The Marketing Mix: Place (DP IB Business Management)

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

• 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