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Distribution

When Ugg the caveman first decided to go into business selling his new invention, the stone wheel, distribution was quite a simple matter because he simply carried a couple down to the local village and then hawked them around the streets. He wasn't alone in this, there were plenty of other hawkers selling their wares but sooner or later they got tired from all the walking around so they decided to get together and sell all their produce from one place at the same time. The first market was born.

Ugg was overjoyed because he was making a huge profit on each wheel so he increased production but he realised that he could not do everything himself; fortunately he had some friends who were prepared to sell these wheels themselves provided that he did the deliveries and paid them a commission. Thus the first agencies were set up!

Business boomed so we took on more staff but he was soon manufacturing more wheels than he could sell! Fortunately his fame had spread and enterprising traders came from other villages and agreed a deal with them; if he would sell his wheels to them at a reduced price they could then sell them at their local markets! Retailers were in business.

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Ugg's business was now booming but he had really gone as far as he could in his local area; nearly everyone who needed a wheel had already bought one so he needed to look further afield. He was still making a huge profit margins on each wheel so the next step was quite logical; he offered some of his retailers a bigger discount if they would take his wheels and sell them to other retailers in all the regions. This was the birth of the first wholesalers.

This may appear at first sight to be an over simplified way of describing a distribution process but similar methods exist today throughout the world. These types of distribution are obviously not suitable for every single product; for instance no one would expect a retailer to stock a battleship, or a nuclear power station; but the vast majority of products are sold through middlemen purely because this is the most efficient method available to a manufacturer. There are of course exceptions to this rule; buyers of big ticket items often prefer to deal directly with employees of the manufacturer in order to ensure that they receive the best prices and that their specifications are followed exactly; it is however a function of the marketing department to decide on the best means of distribution for the company, as well as such related questions as to whether to use a company owned vehicles or any third party delivery service, what sort of discounts to offer to wholesalers and retailers, whether or not to grant exclusive agencies and a large and growing number of related factors.

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