Distribution is concerned with getting a product or service to the right people, at the right time, taking into consideration the need for profit and efficiency. Otherwise described as “the action of sharing something out among a number of recipients.” When a customer purchases a product or service, they may have brought it directly from the business or through a retailer or wholesaler. These ways of purchasing are known as distribution channels.
Channels of distribution are broadly divided into four main types (the fourth is less common):
- Producer-Customer: Shortest and simplest of the 4 main channels (making it economical), no middlemen involved, producers directly sell their products to consumers. The producer or entrepreneur performs all the marketing activities himself and has full control over distribution.A producer may sell directly to consumers through door-to-door salesmen, direct mail or through his own retail stores. E-tailers like ASOS adopt this channel to cut distribution costs and to sell industrial products of high value. Bigger firms tend to have more middlemen involved. Small producers and producers of perishable goods also sell directly to local consumers.
- Producer-Retailer-Customer: Still reasonably straight forward, however there is one middleman involved – the retailer. The producer sells their products to big retailers/those who bulk buy, they then sell the products onto the consumers. This channel relieves the manufacturer from burden of selling the goods himself and at the same time gives him control over the process of distribution. This is often suited for distribution of consumer durables (products which do not need to be bought frequently as they last for a long period of time) and products of high value. An example of this is Walkers who’s products are sold at retailers like Tesco and BP garages.
- Producer-Wholesaler-Retailer-Customer: The third and most common channel of distribution. This tradition method involves two middlemen – wholesalers and retailers. The producer sells their products to wholesalers, who in turn sell it to retailers. The retailers then sell the product to the consumers. Producers who have limited sources of finance and narrow product lines tend to use this channel of distribution. This channel is also useful in that it offers promotional support of wholesalers. An example of this is Costco, they sell a variety of TV’s including brands like Sharp.
4. Producer-Agent-Wholesaler-Retailer-Customer: Finally, the fourth channel of distribution. This is the longest channel due to the three middlemen who are involved. This is used when the producer wants to be fully relieved of the problem of distribution and thus hands over his entire output to the selling agents. The agents distribute the product among a few wholesalers. Each wholesaler distributes the product among a number of retailers who finally sell it to the consumers. This channel is suitable for wider distribution of various industrial products. This method is popularly used in textiles and machinery.
Compare the methods used to distribute products and services
We are now going to look at the different distribution systems in different sectors for example, the food and clothing sector. Products and services can be distributed by road, rail, air and sea.
Food sector: Businesses in the food sector tend to use the third channel of distribution (described above). Food retailers have time restraints due to perishable goods; for example Gregg’s has a delivery every day as each morning fresh goods are displayed. Cakes and pastries need to be stored correctly in order to be kept fresh, you can see the products deteriorate throughout the day. It is always best to visit a bakery first thing in the morning when the goods are fresh, around 3-4 pm you will often find the pastries are dry and unappetising. There will also be a lack of choice. Quality control is crucial, goods need to be inspected before they can be sold. If a product has not been stored correctly or is out of date it must be disposed of immediately or the retailer could face serious consequences when an unhappy customer returns with a complaint of food poisoning.
Clothing sector: Businesses in the clothing sector tend to use the second channel of distribution (described above). Designers have a vision of what they would like the product to look like, a plan is drawn up before the process begins. The process then starts by collecting the materials needed to produce the clothes. For example cotton is purchased from the cotton farmers, it is then shipped off to the factories where weavers and designers will create the fabrics, the fabric factories will then sell to manufacturing companies who will create something the 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 sell it in their particular stores. International brands extend their distribution channels as they have to distribute their goods further around the globe.
If the retailer manufactures their own brand clothing i.e. Primark, the producers send the finished garments directly to their warehouses for distribution into their stores. If it is a clothing retailer that buys garments from fashion houses or via other 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. For example, Topshop and New Look have other London brands in their stores.
