by RDBA Contributing Editor Amanda Rubizhevsky, MPH, NC
Understanding distribution terms and how products get to your store is certainly not one of your primary responsibilities as a retail dietitian, but knowing a little about this area will help you engage with your coworkers and understand the retail business more thoroughly. After all, a retail business needs to stock its shelves to maintain traffic in its stores! Here are five terms to know.
Channels of Distribution. The overall way in which products get from the manufacturer to the end user. Distribution refers to the activities of a business that acts as a middleman between manufacturers or wholesalers and retailers who sell the products to consumers. Wholesale distribution channels that buy products from the manufacturers and sell them to retail outlets are only one example of a channel of distribution.
Channel Length refers to the length of the distribution channel; for example a direct distribution channel (from manufacturer to end user) is a short channel and an indirect distribution involves a long channel. Sometimes, a company shortens its channel by acquiring another company at another stage, such as a retailer buying a manufacturer to produce private label products. The benefits include being more self-sufficient, ensuring supply, controlling channel members, and lower distribution costs.
Just in Time Stocking or just in time inventory (JIT) uses sales projections to stock only as much product as needed at any given time. The goal is to have inventory available to meet demand, but not to a point of excess where you must stockpile extra products – this is useful for produce and other areas with products with limited shelf life.
Intensive Distribution aims to saturate the market by using all available outlets. Companies use this type of distribution when customers have a range of brands to choose from, i.e. dairy or soft drinks. In other words, if one brand is not available, a customer will simply choose another. For example a dairy firm will distribute their brand through multiple outlets (grocers, dollar stores, convenience stores) to ensure their availability to the customer.
Exclusive Distribution is the opposite of intensive distribution. This is when only one wholesaler, retailer or distributor is used in a specific geographical area. When a company only uses one or two outlets or stores for its product this is considered exclusive distribution. Brands might use this strategy to boost exclusivity and grocers can use this to draw customers to their store.