Place Ibdp Notes

Place
Place/ distribution refers to the decision about how products reach the end
consumer or user through different distribution channels.
Channels of distribution
Distribution channels are the chain of people and organisations a product goes
through from producer to end consumer.
These people and organisations a product go through to the end consumer are
called intermediaries. A long distribution channel tends to raise prices for
consumers as each intermediary will add a profit margin to the price.
Zero-level distribution channel/ direct distribution: the producer directly sells
to the consumer.
One-level distribution channel: has one intermediary being used.

Two-level distribution channel: uses two intermediaries.
Wholesalers
Wholesalers are businesses that purchase large quantities of products from a
manufacturer and then separate the bulk-purchases into smaller units for
resale, mainly to retailers. They act as the intermediary between producers and
retailers.
• bear the costs of storage
• eliminate retailer’s need to purchase large quantities directly from a
manufacture
• lower transaction costs or the manufacturer
• Frees up time for manufacturers to focus on production
Producers take a risk in passing on the responsibility of marketing their
products.
Distributors and agents (brokers)

Distributors are independent and specialist businesses that trade in the
products of only a few manufacturers.
Agents (or brokers) are representatives and negotiators who act on behalf of a
product's buyers and vendors (sellers). They are experts in their markets and
charge commissions for their services. Personal selling allows the sales agents
to demonstrate how the product works and enables customers to ask
questions about the product.
Retailers
Retailers are the sellers of products to the final consumer. Retailers can reach
many consumers.
• Independent retailers are small local vendors, often owned by a sole
proprietor.
• Convenience stores are small retail businesses that stock a limited range
of everyday fast-moving consumer goods.
• Multiple retailers (or chain stores) have numerous outlets.
• Supermarkets are retailers that sell mainly foodstuffs and groceries.
• Department stores are retail outlets that sell an extensive range of
products to the public, such as furniture, jewellery, kitchen equipment,
clothing, toys, cosmetics etc.
• Hypermarkets (or superstores) are huge outlets that stock various
products, such as foodstuffs and consumer durables. Due to their
enormous size, they tend to be located in out-of-town areas where the
space is available and the land cost is more affordable.
Speciality channels of distributions
Distribution without the use of intermediaries. Advantages:

• does not have to share its profits with other entities.
• direct control over their distribution
• reach potential customers who do not have easy access to retail outlets.
a) E-commerce: E-commerce is trading via the Internet. This is effective in

reducing the cost and risk of international marketing.
b) Vending machines: Vending machines are specialist machines that stock
products for sale. Due to their compact size, they can be placed almost
anywhere. Modern vending machines allow customers to pay with a
range of smart cards. Running costs and maintenance costs are minimal.
It can be prone to vandalism and mechanical failures, which will halt
sales. Due to the low capacity of a single vending machine, only a small
range of products can be sold.
c) Mail order: Mail order enables customers to order products via the
postal system.
Factors affecting the choice of distribution channels
• The product- Perishable goods cannot be distributed through a long

chain. Fast-moving consumer goods need to be sold in large volumes.
• The market- Suppliers can cater for local niche markets without
intermediaries. Large and dispersed markets usually require the use of
intermediaries as part of the channels of distribution.
• Time- E-commerce can be a convenient channel distribution; there’s a

time lag between customers paying for and receiving a product.
• Legal constraints- Government rules and regulations can prohibit the

distribution of certain products.
• Cost and benefits- Direct selling, without the use of intermediaries,

reduces the costs of distribution. Retailers and distributors may have
better access to customers.

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Place

One-level distribution channel: has one intermediary being used.

Distributors and agents (brokers)

Speciality channels of distributions

Distribution without the use of intermediaries. Advantages:

a) E-commerce: E-commerce is trading via the Internet. This is effective in

Factors affecting the choice of distribution channels

• The product- Perishable goods cannot be distributed through a long

• Time- E-commerce can be a convenient channel distribution; there’s a

• Legal constraints- Government rules and regulations can prohibit the

• Cost and benefits- Direct selling, without the use of intermediaries,

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