By Mark Liangco | BUS 343
Chapter 10 (Week 12)
What is a distribution channel?
- The series of firms or individuals that facilitate the movement of a product from the producer to the final
You can eliminate the middleman, but not the middleman’s function.
- Why have online stock trading sites been very successful in bypassing stock brokers, while online
insurance sites have had much more limited success in bypassing insurance brokers?
o Because you get more value by learning the ropes in online stock trading than in insurance (you
only do insurance once a year!).
Functions of distribution channels
Assortment / Convenience
- Provide a variety of products in one location
- Assortment is mostly found in retail.
- retailer buy the bulk (for cheaper) and people buy individual
Sorting / Grading / Certifying
- agricultural products
- Products are shopped across the world.
Channel Width vs. Channel Length
- Number of retailers that sell the actual product.
- Number of distributors from manufacturer to retail.
Choosing a distribution System:
1) Conventional marketing system
- A multiple-level distribution channel in which channel members work independently of one another.
2) Vertical marketing system
- A channel of distribution in which there is cooperation among members at all levels.
3) Horizontal marketing system
- An arrangement within a channel of distribution in which two or more firms at the same channel level
work together for a common purpose (Air Canada and Lufthansa cooperate in providing passenger air
- Firms that handle the flow of products from manufacturer to the retailer or business user. By Mark Liangco | BUS 343
Type of wholesaling intermediaries:
1) Independent intermediaries
- They are not controlled by any manufacturer but rather do business with many different manufacturers
and many different customers.
o Merchant wholesalers
Firms that handle the flow of products from the manufacturer to the retailer or business
They become legal owners of the goods.
o Full service merchant wholesalers
Provide a wide range of service besides just handling the goods.
o Agents and brokers (no ownership of the goods)
Provide services in exchange for commissions. They represent buyers or sellers of the
Broker - suppose to be a neutral party
Agent - agent