The document discusses physical distribution and distribution channels. It defines distribution as making products available to consumers through direct or indirect channels. There are three main types of distribution channels: intensive/mass distribution which uses many outlets to reach a wide market, selective distribution which uses some intermediaries for specialized goods, and exclusive distribution where a manufacturer uses only one intermediary. Distribution involves warehouses and intermediaries like wholesalers and retailers to store and transport goods and facilitate transactions between producers and consumers.

1. Physical Distribution

2. • The product should be available
• at the right time and at the right place.
• Session I: Meaning and Importance of Place

3. • Distribution (or place) is one of the four elements of the marketing
mix. Distribution is the process of making a product or service
available for the consumer or business user that needs it. This can be
done directly by the producer or service provider, or using indirect
channels with intermediaries.
• It is concerned with making the goods and services available at the
right place, so that people can purchase the same.
•

4. Distribution strategies
• Strategically, there are three approaches to distribution:[1]
•

5. • Intensive or Mass distribution
• Selective distribution
• Exclusive distribution

6. • Name Products falling under these three categories

7. • Intensive distribution: (also known as mass distribution) When
products are destined for a mass market, the marketer will seek out
intermediaries that appeal to a broad market base. For example,
snack foods and drinks are sold via a wide variety of outlets including
supermarkets, convenience stores, vending machines, cafeterias and
others. The choice of distribution outlet is skewed towards those than
can deliver mass markets in a cost efficient manner.
•

8. • Selective distribution: A manufacturer may choose to restrict the number
of outlets handling a product. For example, a manufacturer of premium
electrical goods may choose to deal with department stores and
independent outlets that can provide added value service level required to
support the product. Dr Scholl orthopedic sandals, for example, only sell
their product through pharmacies because this type of intermediary
supports the desired therapeutic positioning of the product. Some of the
prestige brands of cosmetics and skincare, such as Estee Lauder, Jurlique
and Clinique, insist that sales staff are trained to use the product range.
The manufacturer will only allow trained clinicians to sell their products.
•

9. • Exclusive distribution: In an exclusive distribution approach, a
manufacturer chooses to deal with one intermediary or one type of
intermediary. The advantage of an exclusive approach is that the
manufacturer retains greater control over the distribution process. In
exclusive arrangements, the distributor is expected to work closely
with the manufacturer and add value to the product through service
level, after sales care or client support services. The most common
type of exclusive arrangement an agreement between a supplier and
a retailer granting the retailer exclusive rights within a specific
geographic area to carry the supplier's product. [2]
•

10. Type Definition
Intensive distribution
The producer's products are stocked in the majority of
outlets.[3] This strategy is common for basic supplies,
snack foods, magazines and soft drink beverages.[4]
Selective distribution
Means that the producer relies on a few
intermediaries to carry their product.[3] This strategy is
commonly observed for more specialised goods that
are carried through specialist dealers, for example,
brands of craft tools, or large appliances.
Exclusive distribution
Means that the producer selects only very few
intermediaries.[3] Exclusive distribution occurs where
the seller agrees to allow a single retailer the right to
sell the manufacturer's products. This strategy is
typical of luxury goods retailers such as Gucci.

11. Channels and intermediaries
• Distribution of products takes place by means of channels to become
available on markets, in stores or in webshops. Channels are sets of
interdependent organizers (called intermediaries) involved in making
the product available for consumption to end-user.[3] This is mostly
done by merchants or distributors, or in international context by
importers.
•

12. Definition –Distribution Channel
• According to William J.Stanton, “A distribution channel for a product
is the route taken by
• the title to the goods as they move from the producer to the ultimate
customer.”

13. • Definition by Kotler indicates that distribution channel is nothing but
set of intermediaries.
• While Stanton indicates transfer of title of goods from producer to
customers as another angle
• of place.

14. • According to Philip Kotler, “Every producer seeks to link together the
set of marketing
• intermediaries that best fulfil the firm’s objective. This set of
marketing intermediaries is
• called marketing channel.”