Food Sector: To be more efficient and cost effective distribution system must find the best options as possible. Find the right suppliers and warehouses. To be more efficient they have to make sure that the suppliers are supplying the right amount of goods (not more/less than what is needed), because fresh food such as fruit and vegetables have an expiration date not far from the production date, so if they stock more than is needed it might go to waste and cause a loss to the company, this is an example of some of the problems food retailers try to avoid. The distribution system have to come up with a clear idea of where they are going to place the warehouse. Warehouses should be located in a perfect location with easy access, not to far from the shops as they are going to deliver the goods. This will help reduce the cost for the petrol or diesel. They also have to think about how they going to deliver the products, most of the Food retailers prefer to use large transportations to deliver their products to the stores because it is safer and cheaper.
Clothing sector: Not much different from Food, the clothing sector must be aware that every step they take is crucial to their success. Based on this distribution system in charge to deliver the right products in the right quantity to each store. H&M fashion retail work on how to make sure that their transportation have the least possible impact on the environment, to achieve this H&M try to avoid air and road transportation whenever possible, they work with environmentally friendly transport companies and have more efficient logistics with as little impact as possible on the environment. Before launching it into the stores they normally check that is needed or not to send it out to the certain stores, because every store have a limited room in their stock room, by sending the right amount it will allow extra room and don’t make it look over loaded. Nowadays trends change really quickly, so if they have too much stock and are not up to date, the store are forced to put it on sale to be able to clear all the old fashion trends out to allow the new trends to be delivered. Sales will enable stores to shift stock more quickly, they will make less money on each product, however they are more likely to sell a larger amount of stock.
New Look opened their store for the first time in the UK in 1969, it has now grown to become a leading fast fashion brand with 569 stores in the UK and over 200 stores across Europe, China, North Africa, the Middle East and Asia.
New Look have their own online website, where customers can purchase their products with a couple of clicks and New Look will deliver to their door or customers can choose to collect from the nearest store. New Look’s distribution centre needs to make sure that customers are happy when they receive their goods. To encourage the customers to spend more New Look offers a free regular delivery if you spend £45 or more, and free next day delivery if you spend £65 or more. This makes it more cost efficient, a larger order is more likely to cover the cost of packaging and shipping.
Speed of turnaround is crucial, New Look need to be get the process moving the second an order is placed. They need to ensure that products are stocked correctly, if a customer orders a product which is low on stock New Look need to be fast about getting a delivery in so not to disappoint the customer.
New Look customer services are based in Devon – New Look Customer services
PO Box 782
New Look have warehouses based around the UK including Stoke and Newcastle. It is important to have warehouses locally based to enable fast deliveries. It is also saves on transportation costs the more warehouses they are able to have, the less distance the lorries will have to travel to reach stores. Owning their own warehouses means that New Look have more control over their distribution process. With ownership comes responsibility, New Look have to ensure that everything runs smoothly.
Looking at the reviews there are mixed opinions about the New Look distribution system:
- Poor reviews on delivery reflect poorly on their distribution system. A failure to send the correct items gives an indication that there may have been an error in the system. They didn’t send the right products as shown in the pictures below, a customer complained about the pair of jeans she/he purchased online which arrived on time but the size was wrong, this shows that New Look’s distribution system is lacking in customer service skills – staff can be unhelpful and unwilling to go out of their way for customers, even when it was their mistake. There also seems to be a quality control issue as the jeans should have been checked before they were dispatched.
- It’s not all bad – New Look also received some very good reviews from their customers. This customer said they shop in New Look regularly both in store and online and they are really happy with the service. I agree with what he or she said, I shop in new look and never have any problem, the products are up to standard and if there is any faults they will offer either to refund or exchange it with another item. I have shopped online via the New Look website and app countless times and have always found the experience to be a good one. My order always arrives on time and I am always more than satisfied with the customer service I receive. The customer service element is quite small, it mainly comes in when customers have a problem – they have the wrong size or the product is faulty.
With online shopping becoming so important and online shopping, an effective distribution centre will mean that New Look can keep up with demand. This is because the turnaround for replenishing stock will be reduced. Furthermore by investing in enhanced delivery systems New Look are able to offer tracking services to customers. They are also able to allow customers to choose a delivery time that is suitable for their schedule this all leads to an enhanced shopping experience resulting in customer loyalty and increased sales. This is crucial for businesses within the retail sector as it is a concentrated industry and effective distribution channels will give New Look a competitive edge.