Source: Image of globe, curved arrow, plane, box, truck, seesaw, credit card, shopping cart, laptop, washer, phone, images by Video Scribe, License held by Jeff Carroll.
Hi, I'm Jeff. And in this lesson, we'll explore the place, P, in the four P's, talk about the distribution of goods, and discuss what cost and value can be added during distribution. So let's get started.
We've learned about the marketing mix model called the four P's-- product, price, place, and promotion. In this lesson, we're going to explore place in more detail. Place is the locations where a product is sold.
But in order for goods to reach a location, they might need to go through a distribution channel. Distribution is the system of providing a product or service accessible to consumers and businesses for consumption. During distribution, a good will go through intermediaries, which are businesses in the supply chain that bridge the gap between wholesale and retail.
Wholesale companies are those that deal with the distribution of goods on a broad scale to be sold by other parties. And retail companies are those that are selling items to be used and not sold again. Convenience stores are a good example of companies whose distribution channel goes from wholesale to retailer to the consumer.
But using intermediaries though adds a cost to the goods. So to save money, some companies, such as Avon, will sell directly to the consumer and avoid the wholesale and the retail companies.
Other companies, such as Gap, avoid the wholesale companies and ship directly to their retailers. Intermediaries can also provide warehousing and just-in-time distribution. Warehousing is the storage of products until they are needed by the retailers. This is an advantage to wholesalers because they can better weather changes in consumer demand. And it's better for retailers because they only receive the amount of product that they can comfortably sell.
Just-in-time distribution is a form of warehousing where the products are only shipped when the retailer is about ready to run out of product, instead of on a set schedule. This method relies on good communications between the intermediary and the retailer and very reliable shipping methods.
But intermediaries can do more than just transfer goods. They can add value also through efficiency, by distributing large orders of goods from wholesalers to a number of retailers, consistency, a single shipping channel can be used for all retailers, inventory management, if one retailer sells fewer goods and another store sells more, an intermediary can transfer goods between stores to balance inventory, and financing, some intermediaries allow retailers to pay later for goods. And that help smaller companies manage their cash flow.
Of course, all of this adds cost to the goods being distributed. So companies need to choose if enough value is gained.
A large retailer such as Best Buy or Home Depot also brings value to the consumer. Since a consumer can go to one location, one place to find different products, it is more convenient for them. And companies that sell through a big box retailer also gain a benefit from the greater sales numbers, though this might be partially offset by the lower prices they will gain on the sales of their products.
All right, well done. In this lesson, we learned about place, one of the four P's. We discussed how goods are distributed through channels. We talked about warehousing and just-in-time distribution. And we reviewed the value added by those that help distribute goods, such as the intermediaries and the big box retailers.
Thanks for your time, and have a great day.