Marketing · Lesson 5

Channels, intermediaries, retailing and wholesaling

WAECNECO

What the syllabus asks

WAEC: meaning, channels of distribution, choice of channels, functions of channel members). Physical transport and warehousing are expanded in mk8. JAMB does not examine Marketing.

NECO: meaning, channels of distribution, choice of channels, functions of channel members). Physical transport and warehousing are expanded in mk8. JAMB does not examine Marketing.

What you will learn

Define distribution and channels and explain their importance.
Describe channel levels for consumer goods, industrial goods, produce and services.
Explain factors influencing channel choice.
Distinguish intensive, selective and exclusive distribution.
Explain the functions of wholesalers, retailers and agents.
State the functions of channel members and evaluate eliminating middlemen.
Explain channel conflict, push/pull strategies and physical distribution, with margin calculations.

Key points

Distribution creates place and time utility and bridges producer–consumer gaps.
Channels: zero, one, two, three levels; multichannel systems.
Industrial channels are short; produce channels long; services mostly direct.
Choice factors: product, market, company, middlemen, environment, competition.
Intensity: intensive, selective, exclusive; franchising.
Wholesaler functions to manufacturer and retailer; reduces contacts (80 vs 24 example).
Retailers: small-scale and large-scale types; small shops still matter in Nigeria.
Agents: brokers, factors, del credere, commission agents; distributors and dealers.
Channel functions: transactional, logistical, facilitating; functions cannot be eliminated.
Conflict (vertical, horizontal), VMS, push and pull.
Physical distribution: orders, warehousing, stock, handling, transport.
Each intermediary’s mark-up builds the final price.

Start here: Meaning and importance of distribution

WAEC topic 12 is distribution, the “place” element of the marketing mix. Distribution covers all the activities involved in making a product available to the target customers at the right place, at the right time and in the right quantities. It includes choosing channels of distribution (the route a product takes through intermediaries) and physical distribution (transport, warehousing, stock control and order processing; transport and warehousing are studied in detail in mk8).

A channel of distribution (marketing channel) is the set of independent organisations involved in making a product available for use or consumption by the consumer or business user. The organisations in the channel are called intermediaries or middlemen: wholesalers, retailers, agents, brokers and distributors.

Importance of distribution

Bridges the gap between producers and consumers, who are separated by distance, time and quantity. A tomato farmer in Kano and a buyer in Lagos are hundreds of kilometres apart.
Creates place and time utility: goods are where and when people want them (mk1).
Breaks bulk: large factory quantities are broken into small amounts consumers can afford.
Provides assortment: a retailer gathers many producers’ goods in one shop.
Reduces the number of transactions (section 5.6).
Helps sales and profits: a good product that cannot be found will not sell.
Supports production: steady orders allow factories to plan.
Employment: millions of Nigerians work in trading and transport.

Distribution in Nigeria

Large markets such as Onitsha Main Market, Idumota and Kano’s Kantin Kwari serve as wholesale hubs from which goods flow to smaller towns. Modern distribution adds supermarkets, e-commerce warehouses and motorbike delivery riders. Poor roads, fuel costs and insecurity in some areas raise distribution costs, which is why firms think carefully about channels.

Worked example 5.1

Explain how distribution creates time utility for rice. Rice harvested in a few months is stored and released throughout the year, so it is available when consumers want it.

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Practice questions

1. Manufacturer → consumer with no intermediary is a

zero-level channel
one-level channel
two-level channel
three-level channel

Show answer

A: zero-level channel
Direct selling.

2. Manufacturer → retailer → consumer is a

zero-level channel
two-level channel
three-level channel
one-level channel

Show answer

D: one-level channel
One intermediary.

3. Using only one dealer in an area is

selective distribution
mass distribution
exclusive distribution
intensive distribution

Show answer

C: exclusive distribution
Often for luxury cars.

4. Using a few carefully chosen outlets is

direct selling
selective distribution
intensive distribution
exclusive distribution

Show answer

B: selective distribution
Between intensive and exclusive.

5. A function of the wholesaler is

breaking bulk
manufacturing
printing money
setting tariffs

Show answer

A: breaking bulk
Also storage and credit.

Key words

Distribution: Making products available to target customers.
Channel of distribution: Route of intermediaries from producer to consumer.
Intermediary: A middleman such as wholesaler, retailer or agent.
Channel level: One intermediary layer in a channel.
Breaking bulk: Dividing large quantities into smaller ones.
Intensive distribution: As many outlets as possible.
Selective distribution: A limited number of chosen outlets.
Exclusive distribution: One dealer per area.
Franchise: Licence to use a brand and system for fees.
Merchant middleman: Intermediary who owns goods.
Agent middleman: Intermediary paid commission, not owning goods.
Del credere agent: Agent who guarantees buyers’ payment.

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