Marketing consists of the "4Ps:" product, place, promotion and price. Product refers to what is being sold, promotion to how it is touted in the market, and price to the strategy used to generate revenue. Place is the method of distribution that the company selects to move its product to the market. This consideration, distribution, can be critical to a company's success since choosing the wrong distribution system can mean that the company's product is not available to the consumers when they need it. Lost sales result, and companies can suffer serious consequences due to poor distribution. This research considers the overall issue of distribution and factors that companies need to take into account when developing a distribution strategy.
Few manufacturers sell their goods directly to end users; one of the primary exceptions to this is farmers who sell to consumers. However, most manufacturers sell their goods to wholesalers, who sell to distributors, who sell to retail stores, who sell to consumers. Sometimes the distributor is eliminated, or the wholesaler and distributor are the same. In some instances, such as with retailers who are as large as Wal Mart, the manufacturers do market directly to the retailer.
This system, while it sounds cumbersome when described, can actually prove quite efficient. Manufacturers typically produce large quantities of goods. These are divided into smaller shipments (but still containing large numbers of items), which are sent to wholesalers. The wholesalers further divide the shipments and send them to retailers, who divide the shipments still further for final sale. In this way, each level of distribution serves to divide the goods and arrange for more local distribution. Manufacturers are prevented from having warehouses throughout the country, which reduces their overhead, and they are able to realize economies of scale in their production process. At the same time, each of t...