Place: Physical Distribution (OCR GCSE Business)

The Importance of Place

• Place in the marketing mix refers to where customers purchase products and the distribution channels used to move the product from producer to consumer

• In a competitive environment, location and distribution decisions can give a company a competitive advantage

  • Businesses could locate themselves in areas with high foot traffic to achieve high sales volumes

  • They may use innovative online channels to reach customers who prefer to shop online

• Changing consumer needs can impact the way businesses distribute their products

  • E-commerce makes it easier for consumers to shop online and have products delivered to their doorstep

Physical Distribution Channels

• Distribution channels refer to the various intermediaries through which goods/services move from the business to the end customer 

Diagram: distribution channels

Three-stage distribution channels

• A three-stage distribution channels moves a product from the producer to the wholesaler, who then sells it to a retailer, from whom the end consumer purchases it

• These channels are often used for products with high profit margins, where the manufacturer can afford to sell through wholesalers and retailers, while still making a profit

  • E.g. Heinz sells canned goods to wholesalers such as Booker or Costco, who then sell them in smaller quantities to cafes or local shops. Customers then purchase these goods as part of a meal or as groceries to consume at home

Two-stage distribution channels

• In many cases, large retailers such as national supermarkets, purchase stock directly from manufacturers

  • Retailers are the most common distributor for the majority of consumers' needs, who buy items in small quantities for personal use

  • These retailers have large warehouse facilities to store large quantities of goods]

  • E.g. Leading brands such as Coca Cola and Nestle deal directly with UK supermarket Tesco, which distribute goods to its large number of stores across the country

• Some wholesalers allow consumers to purchase products directly from their warehouses

  • Wholesalers are most appropriate when customers wish to purchase products in large quantities

  • E.g. Costco offers memberships to those employed in areas such as finance, local government and education

• Retailers and wholesalers take on the responsibility for breaking bulk, allowing consumer to purchase goods in convenient quantities

One-stage distribution channels

• Businesses that sell products to other businesses often do so directly

  • E.g. Woodlands Poultry Farm Ltd sells its free range eggs directly to Posillippo, a chain of Italian restaurants in Kent

• In some cases, consumers can buy products directly from the the manufacturer

  • Some businesses operate factory shops, where customers can purchase at lower prices

  • E.g. Pottery design company Emma Bridgewater Ltd operates a large shop at its factory in Stoke on Trent

Telesales and mail order

• Some producers sell their products, particularly services, directly to customers over the telephone

  • Examples include insurance products, holidays and magazine subscriptions

    • E.g. Trailfinders sells its adventure holiday packages exclusively using telesales

• Other businesses sell their products by mail order, where customers place orders by post, or over the phone, after consulting a brochure or catalogue

  • Examples include garden plants, clothing items and seasonal items

    • E.g. The Book People accepts mail order purchases, issuing frequent brochures containing a selection of discounted books and gifts

• This eliminates the need to operate expensive retail or wholesale outlets and allows direct contact with customers