Channels of Distribution

All the activities which play a part in moving goods from producers to consumers are included in distribution. Distribution channel is the set of people and firms involved in the transfer of title to a product as the product moves from producer to ultimate consumer or business user. Channels of distribution help to bring goods to the market.

The traditional method of distribution for producers is to sell goods in bulk to independent wholesalers, who hold stocks and distribute relatively small quantities to individual retailers. There are, however, many very large retail organizations which own a large number of retail shops. These organizations are large enough to buy in bulk and they deal directly with the manufacturers. In some cases, the manufacturing, wholesale and retail stages are integrated within a single firm. Small scale producers often deal directly with retailers. One chain of distribution bypasses the retail shop: mail-order firms deal directly with householders. They use local agents to obtain orders and collect payments, and the goods are supplied by post.

The wholesale stage is a most important link in the chain of distribution. The wholesaler helps to solve the basic problem of distribution. The problem arises because:

• the producers wish to supply in large quantities and to dispose of their goods as quickly as possible

• consumers wish to buy small quantities of a variety of goods when they need them.

To overcome this problem, wholesalers provide a number of important services (breaking bulk, holding stocks, information, bearing risk).

Retailers are the last link in the chain of distribution. They provide the following services:

1. they make a variety of goods available in locations convenient to the consumer;

2. they provide producers with a large number of places for their products;

3. they perform an important advertising function for producers by displaying goods and offering advice on them;

4. when goods are bulky or heavy, they normally offer a delivery service;

5. for products of a technical nature, they offer after-sales services.

Independent retailers are usually sole traders or ‘one-shop’ firms. Their share has been steadily declining, though they still remain a very important part of the retail trade. Because there are so many of them, independent retailers offer the public the great convenience of having a shop within easy reach of home. They often remain open for longer hours than other types of shop, and usually offer a personal service which is sometimes lacking in larger stores.

Multiple shops belong to chains of very similar stores that are owned by large companies. Each of the companies has its own particular style of shop front and interior layout. They are easily recognized in the centers of large towns. Organizations which own multiple stores are usually successful because they have the following features:

• they buy in large quantities and obtain their goods at lower prices;

• they employ specialist buyers and marketing experts;

• they market their own brands;

• they advertise extensively;

• they exercise close control over their shops from ‘head office’.

Voluntary groups. Severe competition among the multiples and supermarkets forced independent wholesalers and retailers to form voluntary associations. The shops belonging to one of these groups all trade under the same name, but each shop remains independently owned and controlled. To become a member of such a group, a shop usually has to be of a certain size.

Voluntary groups market many of their own brands; they offer advice and assistance to retailers on matters of management and organization of their shops.

Department stores consist of several special shops under one roof and offer customers the attractive prospect of doing most of their shopping in one building. Department stores also offer many services, such as restaurants and bars, banking, hairdressing, booking agencies for theatre tickets and holidays.

Supermarket is defined as a self-service food store with a sales area of more than 2000 square feet. The techniques of self-service have enabled retailers to obtain impressive gains in productivity.

Both the number and the average size of supermarkets have increased in recent years. This led to the development of the superstore, which is a supermarket with a sales area of 25, 000 square feet, in which food may occupy no more than half the selling space. A further development of the supermarket is the hypermarket, which is a single-storey shop with at least 50, 000 square feet of selling space.

These very large self-service stores are usually located on the outskirts of towns, where adequate car-parking facilities can be provided.

Mail-order houses sell a range of goods very similar to those found in department store. All transactions are carried out by post. Local agents, working on a part-time basis, use colorful and attractive catalogues to obtain orders which can be purchased by installments. Agents are paid by commissions; that is, they receive a certain percentage of the value of the orders they obtain.

Customers have their likes and dislikes, their special tastes and preferences. It is not easy to satisfy the customer and that is why detailed research and very special operations are involved, targeted in one direction to make the customer buy.

Exercise 3. Answer the following questions:

1. What is distribution?

2. What activities are included in distribution?

3. What is the most important link in the chain of distribution?

4. Why do wholesalers buy large quantities from a variety of producers?

5. What services do retailers provide in the chain of distribution?

6. What can you say about voluntary groups?

7. How are department store and supermarket defined?

8. What services do retailers provide?

9. What do mail order houses sell?

10. How can wholesalers solve the problem of distribution?

Exercise 4. Give Ukrainian equivalents of the following:

to satisfy the customer, average size, independently owned and controlled, paid by commissions, outskirts of towns, multiple stores, to obtain impressive gains in productivity, to overcome the problem, mail-order house, to advertise extensively, likes and dislikes, adequate car-parking facilities, department store, self-service stores, to occupy, to provide producers with, to break a bulk, to hold stocks, manufacturer.

