Distribution Channels and Retail: A Detailed Analysis
Definition of Distribution
Distribution is the set of operations needed to make products and services available to those who will consume or use them.
Distribution Channels
Channels are the different paths that products take in the process from the producer to the consumer or end-user. The process can be short or long, depending on the number of intermediaries involved.
Effects of Channel Length
- Direct Channel: The company controls the entire marketing process at a low cost. This type of channel is used in the following cases:
- In the service sector, when provided directly by the company.
- When buyers are a small number of firms acquiring industrial products.
- Short Channels: They have the advantage of low support costs, but their ability to reach the market is smaller.
- Long Channels: They are used in the distribution of most consumer products. Their cost is higher but is offset by the ability to reach more customers.
Wholesale
A wholesale company is an intermediary that is characterized by selling products to other businesses, which, in turn, sell them for resale or processing. Depending on where they are located, they can be classified into:
- Wholesalers at origin, located near the producing companies.
- Wholesalers at destination, set by tax buyers.
- Wholesale origin-destination.
Dealers / Retailers
Dealers/retailers are those that, while working as intermediaries, sell products to final consumers. With the exception of transport and distribution in a geographic area, the dealer performs all other functions described for the wholesaler, but they are carried out only for the final consumer, highlighting its importance in functions of merchandising, advertising, and promotion at the point of sale, already discussed in the previous unit.
Types of Retailers
The concept encompasses retail companies with characteristics very different from each other, as shown in the following classifications:
- According to the size of the establishment: large, medium, and small.
- According to the commercial form: traditional shops, supermarkets, hypermarkets, shopping malls, department stores, franchises, markets, etc.
- According to the sales system:
- Traditional sale, in which the company serves the personal products directly to consumers.
- Self-service sale: the customer takes the product directly.
- Sale without establishing: correspondence, telephone, television, mail, Internet, vending machines, etc.
Characteristics of Different Types of Retailers
Unskilled traditional trade, traditional trade specialist, Supermarkets, Hypermarkets, Department Stores, Popular Warehouse, Discount stores, Specialized.
Associations Between Intermediaries
- Horizontal: The union of intermediaries belonging to the same level of the channel.
- Vertical system: Takes place between companies that move at different levels.
Types of Associations Between Intermediaries
- Horizontal: It consists of the union of intermediaries belonging to the same level of the channel.
- Vertical system: This form of partnership is between companies that move at different levels.