Chapter 16 – Wholesaling, Retailing and Physical
Distribution
Channels of Distribution – Sequence of marketing organizations that
move product from producer to ultimate user.
Middleman
Merchant Middleman – takes title of goods before selling them
Functional Middleman – helps transfer of ownership but
doesn’t take ownership
Channels for Consumer Products
Producer to Consumer (direct channel)
1. Almost all services and practically no goods
2. Producer controls quality
Producer to retailer to consumer
1. Retailer is merchant middleman
2. Often furniture, perishables and high-end fashion.
Producer to wholesaler to retailer to consumer
1. Traditional channel
2. Mainly convenience goods
Producer to agent to Wholesaler to retailer to Consumer
1. Agents = functional middleman
2. Small producers wanting to reach large amount of
suppliers
3. Seasonal products e.g. Christmas
Producers often use multiple channels. A different channel is
used for each market segment.
Channels for business products
Producer to business
1. Heavy machinery, airplanes and major equipment
2. Short channel allows timely services like delivery,
installation and repairs
Producer to Agent middleman to Business User
1. Used for supplies, accessories to equipment small tools
2. Agent independent and usually represents the seller.
Levels of Market coverage
Intensive Distribution – many retail outlets used. Highest
possible exposure.
Selective distribution – only portion of outlets used in each
geographical area
Exclusive Distribution – Only single distribution outlet in large
geographical area
, Marketing Intermediaries (wholesalers)
Justifications for market Intermediaries
They preform essential services
Would increase the records manufactures have keep
Market would be much more inefficient and price would not
decrease as wholesalers keep it as low as possible in order to
stay in business while producers do not have to do this.
Reduces the amount contacts, exchanges between producer
and buyers thus more efficient
Independent retailer – firm that operates only on retail outlet
Chain retailer – Firms operates more than one outlet
Classes of in-store retailers
Department stores
Large establishment with several sectors/departments
Must employ at least 25 members of staff and sell home
furnishings, appliances, family apparel, household linens
and dry goods
Discount Stores
In areas with low rent and self-service. In order to sell
products at less than normal selling price.
Catalog showroom
Retailer with well known brands and sells then at discount
prices through catalog
Warehouse Showrooms
Retailer with a large low cost building; warehouse material
handling technology, vertical merchandise displays, large
on premises inventory; minimal service.
Convenience Stores
Small food store sells limited variety but is open well
beyond normal business hours
Supermarket
Large self-service store that sell primary food and
household products
Minimum sales per year = 2 million
Superstores
Like supermarket with additional product lines e.g.
hardware, clothing etc.
Warehouse Clubs
Large scale members only establishments that combine
cash and carry wholesaling with discount retailing
Traditional Specialty stores
Narrow product mix with deep product lines e.g tekkie
town
Distribution
Channels of Distribution – Sequence of marketing organizations that
move product from producer to ultimate user.
Middleman
Merchant Middleman – takes title of goods before selling them
Functional Middleman – helps transfer of ownership but
doesn’t take ownership
Channels for Consumer Products
Producer to Consumer (direct channel)
1. Almost all services and practically no goods
2. Producer controls quality
Producer to retailer to consumer
1. Retailer is merchant middleman
2. Often furniture, perishables and high-end fashion.
Producer to wholesaler to retailer to consumer
1. Traditional channel
2. Mainly convenience goods
Producer to agent to Wholesaler to retailer to Consumer
1. Agents = functional middleman
2. Small producers wanting to reach large amount of
suppliers
3. Seasonal products e.g. Christmas
Producers often use multiple channels. A different channel is
used for each market segment.
Channels for business products
Producer to business
1. Heavy machinery, airplanes and major equipment
2. Short channel allows timely services like delivery,
installation and repairs
Producer to Agent middleman to Business User
1. Used for supplies, accessories to equipment small tools
2. Agent independent and usually represents the seller.
Levels of Market coverage
Intensive Distribution – many retail outlets used. Highest
possible exposure.
Selective distribution – only portion of outlets used in each
geographical area
Exclusive Distribution – Only single distribution outlet in large
geographical area
, Marketing Intermediaries (wholesalers)
Justifications for market Intermediaries
They preform essential services
Would increase the records manufactures have keep
Market would be much more inefficient and price would not
decrease as wholesalers keep it as low as possible in order to
stay in business while producers do not have to do this.
Reduces the amount contacts, exchanges between producer
and buyers thus more efficient
Independent retailer – firm that operates only on retail outlet
Chain retailer – Firms operates more than one outlet
Classes of in-store retailers
Department stores
Large establishment with several sectors/departments
Must employ at least 25 members of staff and sell home
furnishings, appliances, family apparel, household linens
and dry goods
Discount Stores
In areas with low rent and self-service. In order to sell
products at less than normal selling price.
Catalog showroom
Retailer with well known brands and sells then at discount
prices through catalog
Warehouse Showrooms
Retailer with a large low cost building; warehouse material
handling technology, vertical merchandise displays, large
on premises inventory; minimal service.
Convenience Stores
Small food store sells limited variety but is open well
beyond normal business hours
Supermarket
Large self-service store that sell primary food and
household products
Minimum sales per year = 2 million
Superstores
Like supermarket with additional product lines e.g.
hardware, clothing etc.
Warehouse Clubs
Large scale members only establishments that combine
cash and carry wholesaling with discount retailing
Traditional Specialty stores
Narrow product mix with deep product lines e.g tekkie
town
