Distribution (Edexcel A Level Business)

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

The three different types of distribution channels businesses can use to move products from the manufacturer to the end consumer

  

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 end 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
• This channel is often 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 

• 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 better meet the needs of their customers and stay competitive in the marketplace
   

 The Growth of E-commerce

Explanation

Example

Online distribution has become increasingly popular due to the convenience and accessibility it offers to consumers   Many businesses now use drop-shipping, which allows them to sell products without holding stock Once the business has sold the products, they are shipped directly from the producer to the customer This reduces the cost and complexity of distribution, making it easier for businesses to sell online

Amazon is known as a third-party logistics provider (3PLs) They provide businesses with the infrastructure and online marketplace which allows them to reach a wider audience and increase sales without having to invest in their distribution infrastructure Many businesses now generate the bulk of their sales selling on Amazon

 

 The Shift from Product-based Businesses to Service-based Businesses

Explanation

Example

Consumers increasingly value experiences over material possessions and this shift has impacted distribution, as the delivery of services is often quite different from the delivery of physical products   Distribution for service-based businesses may involve delivering services to customers directly, such as through a mobile app or website This requires a different set of distribution capabilities than traditional product-based distribution

Uber delivers a taxi service through a mobile app The distribution involves matching drivers with customers in real-time The service is distributed directly to the end consumer without the need for wholesalers or retailers With no need for wholesalers or retailers, business costs reduce and profitability may increase