Exercise 5. Give English equivalents of the following:

залишатись відчиненим, взаємовигідне об’єднання оптових та роздрібних фірм, самообслуговування, розташування зручне для споживача, громіздкі товари, традиційний метод розповсюдження, мати справу безпосередньо з роздрібними торговцями, виробник малого масштабу, кольорові та привабливі каталоги, детальне дослідження, змушувати споживача купувати, купувати на виплату, одноповерховий магазин, відсоток, мала кількість, отримувати користь від виробництва, смаки та вподобання, громіздкі товари, у деяких випадках, неподалік.

Exercise 6. Match and learn the synonyms:

A: to display, to dispose, to obtain, to purchase, ultimate user, to supply, channel of distribution, superstore, to wish, to market;

B: to get, to show, to buy, to deliver, final user, supermarket, to desire, chain of distribution, to sell, to allocate.

Exercise 7. Match and learn the opposites:

A: part time, adequate, single-storey shop, interior, small scale, attractive, at lower prices, retail shop, important, colorful;

B: colorless, exterior, many-storey building, unattractive, inadequate, wholesale shop, at higher prices, full time, unimportant, large scale.

Exercise 8. Complete the sentences using the proper words from the list below:

part-time basis, market, interior layout, installments, preferences, retailers, department stores, certain size

1. … … offer many services, such as restaurants and bars, banking, hairdressing, booking agencies for theatre tickets and holidays. 2. Customers have their likes and dislikes, their special tastes and ... . 3. Channels of distribution help to bring goods to the ... . 4. … is the last link in the chain of distribution. 5. Local agents, working on a … …, use colorful and attractive catalogues to obtain orders which can be purchased by … . 6. To become a member of a group a shop usually has to be of a … …. 7. Each of the companies has its own particular style of shop front and … …. .

Exercise 9. Put questions to the bold part of the sentence:

1. The techniques of self-service have enabled retailers to obtain impressive gains in productivity. 2. Department stores consist of several special shops under one roof and offer customers the attractive prospect of doing most of their shopping in one building. 3. Voluntary groups market many of their own brands; they offer advice and assistance to retailers on matters of management and organization of their shops. 4. A further development of the supermarket is the hypermarket, which is a single-storey shop with at least 50, 000 square feet of selling space. 5. Independent retailers offer the public the great convenience of having a shop within easy reach of home. 6. Mail-order houses sell a range of goods very similar to those found in department store. 7. The wholesaler helps to solve the basic problem of distribution.

Exercise 10. Find words or expressions in the text which mean the following:

1. is the set of people and firms involved in the transfer of title to a product as the product moves from producer to ultimate consumer or business user.

2. is a most important link in the chain of distribution which helps wholesaler to solve the basic problem of distribution.

3. are usually sole traders or ‘one-shop’ firms.

4. a kind of shop which has its own particular style of shop front and interior layout. They are easily recognized in the centers of large towns.

5. voluntary associations formed by independent wholesalers and retailers.

6. a kind of shop which consists of several special shops under one roof and offers customers the attractive prospect of doing most of their shopping in one building.

7. a self-service food store with a sales area of more than 2000 square feet.

8. a supermarket with a sales area of 25, 000 square feet, in which food may occupy no more than half the selling space.

9. a single-storey shop with at least 50, 000 square feet of selling space.

Exercise 11. Translate into English:

1. Місцеві агенти отримують замовлення та збирають платежі, а товари постачаються поштою. 2. Магазин повинен бути відповідного розміру, щоб стати членом волонтерської групи. 3. Кожна компанія має свій певний стиль фасаду магазинів та внутрішнє оформлення. 4. Оптові торговці пропонують великий вибір важливих послуг для широкого кола споживачів. 5. Супермаркет – це магазин самообслуговування з торговельною площею більшою ніж універсальний магазин. 6. Сувора конкуренція на ринку змушує незалежних оптових та роздрібних торговців об’єднуватись у волонтерські асоціації. 7. Маркетологи проводять детальні дослідження ринку щоб задовольнити смаки та уподобання споживачів. 8. Агенти мають певний відсоток від вартості замовлення, яке вони отримують. 9. Всі види діяльності, що відіграють певну роль у транспортуванні товарів від виробника до споживача, входять до поняття розповсюдження. 10. Стадія оптової торгівлі є найбільш важливою ланкою каналу розповсюдження товарів.

Grammar: Appendix 21