GCSE Business Studies/Place

The business has to decide how it wants its product to reach the customer. Products pass through a distribution channel, and there are four main ones you need to know. Wholesalers buy products from a wide range of manufacturers and usually sell them to retailers. Retailers specialise in selling to the consumer.

Manufacturer → Wholesaler → Consumer

This happens when consumers buy the product from a cash-and-carry warehouse. This is good for the manufacturer because they get bulk orders, and the wholesaler takes on the cost of storing the products as well as the risk of not selling them. The consumer often benefits from lower prices than if bought from a retailer, however levels of customer service may be lower. So this channel is useful for single use goods.

Manufacturer → Wholesaler → Retailer → Consumer

This is the traditional channel, and is still used mainly in the food and drink industry. The advantages for the manufacturer are the same as channel 1. The retailer also benefits from dealing with a wholesaler: the wholesaler reduces the risk to the retailer by allowing them to buy in smaller amounts (known as breaking bulk) and offering a wide choice of goods. Problems of this channel are that goods can take a long time to get to the consumer, and manufacturers may be too distant from hearing the needs of the consumer.

Manufacturer → Retailer → Consumer

This channel is becoming more common, particularly in the clothing industry. It is faster for retailers than dealing with wholesalers. The manufacturer also gets better consumer feedback about its products. However, it's hard for small retailers to hold lots of stock, and so often the manufacturer gets lots of small orders.

Manufacturer → Consumer

This channel is now very popular: examples include factory retail outlets, mail order, and internet selling. This is the fastest channel, and usually cheapest for the consumer. But it is difficult for the consumer to shop around, and levels of customer service may not be as good.