Place is the element of the marketing mix that deals with distribution. Distribution is the process of making a product or service available from the producer to the consumer. A business can make a great product at a fair price, but if customers cannot easily get hold of it, few sales will follow.
A distribution channel is the route a product takes from the producer to the consumer. Some businesses sell straight to the customer, while others pass goods through another business first.
| Channel | What happens | Effect on the producer |
|---|---|---|
| Producer to consumer (direct) | The business sells through its own shop, market stall or website | Keeps the whole selling price, but pays all the selling costs and must attract every customer itself |
| Producer to retailer to consumer | A retailer — a shop or an e-tailer — sells on to the final customer | Reaches the retailer's existing customers, but the retailer takes a share of the price |
Choosing a channel changes costs, how many customers can be reached and how much control the producer has over price and display, so it feeds straight into sales and profit.
Place covers both the selling environment — a physical shop, a market stall, a website or a mix of these — and the route the product takes to the customer. It is not simply the address of a business; a firm trading only from a lock-up unit can still sell nationwide online.
For example, a small business in Leicester that makes reusable water bottles sells at music festivals and through its own website, and also supplies a chain of outdoor activity shops. Each route reaches a different set of buyers, and the shops keep a share of every bottle they sell.
A retailer is a business or outlet that sells goods or services to the final consumer. It buys from producers or wholesalers and sells on in smaller quantities to customers, either from physical shops, online, or both.
A producer can use a retailer to reach customers without dealing directly with every consumer. This can increase the producer's reach because the retailer already attracts customers to its shop or website. For example, a small producer of reusable water bottles, Clearwell, sells through Greenhouse Goods, a chain of eco-friendly shops. Shoppers already visit Greenhouse Goods, so Clearwell reaches more people than if it tried to find every customer itself.
Retailers can also give customers the chance to see and try a product before buying. In a shop, a customer can pick up a water bottle, check its size and feel the finish. This can build confidence and lead to more sales.
The retailer needs to make a profit, so it keeps a share of the final selling price. If Clearwell sells a bottle to Greenhouse Goods for £14 and the shop sells it to a customer for £20, the retailer keeps £6. Clearwell's revenue is lower for each bottle than if it sold direct at £20, so using a retailer is not automatically better — it depends on whether the extra sales make up for the smaller amount kept per sale.
A producer may choose a retailer whose image and target market match the product. A premium water bottle brand would fit better in a shop known for quality outdoor gear than in a budget discount store, because those customers are more likely to pay the higher price.
E-commerce is the buying and selling of goods or services online. It is the activity itself: a customer orders and pays through a website, and the seller receives the order electronically.
An e-tailer is a retailer that sells goods or services to consumers online. The e-tailer is the business doing the selling, while e-commerce is the activity it carries out. The terms are not interchangeable: every e-tailer uses e-commerce, but e-commerce also covers other online buying and selling, such as a producer taking orders through its own website.
An e-tailer may trade only online, with no customer-facing shop, or it may also have physical shops. A business with both can let customers order online and collect from a shop, or browse in a shop and buy later on its website.
For example, Puzzlebox Games sells jigsaws only through its website. It is an e-tailer, and each sale is e-commerce. A garden centre called Greenrow has two shops and a website where customers can order plants for delivery. Greenrow is still an e-tailer for those online sales, even though it also has physical shops.
| Term | What it means | Example |
|---|---|---|
| E-commerce | The buying and selling of goods or services online | A customer pays for a jigsaw through a website |
| E-tailer | A retailer that sells goods or services to consumers online | Puzzlebox Games, which sells jigsaws through its website |
So Greenrow's website orders are e-commerce carried out by an e-tailer, while its shop sales are retail but not e-commerce. Selling online is a method of distribution a business can add alongside its shops, not a label that replaces them.
E-tailing is selling goods or services to customers online. Selling this way can give a business advantages that a shop relying on passing trade cannot easily match.
An e-tailer can widen its target market beyond its local area because customers can buy from anywhere with an internet connection. A small pottery in a seaside town might sell mugs to customers in another county or another country, rather than only to tourists who visit its workshop. More potential customers can mean more sales without opening branches in new towns.
Online selling lets customers shop at any time, which adds convenience. Someone who finishes work after shops have closed can still order a birthday cake for collection two days later. The business can take that sale overnight, so it earns money from customers who could not have visited during opening hours.
E-tailing can also reduce premises costs because a business does not need an expensive customer-facing shop on a busy high street. A seller of phone cases might run from a small unit on an industrial estate and send orders by post, avoiding the high rent and heating bills of a large shop. It does not make selling free: there are still costs such as packaging, delivery and running a website.
Finally, selling through e-commerce lets product information and prices be changed quickly online. If a supplier raises the cost of reusable water bottles, the seller can update the website price in minutes rather than reprinting shelf labels or changing a window display. The business can keep its offer accurate and respond to competitors without waiting for new printed materials.
Selling online brings real advantages, but e-tailing also creates challenges that a business must plan for and pay for.
An e-tailer may avoid the cost of customer-facing shops, but it often still needs premises for storage, packing and distribution. Stock has to be kept somewhere dry and secure, orders have to be picked and packed, and parcels have to be collected by carriers. That means rent or mortgage payments on a warehouse or unit, shelving and equipment, insurance, and staff to pack orders. These costs do not disappear just because nobody walks in off the street to buy.
E-commerce can increase competition, because customers can compare prices, delivery times and reviews from many sellers within seconds and then buy from whichever suits them. A small shop that was the only place nearby to buy gardening gloves now competes with sellers across the country. To hold on to customers, an e-tailer often has to keep prices keen, offer fast delivery and build up good reviews.
E-tailers must provide customer service without face-to-face contact. Questions and complaints arrive by email, web chat or social media, so problems can take longer to sort out and misunderstandings are easier, which can damage a business's reputation through poor reviews.
They must also manage delivery and returns, which adds cost and complexity: posting items out costs money for packaging and courier charges, and returns mean refunds, paying for return postage and checking goods before they go back into stock.
For example, a small online swimwear business selling 500 orders a week may find that one in four customers orders two sizes and sends one back. Each return costs return postage and staff time to inspect and repack the item, while the warehouse rent is still paid. These costs have to be weighed against the wider reach that online selling brings.
Choosing a distribution method means deciding how a product will be made available to the people the business wants to sell to. This is not just about a shop's location: the method changes the business's costs, who it can reach, the service customers receive and, in turn, its profit.
The method should suit both the product and the target market. For example, a business selling handmade wedding cakes might use a local retailer, where customers can discuss designs face to face before ordering. A business selling downloadable workout plans might choose an online route because the product and its buyers do not need a physical shop. Choose badly and the business could pay for costs it does not need, or miss customers it could have reached.
Physical retailers can offer immediate availability: a customer can take the product home that day. They can also give personal service, such as explaining features or helping with a choice. These benefits may attract customers and increase sales. However, shops have running costs such as rent, heating and staff wages. A business may need to charge higher prices to cover these costs, or accept lower profit on each sale.
A business may sell through both retailers and e-tailers (retailers that sell online) to reach different customers. Some customers want to see and handle a product in a shop; others are happy to order online. For example, a small furniture maker could sell through a local shop for customers who want to check the finish, and through an e-tailer for customers who cannot visit the shop. This can widen sales reach, but it also means managing two sets of costs and customer expectations.
The best method depends on the product, the customer and the business's objectives. A business aiming for high profit per sale may prefer a method with lower running costs, while one aiming to reach as many customers as possible may accept higher costs to widen distribution.