1. Selling & Distribution
GCSE Business Studies
tutor2u™
Revision Presentations 2004

2. Things to Think About
How can businesses ensure that their product or services reach existing and potential customers?
What is the route that the product normally takes between the start of production and finally being “consumed” or used by the customer?
What are the main advantages and disadvantages of the various options for “distribution”?

3. Distribution Channels
Products reach customers via a “distribution channel”
The channel is the link between seller and buyer – but it may have more than one stage in between; for example…
Producer
Producer
Producer
Wholesaler
Distributors
/ Agents
Retailer
Customer
Customer
Customer

4. Wholesalers Wholesalers “break bulk”: Advantages
They buy in large quantities from producers
Then break them into smaller quantities to sell to retailers
Advantages
Reduce the producer’s transport costs (fewer journeys to the wholesaler rather than many journeys to retailers)
Retailers can order in smaller amounts from wholesalers
Wholesaler makes his money by buying at a lower price from the producer and adding a profit margin onto the price paid by the retailer

5. Sale of Daily Newspapers
Wholesalers - Example
Sale of Daily Newspapers
Producer
Newspaper Publisher – e.g. The Sun, The Times – who send bulk print runs of newspapers to large depots run by wholesalers
Wholesaler
Wholesaler (e.g. John Menzies) packs newspapers into bundles for retailers (e.g. newsagents)
Retailer
Retailer (e.g. newsagent; petrol station) displays newspaper in store and delivers to homes
Customer
Customer = newspaper buyer

6. Distributors / Agents Distributors Producer Examples of Agents
Distributors distribute (sell on) products and serve as a local sales point
Usually specialise in a particular market
Usually offer products from several / many producers – so that their customers enjoy greater choice
Agents are an example of a kind of distributor
Examples of Agents
Estate agents
Travel agents
Export/import agents
Producer
Distributors
/ Agents
Customer

7. Direct Marketing
Involves a producer selling directly to the end customer – i.e. there are no other parts to the distribution channel
Various Methods:
Direct mailing
E-commerce
Telemarketing (telephone selling)
Door to door selling
Examples
QVC (TV Selling)
Boden (clothes from catalogue)
Sunday Times Wine Direct (wine through flyers in newspaper)
Producer
Customer

8. Why Use Direct Marketing?
Advantages
No intermediaries (e.g. retailers) to take part of profits
Producer can control own marketing
Chance to reach customers who would not have gone to shops
Don’t use “mass marketing” techniques such as advertising – which can save money
Disadvantages
Costs of distribution of promotional material
Costs of making distributional material (e.g. catalogues for Next)
Can still be very expensive if customers do not respond to the direct marketing materials (i.e. a low “response rate”

9. Sales Promotion
Sales promotion is a term used to describe various methods aimed at persuading customers to buy
Often used as part of other promotional activities such as an advertising campaign
Examples
Money off coupons (widely used by supermarkets)
Competitions
Discount vouchers (e.g. three for the price of two)
Free samples (e.g. washing tablets, shampoo sachets)
Gifts with purchase (e.g. CDs on the front of magazines)
Point of sale material
Frequent user / customer loyalty schemes (e.g. Nectar, Air Miles)

10. Why Use Sales Promotion?
Advantages
Short term boost to sales
Can attract customers away from other brands
All about “action” – encouraging customers to buy rather than encouraging them to think about it!
Disadvantages
Reduces profit margin on each product (depends on how much is given away in the “promotion”)
Usually only effective in short term, will need a longer term tactic to boost overall sales
Customers may come to expect sales promotions – and so wait until the next one comes along!

11. Customer Loyalty Schemes
A kind of sales promotion used by retailers
Encourage customer to return to retailer
Low cost of discounts given can be offset by profits generated by sales made
Loyalty cards also provide information about shopping habits of customers:
Where do they shop
When do they shop
What do they buy
Examples
Nectar
Air Miles
Boots Advantage Card

12. Retailing Retailer – part of the distribution channel
Retailer is the final step in the chain – deals directly with the customer
Focused on consumer markets
Various kinds of retailer:
Multiples – chains of shops owned by a single company (e.g. Sainsbury’s or Body Shop)
Convenience stores (e.g. Spar, Londis, Costcutter)
Independents – a shop run by an owner

13. Exporting Exporting = selling overseas
An important option for a business to grow:
UK markets may be too small or in decline
Product or service may be attractive to customers in other countries
Challenges faced by exporters:
Exchange rates
Language barriers
Different cultures
Trade barriers (e.g. quotas, tariffs, legislation)
Successful exporters need to have a detailed understanding of overseas markets

14. E-Commerce Two kinds of business websites
Marketing sites
Promotes a business and its products or services to potential and existing customers
Trading sites
Promote a business
Allow customers to purchase online
Many Advantages of Selling Online
Website gives a business new ways of marketing and selling its products or service
Provides an opportunity for its to build relationships with customers
Effective and lower risk way of selling in international markets
Increasingly an essential part of doing business
Not a replacement for traditional marketing activities - website should complement and support them