15. • Place or Channel of distribution is concerned with the movement of goods from
the point of
• production to the point of consumption. The term 'Channel of Distribution' refers
to the route
• taken by goods as they flow from the Manufacturer to the consumer. This flow of
goods may
• mean its physical distribution and/or the transfer of title (ownership). Channels of
distribution
• are mainly concerned with the transfer of title to a product which may be
affected directly or
• 5
•
• through a chain of intermediaries.

16. • It comprises of set of four participants of distribution
• system:
• (1) Manufacturers,
• (2) Intermediaries,
• (3) Facilitating agencies, and
• (4) Consumers

17. Session II: Types of Distribution Channels
• I. Direct Channel
• II. Indirect Channel

18. Channels of Distribution
In case of large number of consumer products, the potential buyers are
scattered over a wide geographical area. In order to contact these
people efficiently and effectively, it is important to take the help of
number of intermediaries as contacting them directly may not be cost
effective and may be difficult even otherwise

19. • For example, a manufacturer of detergent powder in Gujarat would
find it very difficult to directly approach customers, say in Delhi,
Thiruvananthapuram, Bhuvaneshwar, Hyderabad Srinagar and other
far off places. Therefore, he/ she would supply a large quantity of
his/her product to a big merchant,

20. • Mostly goods and services are distributed through a network of
marketing channels. For example we buy merchandise of our need
such as salt, bulb, tea, sugar, soap, paper, books, flour, etc., from retail
sellers

21. One Level Channel
• Intermediaries are the organizations who make the product available
for the consumers. Channels are classified on the basis of number of
intermediaries between producer and consumer. So, the classification
can also be done on the basis of direct (Zero level) and indirect
marketing (One level, Two level).
•
These intermediaries also play an important role in matching demand
and supply, and making contacts with the customer.
•

22. • Intermediaries can also be:
• • Online websites like flipkart, ebay, jabong etc.
• • Products sold in B2B markets (eg. Firewall sold to an organization)
• So, an important element of the Marketing Mix or the 4 P’s is Place, according to
which a producer has to access the right distribution channel to make the goods
available for the consumers. Channel decisions are very important as it affects
other marketing decisions and long-term commitments.
•
One level distribution is popular in supermarkets, hypermarkets, retail chains,
departmental stores.
•

23. Advantages
• Advantages:
• • Lesser investment than in direct selling
• • Suitable for small scale producers
• • Expertise of the middle man can be used
• • The geographical reach can be extended
• • Reducing the stock-holding costs

24. Disadvantages
• • It takes some time as compared to direct selling
• • The producer does not have control over distribution
• • It does not generate direct cash for the organization
• • Cannot build relationships with the customer

25. One level Channel
• A one level channel contains one selling intermediary. In consumer
markets, this is usually a retailer. The consumer electrical goods
market in the United Kingdom is typical of this arrangement whereby
producers such as Sony, Panasonic, Canon etc. sell their goods directly
to large retailers such as Comet, Dixons and Currys which then sell the
goods to the final consumers.

26. Warehousing
• Storage has always been an important aspect of economic
development. The warehouse was initially viewed as a static unit for
keeping and storing goods in a scientific and systematic manner so as
to maintain their original quality, value and usefulness. The typical
warehouse received merchandise by rail, truck or bullock cart. The
items were moved manually to a storage within the warehouse and
hand piled in stacks on the floor. They are used by manufacturers,
importers, exporters, wholesalers, transport business, customs etc., in
India

27. • Wholesaling is concerned with the activities of those persons or
establishments which sell to retailers and other merchants, and/or to
industrial institutional and commercial users but who don’t sell in
significant amount to ultimate consumers.
• Wholesalers serve as an important link between manufacturers and
retailers.
• They purchase in bulk and sell in small lots to retailers or industrial
users.

28. • They undertake various activities such as grading of products, packing
into smaller lots, storage, transportation, promotion of goods,
collection of market information, collection of small and scattered
orders of retailers and distribution of supplies to them.
• They also relieve the retailers of maintaining large stock of articles
and extend credit facilities to them. Most of the functions performed
by wholesalers are such which cannot be eliminated.

29. • d. If there are no wholesalers, these functions shall have to be
performed either by the manufacturers or the retailers.

