Distribution channels - intermediaries

Author: Jim Riley Last updated: Sunday 23 September, 2012

Marketing - Selling using intermediaries (retailers, wholesalers etc)

Retailers

The most popular distribution channel for consumer goods, retailers operate outlets that trade directly with household customers. Retailers can be classified in several ways:

Type of goods being sold (e.g. clothes, grocery, furniture)
Type of service (e.g. self-service, counter-service)
Size (e.g. corner shop; superstore)
Ownership (e.g. privately-owned independent; public-quoted retail group)
Location (e.g. rural, city-centre, out-of-town)
Brand (e.g. nationwide retail brands; local one-shop name)

Retailers enable producers to reach a wider audience, particularly if broad coverage by the major retail chains can be obtained. The big downside to using a retailer is the loss of profit margin. A high street retailer will typically look to take at least 40-50% of the final consumer price.

Wholesalers

Wholesalers stock a range of products from several producers. The role of the wholesaler is to sell onto retailers. Wholesalers usually specialise in particular products – for example food products.

Distributors and dealers

Distributors or dealers have a similar role to wholesalers – that of taking products from producers and selling them on. However, they often sell onto the end customer rather than a retailer. They also usually have a much narrower product range. Distributors and dealers are often involved in providing after-sales service.

Franchises

Franchises are independent businesses that operate a branded product (usually a service) in exchange for a licence fee and a share of sales. Franchises are commonly used by businesses (franchisors) that wish to expand a service-based product into a much wider geographical area.

Agents

Agents sell the products and services of producers in return for a commission (a percentage of the sales revenues). You will often find agents working in the service sector. Good examples include travel agents, insurance agents and the organisers of party-based selling events (e.g. Tupperware and Pampered Chef).