Distribution (Edexcel A Level Business): Revision Note

Types of distribution channels

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

Common distribution channels

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

  • For example, The Coca-Cola Company produces the soft drink and then sells it to a wholesaler, which 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

  • For example, Dell produces laptops and sells them directly to retailers such as Currys, which 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

  • For example, Ryanair sells its service (passenger tickets) directly to the end customer on its website 

Changes in distribution to reflect social trends

• E-commerce is the buying and selling of goods and services over the internet

  • 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

• 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

  • It provides businesses with the infrastructure and online marketplace that allows them to reach a wider audience and increase sales without having to invest in their distribution infrastructure

  • Many small businesses now generate the bulk of their sales by selling on Amazon

The shift from product-based businesses to service-based businesses

• Consumers increasingly value experiences over material possessions

• 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

Example

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