retailer
Wholesaler
Agent/Broker

10. How do you choose which channels to use? Market Factors
Market Factors That Affect
Channel Choices
Customer Profiles
Consumer or Industrial
Customer
Notes:
Market factors include the target customer considerations, such as these questions: Who are the potential customers? What/where/when/how do they buy?
Also important to channel selection is the distinction between consumer or industrial customers. Consumer buy in small quantities and don’t require much service, whereas industrial customers purchase in larger quantities and require more customer service.
If the target market is concentrated in specific areas, direct selling is appropriate. If widely dispersed, intermediaries would be less expensive.
A large market requires more intermediaries.
Size of Market
Geographic Location

11. Marketing Intermediaries: Retailers
Retailers: The final link between producers and consumers
Approx. 2.6 million retail firms in the U.S.
90% have sales of less than $1 million

12. Classes of In-Store Retailers by Ownership
Independent retailer
A firm that operates only one retail outlet- one owner of one store
Chain retailer
A company that operates more than one retail outlet -one owner of many stores
Franchise
A company that leases some of its retail outlets - many owners of many stores

13. Classes of In-Store Retailers by Merchandise
Type of Retailer
Department Store
Specialty Store
Supermarket
Convenience Store
Drugstore
Full-line Discounter
Service
Level
Mod Hi-High
High
Low
Low-Mod
Mod-Low
Product
assort-
ment
Price
Broad
Narrow
Med-Narrow
Medium
Med-Broad
Mod-High
Moderate
Mod High
Mod Low
Restaurant
Low-High

14. Non-Store Retailing Purchase products without visiting a store
Catalog marketing
make selections & place orders by mail or telephone
Online retailing
Presenting and selling products through computer connections
Automatic vending
The use of machines to dispense products
Direct Selling (sometimes called door-to-door)
Selling through face to face presentations