Retailing businesses Essay
Different retailing businesses have very different distribution methods based on the types of product that they sell, some arguably more effectively than others. As mentioned in an earlier assignment, there are three main types of distribution channels. The first is the channel that goes from the producer, then to the wholesaler, then to the retailer or sells to the consumer. The second channel starts with the producer who sells straight to the retailer, who then sells to the consumer. The third channel goes directly from the producer to the consumer. Channels one and two are classed as indirect marketing channels, whereas channel three is a direct marketing channel as it goes straight from producer to consumer. All of the distribution channels start with a producer who will create the products, for example the person that milks the cows to get milk.
For the first channel, the producer makes the product and then sells it to a wholesaler, such as Costsco who will purchase a huge quantity of products from them. They would do this to make sure that they have enough to sell onto retailers. They would keep a large amount of the product, for example some kind of confectionary, in there warehouse so they’re in a suitable environment to be kept until they’re sold on. Next, the retailer, who could be a small store or a larger store, who would want to purchase a specific amount of products from the wholesalers, not in as bulk form as the wholesaler would have purchased them in. This method would typically be used by used by smaller, more personal stores, that don’t need to buy in such bulk. This channel is effective for confectionary products for example, as Costco can get sweets such as Dairy Milk bars, or Skittles, at an incredibly low price for huge boxes.
It is good because it means that the businesses further down the chain will have confidence that they will be able to get the products that they want because the wholesaler gets the items I such bulk and if they sell all of their products, they can replenish easily. For the second channel, the retailer can give their consumers a guarantee that the product is fresher than if they used channel one, as they are getting the product directly from the producer before selling it to the consumer. This is because companies get the products directly from producers so they can guarantee the quality, unlike the first channel where the products go through two separate distributors which could contaminate the product or raise the risk of it being damaged. An example of this would be the electronics company Sony. Due to the fact that Sony produces their own products and then sells them onto other electronic stores such as Currys/PC World who will then sell the products onto the consumers.
The third Channel will typically deal with the consumer directly rather than using a middleman. This means that the customer will get the product or service at that moment on purchase. An example of this could be seen with Gregg’s Bakery. Due to the fact they will have their products made on site and would be able to sell their customers everything they have produced in store without using other stores ford or bringing in any assistance. By doing this it gives Greggs a better look by being able to say that they produce all of their products on site and they can also guarantee that the products are fresh. Different sectors of business will use different techniques when going through the distribution stage differently. This can be from the difference of storing products whilst distributing them and how they actually transport the product to the next person in the channel. For example, how a food retailer and gets their products distributed will be different to how a clothing store gets theirs.
For a restaurant they use a wide variety of produces such as local farmers and local fishermen, depending on the type of restaurant that they own. They could have very specific producers, for example if they were a halal based restaurant they would have to be very specific about their supplier. Then they will have to either make a deal with the producer/supplier so they can collect produce direct from them. Then they will prepare the food ready to cook it and will store the prepared ingredients safely at the correct temperature. They will then wait for the person at the end of the chain – the consumer – to come to the restaurant to cook it for them. This is good for the producer because money will track back to them through the restaurant gaining the money from selling the meals. The money goes into the restaurant from customers pockets, and then the restaurant will use a portion of this money to re-purchase some supplies from the producer.
This is when a good working relationship will develop between them as they will gain more sales and earn more money back. Continuing with a food retailer, Greggs or a restaurant will want to get fresher ingredients than other retailers so that they can make sure they produce all of their products to be as fresh as can be. This can be done for example by Gregg’s own in-store bakeries having their ingredients delivered in the morning and then they bake them the same morning to make sure they are as fresh as possible. When they order the ingredients from the producers they will have to check that the supplier is storing the produce correctly before purchasing, otherwise they may purchase products that could be unsuitable for them to use and if they did use them, could create problems for them in the future. A good example of this could be seen with restaurants purchasing fish. A lot of the time they would send an employee to get it directly after it has been caught on the boat.
They do this so that there are no issues with how the fish is stored, as if it is stored incorrectly whilst distributed it will cause severe food poisoning and could lead to the restaurant getting sued or shut down. A clothing retailer will start the process from the producer then they will involve the their designers and then they would create the products. If the retailer manufactures their own brand clothing for example Primark the producers send the finished garments directly to their warehouses fir distribution into their stores. If it is a clothing retailer that buys garments from fashion houses or via intermediaries then the finished items would go to their wholesalers and then potentially go to retailers depending on what business it is and then finally, they would be bought by the consumers.
They would start the process by collecting the cotton from the cotton farmers then they would be shipped off to the factories where weavers and designers will create the fabrics, the fabric factories will then sell them to clothing manufacturing companies who will create something that retailers can sell on to make a profit from the whole process. When they have been created they will choose either to sell them onto a wholesaler or to only sell it in their particular stores. With some businesses having stores in other countries it means they have to have all of their products send to one area then they will have to have those products sent to other stores across to other countries, extending the distribution channels. A retail business such as House of Fraser will be using the second channel. This means that they will get their clothing material/parts sent to them and then thy will create their products, and then send them to their retail stores.
Because they have a large area inside their stores to store and display their stock it means they can have a large amount of one clothing item on sale at once. Because House of Fraser is a bigger company than Greggs they will be using more trucks to get their products to them. Another difference between the two would be that House of Fraser will be able to store their products for a longer period of time due to them selling the non-perishable products unlike Greggs, who make the majority of their products on a daily basis and at the end of the day would have to throw those products away otherwise they would go off.
In terms of cost, a restaurant will be willing to spend money in order to get products distributed to them in a safe and hygienic way, as long as they know the full process that the products take. For other businesses, such as Primark, the aim is to get them distributed to them at a very low cost, as long as the products aren’t damaged. This is because the products aren’t perishable and there is no need to store them in any specific way to keep them secure.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 20 September 2016
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