Place is one of the 4Ps of the Marketing mix.
Remember for the exam:
Channels of Distribution
Direct to Consumers/ E-commerce
The Manufacturer sells the products directly to the consumers either online (e-commerce) or via catalogues/ mail orders.
Example: Electric Car company, Tesla, only sells cars directly to consumers.
Advantages to Manufacturer
- Nobody in between to take profits (e.g. retailer or wholesaler)
- Producer in charge of the whole process and markets directly to the consumer
- Drive customers to their own website, not 3rd parties
- Online sales have lower costs
Disadvantages to Manufacturer
- Costs of distribution/ postage
- Costs of making distributional material (e.g. catalogues for Next)
- Can still be very expensive as the producer is responsible for who whole distribution process
- Customers may be put off if they can’t buy from their usual retailer
Through Retailers
The retailer buys in from the manufacturers or wholesalers and then sells to the customers. The retailer will buy from the producer at a lower Cost and sell on to make a profit. The producer gets less revenue per unit than selling directly to the consumer.
Example: Samsung sells its products to PC World, which then sells the products to consumers in their retail stores.
Advantages to Manufacturer
- Retailers have their own promotions and advertising to draw customers into the store
- No retail premises costs for the manufacturer
Disadvantages to Manufacturer
- The retailer may set their own Price which could impact the image of the Product (too low) or result in fewer sales (too high)
- Retailers may stock competing products (such as PC World selling many brands of laptops)
Through Wholesalers
Wholesalers buy the product in bulk from the manufacturer and then sell the product to a retailer or customers. The producer may offer a large discount for bulk orders.
Example: Penguin Books sells to a wholesaler in bulk, who then sells to Waterstones and other book stores which in turn sells on to the final consumer.
Advantages to Manufacturer
- Wholesalers place larger orders as they buy in bulk
- Wholesalers will run their own promotions and advertising to get customers
Disadvantages to Manufacturer
- Little control over the marketing of the product in store
- Wholesalers will try to pay as low a price possible for the product as they can
Factors Affecting Place
Businesses will consider a range of factors when deciding where to locate. These include:
- Online or Bricks & Mortar – A business may decide to operate online, rather than having a physical Location where customers visit.
- Customer Location – A business in the tertiary sector (service business like retail, hairdresser, hospital) may choose to locate closer to its customers.
- Supplier Location – A business in the secondary sector (manufacturing business) may choose to locate closer to suppliers so that they can easily access the raw materials needed to manufacture, this may reduce the transport cost of raw materials.
- Transport Links – Businesses may locate close to transport links such as good public transport or road infrastructure. This could be important to provide easy access for staff or customers.
- Communication Links – Businesses may need to locate in areas with good communication links, such as high-speed broadband or postal service infrastructure.
- Availability of Staff – Businesses that may choose to locate closer to staff are those that may need highly skilled staff and needs to locate close to them, such as tech businesses located in silicon valley close to where highly skilled tech staff are. However., businesses may also choose to locate close to where labour pay is low, such as manufacturing businesses may choose to locate in some parts of Asia where wages are lower.
E-commerce
E-commerce is the activity of buying and selling online (websites).
M-commerce refers to buying and selling through mobile phones (Apps).
Brick and mortar means having a physical location that customers can visit. It refers to the materials that buildings are made from (bricks and mortar).
E-commerce provides many advantages to businesses and consumers.
One advantage of operating online is that it is cheaper to have an online location, rather than an expensive physical location where the business serves customers, additionally online Customer service can also save time and money as advisors can deal with many customers at once, as opposed to face-to-face where they will only deal with one customer at a time.
E-commerce also allows businesses wider access to more customers 24/7, giving them access to customers that they wouldn’t be able to target before, they can then ship the product to the customer at their location.
Different types of businesses will benefit from e-commerce, whereas some would not be suitable for this type of location.
Businesses suited for E-commerce
- Retail
- Digital goods (music, videos, digital art)
- Quaternary sector (high tech research and development)
Businesses not suited for E-commerce
- Businesses in the primary sector (extracting raw materials from the ground)
- Businesses in the secondary sector (manufacturing goods)
- Personal services
- Farmers
- Medical businesses
- Hospitality
Task: Can you think of any businesses that struggled to move online during the Covid-19 lockdown? Were there any that found the transition easier than others? Why do you think this was the case?
Shopping online is also convenient for customers as they can browse from the comfort of their own homes 24 hours a day. This is also convenient for the business as they can operate 24 hours without hiring staff to run the store at night, perhaps leading to the recent decline of the 24-hour stores.
A disadvantage for businesses and customers of e-commerce is that the products may not meet the customer’s expectations, for example, they might not look the same in real life. 30% of all products ordered online are returned as compared to 8.89% in brick-and-mortar stores (source). This increased return rate is an additional cost to the business and inconvenient for customers.
M-commerce stands for Mobile Commerce, stemming from the increased usage of apps and mobile devices for online shopping.
