Distribution and Placement: How Do You Get the Product to the Customer?
Figuring out how to get products to the customer is actually more complicated than you might think. As a retailer, you need to find the most efficient and effective ways to provide consumers with good value. Because of its importance, distribution -- placement -- is one of four elements in a company's marketing mix, which also includes product, price and promotion.
The distribution channels is the term given to describe the typical movement of products from original manufacturing to the end customer. In a normal product flow, the manufacturer sells to a wholesaler, who then distributes or sells to the retailer. Retailers typically hold inventory on hand and resell to customers as needed. This is the conventional movement of products through a brick-and-mortar retail store channel.
While the Internet, catalogs and other channels of retail have emerged, a physical store remains the most prevalent means for retailers to get product to customers in 2012. The retailer needs to collaborate with supply chain partners to provide quality products at affordable prices to customers. While retailers hold, market and sell products directly to consumers, each member in the process needs consumer demand to exist for long-term success.
The emergence of the Internet in the late 20th century presented a new format through which to present products to consumers. Retailers, along with some wholesalers and manufacturers, now market products through Internet sites to consumers who want online convenience as opposed to buying from a store. Despite its conveniences, only about 7 percent of all retail sales happened online in 2010, according to Forrester Research. This is because of the order fulfillment and distribution requirements. When customers order online, your business must have a process in place to quickly and economically get products to the customer through the mail.
Retailers selling through websites or buying products for stores generally have two options: distribution centers and direct ship from vendors. Distribution centers are warehouses maintained by retailers to store goods before they are needed at stores or ordered online or through catalogs by customers. Distribution centers offer more control and shipping efficiency for stores concentrated in certain areas. When you need to get products to consumers quickly or when demand is unpredictable, having vendors ship directly to your stores or customers makes sense. While direct ship systems have higher shipping costs, you don't have to pay for the storage and management of goods.