Methods of distribution
Place means how the product gets from the business to the customer — the distribution channel. It does not mean where the business is located; that was 1.4.2.
The specification names two methods: retailers and e-tailers, meaning e-commerce.
Selling through retailers. The business sells to a shop, which sells to the customer. The retailer reaches customers the business could not reach alone, handles the selling, and buys in large quantities, which is convenient. But the retailer takes a share of the price, so the business earns less per unit; it has little control over how the product is displayed or sold; and it may sit beside a competitor on the shelf.
Selling through e-tailers, or directly online. The business sells through its own website or an online marketplace. It keeps more of the price, controls how the product is presented, deals with customers directly and can collect their data. But it must handle its own promotion to attract visitors, pack and deliver every order, process returns, and pay fees on each transaction.
- Place
- how the product gets from the business to the customer — the distribution channel; not where the business is located
- E-tailer
- a business that sells to customers online rather than through a physical shop
Choosing a distribution method
What decides the choice:
• The product. Something customers want to try, handle or be fitted for suits a shop. Something standard, where every unit is identical, sells perfectly well online. • The customer. Where do they already shop? A method customers do not use is no use however efficient it is. • Cost. A retailer's margin against the cost of running a website, packing and delivering. • Control. How much the business cares about how the product is presented and who owns the customer relationship. • Speed and convenience. What the customer expects — same day, next day, or willing to wait.
Many businesses use both, which the specification's phrasing allows for. A manufacturer can sell through shops for reach and online for margin, though this risks annoying retailers if the business undercuts them on its own website.
Worked example
A business making handmade candles currently sells only through gift shops. It is considering selling online as well. Analyse this decision.
- Identify what it gains: it keeps the retailer's margin, so earns more per candle, and reaches customers anywhere rather than only where the shops are.
- It also gains direct contact with customers and data about them, useful for future promotion.
- Identify what it takes on: promoting its own website, packing fragile items, delivery costs and handling returns.
- Identify the conflict: gift shops may object if the business sells the same candles more cheaply online, and could stop stocking them.
- Reach a recommendation with a condition.
Answer: Selling online would raise the margin per candle and reach a national market, with direct customer contact as a further gain. But it adds promotion, packing, delivery and returns costs, and risks the gift shops dropping the product if they are undercut. It should do both — but price the online candles at or near the shop price, so retailers are not undercut.
Common mistake
Place is distribution, not location. A question about place is asking how the product reaches the customer, not where the premises are — that confusion loses whole answers.
Before you practise
- Place means how the product reaches the customer — the distribution channel.
- The two methods named are retailers and e-tailers.
- Retailers reach customers and do the selling, but take a margin and control presentation.
- Selling online keeps more of the price and gives direct customer contact, but the business must promote, pack, deliver and handle returns.
- The choice depends on the product, the customer, cost, control and expected speed.
- Many businesses use both, but must avoid undercutting their own retailers.