30. • Services of Wholesalers Wholesalers provide various services to the
manufacturers as well as the retailers and provide immense help in
the distribution of goods and services. By making the products
available at a place where these are needed and at a time when these
are needed for consumption or use, they provide both time and place
utility. The various services of wholesalers to different sections are
listed as follows:

31. Service of Wholesalers
• (i) Facilitating large scale production: Wholesalers collect small orders
from number of retailers and pass on the pool of such orders to
manufacturers and make purchases in bulk quantities. This enables
the producers to undertake production on a large scale and take
advantage of the economies of scale.

32. • (ii) Bearing risk: The wholesale merchants deal in goods in their own
name, take delivery of the goods and keep the goods purchased in
large lots in their warehouses. In the process they bear lots of risks
such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc. To
that extent, they relieve the manufacturers from bearing these risks.

33. • (iii) Financial assistance: The wholesalers provide financial assistance
to the manufacturers in the sense that they generally make cash
payment for the goods purchased by them. To that extent, the
manufacturers need not block their capital in the stocks. Sometimes
they also advance money to the producers for bulk orders placed by
them.

34. • (iv) Expert advice: As the wholesalers are in direct contact with the
retailers, they are in a position to advice the manufacturers about
various aspects including customer’s tastes and preferences, market
conditions, competitive activities and the features preferred by the
buyers. They serve as an important source of market information on
these and related aspects.

35. • (v) Help in the marketing function: The wholesalers take care of the
distribution of goods to a number of retailers who, in turn, sell to
large number of customers spread over a large geographical area. This
relieves the manufacturers of many of the marketing activities and
enable them to concentrate on the production activity

36. • vii) Storage: Wholesalers take delivery of goods when these are
produced in factory and keep them in their godowns/warehouses.
This reduces the burden of manufacturers of providing for storag

37. Services to Retailer
• (i) Availability of goods: Retailers have to maintain adequate stock of
varied commodities so that they can offer variety to their customers.
The wholesalers make the products of various manufacturers readily
available to the retailers. This relieves the retailers of the work of
collecting goods from several producers and keeping big inventory of
the same.

38. • (ii) Marketing support: The wholesalers perform various marketing
functions and provide support to the retailers. They undertake
advertisements and other sales promotional activities to induce
customers to purchase the goods. The retailers are benefitted as it
helps them in increasing the demand for various new products.

39. • (iii) Grant of credit: The wholesalers generally extend credit facilities
to their regular customers. This enables the retailers to manage their
business with relatively small amount of working capital.
• (iv) Specialised knowledge: The wholesalers specialise in one line of
products and know the pulse of the market. They pass on the benefit
of their specialised knowledge to the retailers. They inform the
retailers about the new products, their uses, quality, prices, etc. They
may also advise on the decor of the retail outlet, allocation of shelf
space an

40. • ) Risk sharing: The wholesalers purchase in bulk and sell in relatively
small quantities to the retailers. Being able to manage with purchase
of merchandise in smaller quantities, retailers are in a position to
avoid the risk of storage, pilferage, obsolescence, reduction in prices
and demand fluctuations in respect of the additional goods that they
would have to purchase in case the services of wholesalers are not
available.

41. • RETAIL TRADE
• A retailer is a business enterprise that is engaged in the sale of goods
and services directly to the ultimate consumers. He/she normally
buys goods in large quantities from wholesalers and sells them in
small quantities to the ultimate consumers.

42. • There may be different ways of selling the goods viz., personally, on
telephone, or by vending machines. Also, the products may be sold at
different places viz., in a store, at the customer’s house or any other
place.
• Some of the common situations that we encounter in our daily life for
example, are the sale of ball pens or some magic medicine or book of
jokes in the roadways buses; the sale of cosmetics/ detergent powder,
door-to-door sales; and the sale of vegetables by the road side by a
small farmer.

43. • A retailer performs different functions in the distribution of goods
and services. He/she purchases a variety of products from wholesale
distributors and others, arranges for proper storage of the goods, sells
the goods in small quantities, bears business risks, grades the
products, collects market information, extends credit to the buyers
and promotes the sale of products through displays, participation in
various schemes, etc.

