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The term "distribution" is not confined to the physical distribution of goods from the producer to the consumer, e.g. road and rail transport. In the business context it also refers to the distribution channels, i.e. the sort of retail outlets that the goods and services are sold in.

Many industrial products and services are sold directly to the consumer or user, e.g. aircraft and lathes. Most consumer products are usually distributed through retail organiza­tions. By tradition many manufacturers sell their products to a wholesaler who warehouses the goods until they are required by the retailer. This so-called full chain of distribution offers advantages to both the manufacturer and retailer. The manufacturer can mass-produce the goods, get the money for the goods straight away, and does not have to worry about storage and distribution costs. The retailer can order goods from the wholesaler and does not have to worry about holding large stocks. The full chain of distribution has disadvantages for the manufacturer and the retailer. The wholesaler does not have any particular incentive to promote the sale of the manufacturer's goods, and the retailer will have to pay a higher price for the goods from the wholesaler than if they were bought directly from the manufacturer. Some industries have cut the "middle-man" (wholesaler), and the manufacturer sells directly to the retailer. In other indus­tries the wholesaler may sell the goods directly to the cus­tomer and no retailer is involved. Finally, the manufacturer may sell directly to the customer without a wholesaler or retailer being involved.

Full Chain of Distribution

This tends to be used when the producer makes a limited •range of products, storage costs are high and the product is perishable.

No Wholesaler

The wholesaler is eliminated in industries where the pro­ducer makes a number of standard products that it sells to similar kinds of retail outlets. Frozen-food firms and large bakeries tend to have their own distribution networkand their own fleet of delivery lorries.

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Dialogue No 2 | No Retailer

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