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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.
Copyright zdintelligence.com 2007
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