Distribution (Place) (AQA A Level Business): Revision Note

Introduction to place

• In the marketing mix, place refers to how a product gets from the producer to the final customer

  • Also known as distribution, place is about making the product available in the right location, at the right time and in the right quantity to meet customer needs

• Place decisions matter because a product can be perfectly designed, competitively priced and heavily promoted, but if customers cannot easily access it, sales will still suffer

  • Convenience and accessibility are critical factors in the purchase decision

• Like all elements of the marketing mix, place must be consistent with the overall positioning of the product

  • A premium product should be distributed through select, high-end outlets that reinforce its exclusivity

  • A mass-market product requires wide distribution to maximise the number of customers who can access it

  • A product targeting a young, digitally active audience should be available online as a priority

• Place decisions also affect costs

  • Wider distribution typically costs more, and the choice of distribution channel directly impacts profit margins

The value of distribution channels

• A distribution channel is the route a product takes from producer to final customer

  • It may be direct (producer sells straight to the customer) or indirect (involving one or more intermediaries such as wholesalers or retailers)

• Distribution channels create two important types of utility

  • Place utility

    • Making products available where customers want to buy them (a nearby shop, an online store, a specialist outlet)

  • Time utility

    • Making products available when customers want them (a 24-hour website, a convenience store open late)

Why effective distribution channels are important

• Effective distribution channels add value to both the business and the customer

  • For the business

    • Channels of distribution extend reach beyond what the business could achieve through its own sales efforts alone

    • They reduce the cost of reaching large numbers of customers

    • They allow the business to focus on production while intermediaries handle selling

  • For the customer

    • Distribution channels make it more convenient to find and purchase products

    • Intermediaries such as retailers often provide additional services, including product advice, after-sales support and easy returns

• A well-chosen distribution channel can also be a genuine source of competitive advantage

  • If customers can access a product more easily than a rival's, they are more likely to buy it

Direct distribution

• Direct distribution means the producer sells its products straight to the final customer, without using any intermediaries

  • Examples include factory outlets, the business's own website, direct sales representatives and market stalls

Advantages and disadvantages of direct distribution

E-commerce

• E-commerce involves selling online through a business's own website or app

  • It is the most significant and fastest-growing form of direct distribution in modern marketing

Retail e-commerce sales worldwide 2021-2026

Advantages and disadvantages of e-commerce

The use of intermediaries

• Intermediaries are businesses that operate between the producer and the final customer

• The two main types are wholesalers and retailers

Benefits of using intermediaries

• Greater reach

  • Retailers have established locations and loyal customer bases, giving the producer access to far more customers than it could reach alone

• Reduced distribution burden

  • Intermediaries handle storage, transport and sales, freeing the producer to focus on manufacturing

• Wholesalers provide large, predictable orders

  • Buying in bulk gives producers reliable revenue and simplifies logistics significantly

• Retailers provide display space and sales support

  • This reduces the producer's need to invest in its own retail infrastructure and sales staff

• Established customer trust

  • Well-known retailers lend credibility to the products they stock, reassuring customers about quality and reliability

Disadvantages of using intermediaries

• Loss of control

  • The producer has limited influence over how the product is displayed, priced, or presented to customers

• Reduced profit margins

  • Each intermediary takes a share of revenue, reducing the producer's profit per unit sold

• Distance from the customer

  • The producer loses direct contact with the end customer, making it harder to gather feedback and respond to changing needs

• Dependence on intermediary priorities

  • A retailer may choose to promote a competitor's product more prominently or reduce shelf space for the producer's product at any time

• Wholesaler risk

  • Products may sit in wholesale storage for extended periods, risking damage or obsolescence, with the producer having little visibility or control

Multi-channel distribution

• Multi‑channel distribution means making a product available to customers through two or more different channels at the same time

  • For example, physical stores, a branded website, online marketplaces and mobile apps

Reasons for the growth of multi-channel distribution

1. The rise of e‑commerce and smartphones

   • Shoppers now expect to browse and buy anywhere, anytime

   • E.g. Zara allows customers to order via app, website or in-store

2. Click and collect popularity

   • Combining online ordering with store pickup saves delivery fees and brings footfall into shops

   • E.g. Argos reports most web orders are collected in‑store within hours

3. Need for seamless customer experience

   • Firms link channels so baskets, loyalty points and returns work everywhere

   • E.g. John Lewis & Partners integrates its website, app and department stores under one account

4. Competitive pressure

   • Rivals offering more choice encourage others to follow

   • E.g. grocery chains such as Sainsbury’s added rapid‑delivery apps after Deliveroo gained market share

5. Falling technology costs

   • Cloud platforms and third‑party fulfilment companies, such as Evri, make it affordable even for smaller brands

   • E.g. soft drinks manufacturer Innocent sells direct via Shopify as well as in supermarkets and other retailers

Advantages and disadvantages of multichannel distribution