“Place” refers to how a product is distributed and made available to customers. Effective distribution ensures that goods and services reach consumers conveniently and at the lowest possible cost.
Channels of distribution
The main ways of getting products to customers are:
- Direct selling – the producer sells straight to the consumer via its own shop, website, mail order or sales force. This gives full control over the brand and direct feedback but can be expensive.
- Retailers – businesses such as supermarkets or specialist shops buy from manufacturers and sell to final consumers. Retailers provide convenience and customer service.
- Wholesalers – buy in bulk from manufacturers and sell in smaller quantities to retailers. They reduce storage and transport costs for producers and retailers but add an extra margin to the price.
- Agents/brokers – represent producers and help sell to wholesalers or retailers, often used in foreign markets.
Choosing the right channel depends on the product, market size, customer preferences, cost and the manufacturer’s resources.
| Channel | Advantages | Disadvantages |
|---|---|---|
| Direct (producer → consumer) | Full control over marketing; direct feedback; no intermediary margins. | High marketing and distribution costs; limited reach if firm is small. |
| Producer → Retailer → Consumer | Retailers provide customer service and convenience; reduces producer’s distribution burden. | Retailer takes a margin; producer has less control over display and pricing. |
| Producer → Wholesaler → Retailer → Consumer | Wholesaler buys in bulk, reducing storage and distribution costs for producer and retailer. | Extra intermediary increases final price; producer further removed from consumer feedback. |
| Producer → Agent → Wholesaler/Retailer → Consumer | Useful for entering foreign markets; agent’s expertise and contacts reduce risk. | Less control; fees paid to agent; slower communication. |
Explaining the trade‑offs: Choosing a distribution channel involves balancing control, cost and reach. Selling directly gives firms the greatest control over branding and pricing, but requires them to handle marketing, warehousing and delivery themselves. Retailers and wholesalers can expand a product’s reach and provide customer service, but each intermediary takes a margin and reduces the producer’s influence over how the product is displayed or promoted. Agents are useful when entering unfamiliar markets because they bring local expertise, but they also charge fees and slow down communication.
Distribution decisions
Distribution strategy is influenced by:
- Nature of the product – perishable goods require quick, direct distribution; bulky goods may need intermediaries.
- Market location – direct selling is easier for local markets; overseas markets may need agents.
- Control over the marketing mix – producers may choose direct channels to control brand image and customer service.
- Costs and profitability – intermediaries add costs but may reduce the producer’s marketing and distribution expense.
E‑commerce
The internet has transformed distribution. E‑commerce allows businesses to sell goods and services online directly to consumers. Benefits include reduced overheads, access to a global market, personalised marketing and the ability to collect customer data. However, challenges include intense competition, logistics and security concerns.
Examples and applications
A farmer selling fruit at a local market uses direct distribution, interacting face‑to‑face with customers and keeping all profits. Small craft businesses often sell products through their own websites or social media pages, avoiding retailer margins. By contrast, a snack manufacturer may supply supermarkets through wholesalers because it lacks its own fleet of delivery vehicles. The wholesaler buys in bulk and distributes cases of crisps and drinks to many independent shops and convenience stores.
International expansion often requires intermediaries. A clothing brand entering a foreign market might hire an agent with local knowledge to arrange contracts with retailers. E‑commerce platforms such as Amazon allow even tiny producers to reach customers worldwide: a graphic designer can upload a t‑shirt design to a print‑on‑demand service, which then prints and ships orders directly to customers.
