Place and distribution
Place is the marketing mix decision covering how and where a product reaches the customer. A direct distribution channel sells the product straight to the customer, for example through the business's own website or shop, without an intermediary.
Method
- Learn the difference between a direct channel, where the business sells straight to the customer, and an indirect channel, where the product passes through one or more intermediaries such as a wholesaler or retailer.
- Learn the trade-off: direct channels usually give more control and a higher margin per sale but require the business to handle its own logistics and customer service; indirect channels reach a wider range of customers through established networks but the business earns a lower margin per unit and has less control over presentation.
- Learn how e-commerce has changed place decisions: it lets even small businesses sell directly to customers nationally or globally without physical stores, lowering some costs but requiring investment in a website, digital marketing and reliable delivery.
- Learn what omnichannel distribution means: integrating multiple channels, such as a physical store, website, app or marketplace, so the customer experience is joined up, rather than running channels as separate, disconnected operations.
- For 'explain' questions, name the channel or decision plus the linked effect on cost, reach, control or customer experience.
- For 'recommend' or 'evaluate' questions on choosing a channel, weigh the options against the business's product, target market, resources and objectives in the case, then reach a supported judgement naming the business.
Worked example
Orchard Row makes small-batch jam and currently sells only through a stall at its local farmers' market. It is considering two options to grow: (1) supplying its jam to a regional supermarket chain, an indirect channel, or (2) launching its own website to sell and post jam directly to customers nationally, a direct e-commerce channel. Recommend which option Orchard Row should pursue first, with a reason.
- Consider the supermarket option: it would give Orchard Row access to a large number of existing supermarket customers immediately, but the supermarket, as an intermediary, would take a margin, reducing profit per jar, and Orchard Row would likely need to scale up production quickly to meet supply requirements.
- Consider the website option: it keeps Orchard Row in direct control of pricing and the customer relationship and can start small and grow gradually, but it requires investment in a website, postage-suitable packaging, and its own logistics.
- Weigh the options against Orchard Row's current size: as a small-batch producer that has only sold at a market stall, it likely lacks the production capacity to supply a supermarket chain reliably at short notice.
- Recommend the website or direct channel first, because it lets Orchard Row grow its customer base and revenue at a pace that matches its current small-batch production capacity, while keeping a higher margin per jar and full control over its brand.
- Note that supplying a supermarket could be a suitable next step once Orchard Row has grown its production capacity and built a stronger brand reputation through direct sales.
Practice questions
Try each question, then tap to reveal the answer.
Q1What is a direct distribution channel?Show answer
Answer: One where the business sells its product straight to the customer, without using an intermediary such as a wholesaler or retailer.
Q2What is a wholesaler?Show answer
Answer: A business that buys goods in bulk from producers and sells them on, usually in smaller quantities, to retailers.
Q3State one advantage of an indirect distribution channel.Show answer
Answer: It can reach a much wider number of customers quickly by using an established retailer's or wholesaler's existing customer base and outlets.
Q4State one disadvantage of a direct distribution channel.Show answer
Answer: The business must handle its own logistics, delivery and customer service, and typically reaches fewer customers than an established retail network.
Q5What does 'omnichannel distribution' mean?Show answer
Answer: Integrating multiple sales channels, such as a physical store, website and app, so customers have a joined-up experience across them, such as buying online and returning in store.
Q6Give one cost e-commerce can reduce for a small business compared with running physical stores.Show answer
Answer: Retail rent or business rates on physical shop premises, though it adds costs such as delivery and website or IT costs.
Q7Why might a business use both a website and physical stores rather than just one?Show answer
Answer: To reach the widest possible range of customers and let each customer choose the way they prefer to shop, which can increase total sales.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Explain ONE advantage and ONE disadvantage for a business of selling through an indirect distribution channel rather than direct to the customer.
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Thistle and Bone is a small artisan dog treat maker that currently sells only direct through its own website. A large national pet supplies retailer has offered to stock Thistle and Bone's treats in 150 stores, but has asked for a wholesale price 40% below Thistle and Bone's usual website price. Evaluate whether Thistle and Bone should accept this offer.
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Free printable worksheet
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