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Distribution: channels and changing methods

Edexcel IAL Business · WBS11 Marketing and people

Place is about getting the product to customers where and when they want it. This lesson covers the four-, three- and two-stage distribution channels in the specification and how distribution methods are changing.

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Distribution channels

A distribution channel is the route a product takes from the producer to the final consumer.

Four stage: producer to wholesaler to retailer to consumer. Wholesalers buy in bulk and break bulk into smaller quantities for many small retailers, and store and transport goods. Suits mass-market goods sold through many small shops. Each intermediary adds a mark-up, so the price is higher and the producer has less control.
Three stage: producer to retailer to consumer. Large retailers (supermarkets) buy directly in bulk. Producer has more control, but large retailers have strong buying power and push prices down.
Two stage: producer to consumer (direct). Online sales, factory shops, farm shops, subscriptions. The producer keeps the whole margin, controls the customer experience and gathers customer data, but must handle storage, delivery and customer service itself, and reaches fewer customers.

Choosing a channel

Factors: type of product (perishable goods need short channels), the target market and where customers shop, the size and spread of the market, the firm's resources, the level of control wanted, and costs. Intermediaries provide valuable functions (storage, stock management, transport, display, reaching many customers); removing them means the producer must perform these functions.

Changes in distribution methods

E-commerce and apps allow two-stage direct-to-consumer (DTC) selling. The ONS reported that 27.6% of GB retail sales were made online in August 2025.
Multi-channel / omnichannel retailing: shops, website, app and click and collect working together.
Online marketplaces (third-party platforms) give small firms access to huge numbers of customers for a fee.
Home delivery, lockers and fast delivery raise customer expectations.
Fewer wholesalers as large retailers and online sales bypass them.

The January 2022 WBS11 Section C asked candidates to evaluate a sportswear firm's strategy of selling through fewer businesses; the scheme credited more control and lower intermediary costs, against lower demand where customers no longer have a nearby retailer and extra costs in the short run.

Worked example

A small farm sells cheese to a wholesaler, which supplies local shops. It is considering selling direct online. Analyse one benefit and one drawback.

Benefit: it keeps the margin the wholesaler and shops took, and builds relationships with customers using their data.
Drawback: it must pay for packaging, chilled delivery and a website, and may reach fewer customers than through many shops.

Answer: Higher margin and control against extra costs and lower reach: a judgement depends on the scale of online demand.

Key idea: Four stage: producer, wholesaler, retailer, consumer. Three stage: producer, retailer, consumer. Two stage: producer to consumer. Trends: e-commerce, direct to consumer, omnichannel, marketplaces, fast delivery.

Check yourself

A sweet manufacturer sells to a cash-and-carry wholesaler, which sells to corner shops, which sell to customers. How many stages is this channel?
- Three
- Two
- Five
- Four
Show answer
Four. Producer, wholesaler, retailer, consumer.
Which is an example of a two-stage channel?
- A brand selling through a supermarket chain
- A clothing brand selling through its own website
- A brand selling to a wholesaler
- A brand selling through department stores
Show answer
A clothing brand selling through its own website. Producer direct to consumer.
What is a main function of a wholesaler?
- Designing products
- Setting government regulations
- Manufacturing raw materials
- Buying in bulk and breaking bulk into smaller quantities for retailers
Show answer
Buying in bulk and breaking bulk into smaller quantities for retailers. Breaking bulk, storage and transport.
Explain one advantage to a producer of selling directly to consumers online.
Show answer
There are no intermediaries taking a mark-up, so the producer keeps more profit per unit and controls the customer experience and data.. Cutting out intermediaries gives margin, control and data.
Explain one disadvantage for a producer of cutting out wholesalers and retailers.
Show answer
The producer must take on storage, delivery and customer service itself, which raises costs, and it may reach fewer customers than it did through many shops.. Lost intermediary functions and reach.
The ONS reported that 27.6% of GB retail sales were made online in August 2025. What percentage was made through other channels?
Show answer
72.4 %. 100 - 27.6 = 72.4%.
Why do fresh bakeries usually use short distribution channels?
- Wholesalers refuse to sell bread
- Long channels are illegal for food
- The products are perishable and must reach customers quickly
- Short channels always have higher costs
Show answer
The products are perishable and must reach customers quickly. Perishable goods need quick routes.

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Last updated 8 November 2026. Spotted a mistake? Tell us.