Place is concerned with:

– the stores and outlets at which consumers can buy the products

– the channels of distribution by which a business gets its products from the factory to the outlets

Distribution channels are the intermediaries that transport the product in order to make it available to consumers. For example, wholesalers, distributors or retail outlets.

There are four main channels of distribution involved in getting a product to consumers:

• Direct marketing from producer to consumers: this is a common channel for industrial products and with advances in communication technology this has become increasingly popular. One example is specialist mail-order manufacturers
• Manufacturer – retailer – consumer: independent wholesalers are not as important now due to the popularity of large supermarkets. Retail chains buy in bulk and so deal with the manufacturers directly thereby dealing with their own wholesale activities.
• Manufacturer – wholesaler – retailer – consumer: in a consumer goods market this is the traditional channel. Smaller retailers rely on wholesalers and manufacturers don’t need to concern themselves with wholesaling functions. The wholesaler purchases supplies in bulk and then distributes these to the retailers.
• Manufacturer – agent – wholesaler – retailer – consumer: this popular for manufacturers who want to sell in foreign markets. An agent assists them with the movement of their goods through markets they’re unfamiliar with.

Usually the manufacturer sells a large quantity, known as bulk purchasing, to a wholesaler. The wholesaler pays a low price per unit and then splits the large batch into smaller batches which they sell on at a profit to a retailer, known as breaking bulk.

The retailer then adds their own profit margin and sells the product on to the consumer. The final price increases the more intermediaries there are as each intermediary adds on their own profit margin.

For a distribution channel to be efficient it must follow certain criteria:

• – Products have to be available to the consumers quickly and as cheaply as possible
• – Certain products, like those which are fragile or perishable, should have the shortest travelling time and be handled as little as possible to reduce the risk of damage
• – Markets which are large and dispersed require more intermediaries and so these must be chosen well to ensure the product gets to the consumers as quickly as possible
• – Goods which are heavy or bulky tend to require a direct channel from factories to retail outlets

A recent trend with businesses is to cut out as many intermediaries as they can. This reduces the final price and also gets the product to the consumer faster.

Within retailing there have also been a lot of changes. These include the introduction of out-of-town shopping centres, the increased use of Electronic Point Of Sale (EPOS) systems, longer opening hours, and products being sold on one outlet only.

All these developments have allowed bigger businesses the opportunity to take a larger hold over the markets. They now have much more power over stock-buying and the prices they’ll pay for their supplies. This means that factories are left with no choice but to sell low as they can’t afford to lose the big clients.