As you know, the four Ps of Marketing is Price, Product, Promotion, and Place. According to the American Marketing Association, “place is where you should sell your product and how it should be delivered to the market.” In other words, this refers to the distribution channels used to make the product or service available to the customer. Companies must choose the most effective and efficient distribution channels to reach their target market and ensure their products are readily available to customers.
The distribution portion of marketing includes various activities, such as selecting and managing distribution channels, transportation and logistics, inventory management, and order processing. Distribution channels can be direct distribution to customers, retail stores, wholesalers, agents, and online marketplaces.
The importance of the distribution channels on the financial success of an organization
You can have the most wanted product, but if you cannot make it available to the consumers are the right time, you can jeopardize the business and make the company suffer losses. During the 2020 pandemic, everybody experiences shortages of essential products such as toilet paper, food and grocery items, building materials, automotive parts, and medical supplies.
Consumers were jumping from one store to another to find the needed products or alternatives. “Supply chain problems were prominent during the COVID-19 lock down amid a “perfect storm” of causes, including shifts in demand, labor shortages, and structural factors.” according to a recent J.P. Morgan Research.
During this extraordinary time, consumers suffered, and many companies struggled to keep producing and distributing products, others dedicated to offering services were pretty much out of business or temporarily closed, like hotels, restaurants, etc. And, of course, many people were laid off, “the unemployment rate was pushed to a high 13% in the second quarter of 2020.” per the US Bureau of Labor Statistics.
With these conditions, the supply chain was pushed to the limit and just revealed how vital is the distribution process to the well-being of the finances and economy of any organization of any size.
Distribution can impact the cost structure of a company. If a company has an inefficient distribution system or the distribution system was disrupted due to an extraordinary event like the pandemic, it can cause a negative reaction chain. A shortage of raw materials to produce, for example, milk, can increase production costs, but also, if the transportation fails because you have sick truckers that are not able to drive or because you cannot find a proper tire to replace some of the damaged one, then the milk can get spoiled. You cannot sell it, and the company losses profit, which occasioned layoff, and so on, as you can see, is a domino effect.
On the other hand, an efficient distribution system can help reduce costs and increase profits. Effective distribution allows a company to deliver its products or services to its target market on time and cost-effectively. It ensures that the products or services are available at the right place and time, improving customer satisfaction and loyalty. This leads to increased sales and revenue for the company.
Amazon is a real success story of distribution channel
Amazon has revolutionized the B2C industry through its highly efficient distribution system. The company has invested heavily in developing a vast network of distribution centers and fulfillment centers around the world, which allows it to deliver products to customers quickly and cost-effectively
Amazon’s distribution system allows customers to order products online and receive them within a matter of days or even hours in some cases. Amazon offers multiple delivery options, including same-day delivery, two-day delivery, and free shipping, which has helped to attract and retain customers. Also, they created a membership program named: Amazon Prime which includes free shipping for a lot of products, cloud storage space, music, video, tv shows, audio and electronic book access and many other services.
Amazon’s distribution system has also enabled the company to expand its product offerings beyond books and electronics to a wide range of products, including groceries, clothing, and household items. This has helped to drive revenue growth for the company, to a “9.4% increase from 2021, with annual revenue for 2022 of $513.983B.” per macrotrends.net
