One level channel

One level channel is when the manufacturer supplies its goods to the retailer, and then the retailer sells these goods to consumer. In this case retailers play the role of wholesalers, because they buy in bulk. Some large supermarkets buy goods directly from the manufacturer and then do their own wholesaling. One of the examples of these types of shops is ‘Metro Cash & Carry’. They buy products in bulk from the manufacturer. Then they break this bulk down and sell in smaller quantities. By buying the products in bulk, retailers obtain a discount. This method of buying and distributing the products helps businesses to add a profit margin, which means they will increase their profits. E.g. the large supermarket buys 200 huge boxes containing 45smallers boxes. Then the supermarket sells these smaller boxes to the consumers. This type of distribution is sometimes also used by agents. They buy products from the manufacturer and then sell them directly to the consumer. For example, WHSmith may buy 2000 of J.K. Rowling’s books directly from the manufacturer and then use WHSmith newsagents to sell these books directly to consumers.

E.g. Tesco and Argos operate using this type of distribution of the products. In their distribution chain they have one big store in the city and then many small ones located in different areas. When some of their small stores starts running out of certain products, they transport their product from the main store to the small ones. This means, that their small stores don’t have to keep as much stock as the main store does.

Some people find this type of selling very effective. They buy enough products once enough for few months. In this case consumers also buy the products for a cheaper price per unit. This type of distribution is also very beneficial for the manufacturer, because it allows him to get rid of the stock on the factory. But on the other hand, due to the costs of transportation and the fact that retailer wants to get some profit from selling the products, the price on the products being made by the manufacturer are likely to rise.

Two level channel

This channel of distribution is often used by fast moving consumer goods, which are usually sold by supermarkets. The products are sold from a manufacturer to a wholesaler, then to a retailer and a final consumer. Basically, retailers (supermarkets) buy products from the wholesalers and then sell them to the consumers. Usually supermarkets buy relatively small amounts of certain products and see whether people buy them or not. If demand for these products increases, then supermarket buys more products in bulk from the wholesaler and then sells them to the consumers. Supermarkets also buy in bulk, but not as much as wholesalers do, and supermarkets also have a big range of products. Supermarkets don’t get as many discounts as wholesalers do, but they still get the products for much cheaper price per unit.

Nowadays, most supermarkets have special system on the tills, which records what particular products consumers buy. Then the computer checks how many products are left in the stock, and if it’s running out of certain products, it automatically orders more products.