The Marketing Mix: Place (DP IB Business Management)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
Types of Distribution Channels
Distribution channels refer to the chain of intermediaries through which goods/services move from the manufacturer to the end customer
Diagram: types of distribution channels
Four Stage Distribution Channel
A traditional channel consists of four stages: producer, wholesaler, retailer, and consumer
This channel is commonly used for products such as groceries, clothing, and electronics
E.g. The Coca-Cola Company produces the soft drink and then sells it to a wholesaler, who in turn sells it to a retailer
The retailer then sells the soft drink to the customer
Three stage distribution channel
The three stage distribution channel eliminates the wholesaler stage, with the producer selling directly to the retailer
This channel is often used for products with high demand or where the cost of distribution is high
It is also frequently used for products with high profit margins, where the manufacturer can afford to sell directly to the retailer and still make a profit
Eg Toshiba produces laptops and sells them directly to retailers like Currys, who then sell them to the end customer
Two stage distribution channel
The two stage distribution channel eliminates both the wholesaler and retailer stages, with the manufacturer selling directly to the end consumer
This channel is commonly used for products that are sold online or through direct sales channels
E.g. RyanAir sells its service (passenger tickets) directly to the end customer on their website
Evaluation of Different Distribution Channels
Distribution Channel | Advantages | Disadvantages |
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Four Stage |
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Three Stage |
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Two Stage |
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Changes in distribution have been impacted by social trends such as the growth of e-commerce and the shift from product-based businesses to service-based businesses
By understanding these trends, businesses can adjust their distribution strategies to meet the needs of their customers better and stay competitive in the marketplace
The Growth of E-commerce
Explanation | Example |
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Examiner Tip
In some cases, customers are also able to purchase directly from wholesalers.
Costco is a global business which operates a chain of membership-only warehouse outlets that allow both small retailers and consumer members to shop in its stores and online.
In 2022, Costco was the fifth largest global retailer and the world's largest retailer of choice for prime beef, organic foods, rotisserie chicken and wine.
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