Distribution Management
MNM2610
Study Unit One
Nature and Role of Distribution
1. Introduction & Defining Channel Management
- Marketing mix consist of four factors: Price, Promotion, Product and Place (Distribution)
- Distribution is the functions that ensure the product reaches the customer
- By focusing in distribution, organisations can reduce cost, inventory and out-of-stock situations and together
with the other functions ensure success
- Distribution channel refers to a type of structure that is used to make a product or service available to the
end users or customers’
- Intermediaries: independent businesses that perform specific tasks to assist in the facilitation process
between the sellers and buyers
- Intermediaries can be wholesalers, retailers, agents or any other type of organisation
- Channel structure influences cost, price setting, promotional activities and package designs of products
a. Defining Channel Management
Resellers
- Organisations that resell the products
Wholesalers
- There are four types of wholesalers:
- Cash & Carry: Retailers buy for cash and transport to their store
- Rack-Jobbers: lease part of a store, division of a rack, or store isle
- Truck-Jobbers: organisations that manufacture perishable goods which need frequent replenishment
as they only distribute within a specific geographic area
- Mail Order Wholesalers: put goods up for sale in catalogues that may be circulated broadly to agents
Retailers
- Businesses that sell goods and services to the end users, usually individuals
- Functions of these retailers:
- Range of merchandise: usually buy a range of goods of a number of different wholesalers and
manufacturers based on consumer needs
- Storage of goods: retailer can’t keep all stock on the sales floor so they need a storage area to
ensure they keep enough stock to meet consumer demand
- Credit Facility: makes it easier for consumers to purchase items without waiting.
- Other Services: offer services such as advice regarding quality, features and usefulness of the items
or free delivery
- Risk Bearing: take some risk in offering products to consumers. Include theft, deterioration in the
quality of goods as long as they are not sold,
- Display of Goods: display different types of goods in a very systematic and attractive manner
- Supply of Information: are a great source of information to their suppliers regarding the issues such
as the behaviour, taste, fashions and demand of customers
Wholesalers Retailers
Buys goods in large quantities Buy goods in small quantities
Buy goods directly from producers Buys goods from the wholesalers
Deals with a limited variety of goods Deals with a wide range of products
Requires more capital to start and run the business Requires less capital to start and run the business
Sells goods for resale purposes Sells goods for consumption
Has no direct contact with consumers Has direct contact with customers
No special attention is given to the decoration of the To attract the attention of customers, retailers give
shop more attention to the decoration of the shop
Page 1 of 45
MNM2610
Study Unit One
Nature and Role of Distribution
1. Introduction & Defining Channel Management
- Marketing mix consist of four factors: Price, Promotion, Product and Place (Distribution)
- Distribution is the functions that ensure the product reaches the customer
- By focusing in distribution, organisations can reduce cost, inventory and out-of-stock situations and together
with the other functions ensure success
- Distribution channel refers to a type of structure that is used to make a product or service available to the
end users or customers’
- Intermediaries: independent businesses that perform specific tasks to assist in the facilitation process
between the sellers and buyers
- Intermediaries can be wholesalers, retailers, agents or any other type of organisation
- Channel structure influences cost, price setting, promotional activities and package designs of products
a. Defining Channel Management
Resellers
- Organisations that resell the products
Wholesalers
- There are four types of wholesalers:
- Cash & Carry: Retailers buy for cash and transport to their store
- Rack-Jobbers: lease part of a store, division of a rack, or store isle
- Truck-Jobbers: organisations that manufacture perishable goods which need frequent replenishment
as they only distribute within a specific geographic area
- Mail Order Wholesalers: put goods up for sale in catalogues that may be circulated broadly to agents
Retailers
- Businesses that sell goods and services to the end users, usually individuals
- Functions of these retailers:
- Range of merchandise: usually buy a range of goods of a number of different wholesalers and
manufacturers based on consumer needs
- Storage of goods: retailer can’t keep all stock on the sales floor so they need a storage area to
ensure they keep enough stock to meet consumer demand
- Credit Facility: makes it easier for consumers to purchase items without waiting.
- Other Services: offer services such as advice regarding quality, features and usefulness of the items
or free delivery
- Risk Bearing: take some risk in offering products to consumers. Include theft, deterioration in the
quality of goods as long as they are not sold,
- Display of Goods: display different types of goods in a very systematic and attractive manner
- Supply of Information: are a great source of information to their suppliers regarding the issues such
as the behaviour, taste, fashions and demand of customers
Wholesalers Retailers
Buys goods in large quantities Buy goods in small quantities
Buy goods directly from producers Buys goods from the wholesalers
Deals with a limited variety of goods Deals with a wide range of products
Requires more capital to start and run the business Requires less capital to start and run the business
Sells goods for resale purposes Sells goods for consumption
Has no direct contact with consumers Has direct contact with customers
No special attention is given to the decoration of the To attract the attention of customers, retailers give
shop more attention to the decoration of the shop
Page 1 of 45
