Distribution Decisions (AQA A Level Business): Revision Note

Every distribution stage (wholesaler, retailer, delivery firm) takes a share of the selling price

Firms compare this cost against the number of customers that can be reached

Dell shifted to selling laptops direct online to cut out retailers’ margins and lower final prices

Bulky, fragile or perishable items need shorter, safer routes to the end consumer

High-value or highly technical goods may need trained staff to explain them

Fresh flowers travel quickly by air freight to florists

Apple sells in its own stores so staff can demonstrate devices

Should the product be everywhere (intensive), in selected key outlets (selective), or in just a few prestige stores (exclusive)?

The choice depends on a product's brand image and sales objectives

Coca‑Cola aims for global, “every fridge” reach

Rolex restricts sales to a limited number of jewellers worldwide

Using intermediaries means less say in how products are displayed or discounted

Firms wanting tight control create their own stores or websites

Nike opened flagship “House of Innovation” stores and its own app to control prices and image of the brand

Buyers have set habits and expectations about where to find a product and the speed of delivery

Ignoring these habits risks lost sales

Gamers expect new releases on Steam for instant download

Weekly grocery shoppers look for fresh food in local supermarkets, not mail order

E‑commerce, mobile apps and real‑time tracking allow direct‑to‑consumer sales and faster delivery options

Technology can reduce the need for intermediaries

Amazon Prime uses advanced logistics and data to offer next‑day (often same‑day) delivery

Netflix relies on streaming technology to bypass DVDs and physical stores

Producer → Wholesaler → Retailer → Consumer

This channel is commonly used by smaller retail business that lack space or sufficient cash flow to hold large amounts of stock

Advantage: Small shops can buy little and often from the wholesaler, so they don’t need big, costly storage space

Disadvantage: Two extra mark‑ups (wholesaler and  retailer) push the selling price up for customers

The Coca-Cola Company produces soft drinks, which are sold in bulk to a wholesaler

The wholesaler sells smaller quantities to a convenience store

The convenience store  then sells individual soft drinks to the customer

Producer → Retailer → Consumer

This channel is often used for products with high demand or where the cost of distribution is high

This method is also common where customers require support or advice in selecting the product

Advantage: Retail staff can give advice and after‑sales help, which suits complex goods like laptops

Disadvantage: Stock sits in the retailer’s warehouse or shop, tying up cash until each item is sold

Toshiba produces laptops and sells them directly to electronics retailers

Currys employs knowledgeable sales staff who sell Toshiba laptops to end customers
 

Producer → Consumer

This channel is commonly used for products that are sold online or through direct sales channels

Advantage: No intermediaries mean lower costs, so the firm can offer low online prices or keep more profit

Disadvantage: The producer must handle delivery, returns and customer service itself, which can be expensive and time-consuming

GermanWings sells its service (airline passenger tickets) directly to the end customer on their website

Accesses shoppers who prefer different channels, increasing potential sales volume

Requires extra marketing to ensure all channels attract enough customers to make them worthwhile

Customers enjoy a choice of delivery, pickup and returns, increasing satisfaction and repeat purchases

Slow service on any distribution channel can hurt the whole brand

If one channel (e.g., high‑street stores) is disrupted, others (e‑commerce) keep revenue flowing

Stock management is more complex

Available stock must be visible and accurate across all outlets

Multiple ways to interact with customers generate significant insights into customers' buying behaviour

Greater data‑handling costs and the need for robust digital security systems

Creates the ability to upsell (add accessories online) or cross‑sell (store staff recommend linked items) across distribution channels

Risk of channel conflict—online prices or promotions may not be matched in store, confusing customers