44. Services to Manufacturers and Wholesalers
• (i) Help in distribution of goods:

47. • Today’s warehouses have ceased to be a mere storage service
providers and have really become logistical service providers in a cost
efficient manner. That is making available the right quantity, at the
right place, in the right time, in the right physical form at the right
cost. Modern warehouses are automated with automatic conveyors,
computer operated cranes and forklifts for moving goods and also
usage oflogistics automation software’s for warehouse management.

48. • (i) Private warehouses : Private warehouses are operated, owned or
leased by a company handling their own goods, such as retail chain
stores or multi-brand multi-product companies.
• The private warehouses are owned and operated by big
manufacturers and merchants to fulfill their own storage needs.
• A big manufacturer or wholesaler may have a network of his own
warehouses in different parts of the country.

50. • warehouses can be used for storage of goods by traders,
manufacturers or any member of the public after the payment of a
storage fee or charges. The government regulates the operation of
these warehouses by issuing licences for them to private parties. The
owner of the warehouse stands as an agent of the owner of the
goods and is expected

51. • They are responsible for the full safety of the goods. Small
manufacturers find it very convenient as they cannot afford to
construct their own warehouses.

53. • Public warehouses are very useful to the business community. Most
of the business enterprises cannot afford to maintain their own
warehouses due to huge capital Investment.
• Public warehouses provide storage facilities to small manufacturers
and traders at low cost. These warehouses are well constructed and
guarded round the clock to ensure safe custody of goods. Public
warehouses are generally located near the junctions of railways,
highways and waterways.
•

54. • They provide, therefore, excellent facilities for the easy receipt,
despatch, loading and unloading of goods. They also use mechanical
devices for the handling of heavy and bulky goods.
• Public warehouses provide facilities for the inspection of goods by
prospective buyers. They also permit packaging, grading and grading
of goods. The public warehouses receipts are good collateral
securities for borrowings.
•

56. • (iii) Bonded warehouses: Bonded warehouses are licensed by the
government to accept imported goods prior to payment of tax and customs
duty. These are goods which are imported from other countries. Importers
are not permitted to remove goods from the docks or airport.
• Bonded warehouses are very helpful to importers and exporters. If an
importer is unable or unwilling to pay customs duty immediately after the
arrival of goods he can store the goods in a bonded warehouse. He can
withdraw the goods in installments by paying the customs duty
proportionately.
•

57. • In case he wishes to export the goods, he need not pay customs duty.
Moreover, a bonded warehouse provides all services which are
provided by public warehouses. Goods lying in a bonded warehouse
can be packaged, graded and branded for the purpose of sale.
•

60. • At times, importers are not in a position to pay the duty in full or does
not require all the goods immediately. The goods are kept in bonded
warehouses by the customs authorities till the customs duty is paid.
• Goods can be removed in part as and when required by the importers
and buyers, and import duty can be paid in instalments

61. • (iv) Government warehouses: These warehouses are fully owned and
managed by the government. The government manages them
through organisations set up in the public sector. For example, Food
Corporation of India, State Trading Corporation, and Central
Warehousing Corporation.

64. • (v) Cooperative warehouses: Some marketing cooperative societies or
agricultural cooperative socities have set up their own warehouses for
members of their cooperative society

66. • Automated Warehouse
• With advances in computer and robotics technology many
warehouses now have automated capabilities. The level of
automation ranges from a small conveyor belt transporting products
in a small area all the way up to a fully automated facility where only
a few people are needed to handle storage activity for thousands of
pounds/kilograms of product. In fact, many warehouses use machines
to handle nearly all physical distribution activities such as moving
product-filled pallets (i.e., platforms that hold large amounts of
product) around buildings that may be several stories tall and the
length of two or more football fields.

68. • Climate-Controlled Warehouse
• Warehouses handle storage of many types of products including
those that need special handling conditions such as freezers for
storing frozen products, humidity-controlled environments for
delicate products, such as produce or flowers, and dirt-free facilities
for handling highly sensitive computer products.