Five o'clock on Mill Lane: Baking a good loaf is half the job. The other half is getting it to the person who will eat it, at the right time and in the right place.
A morning on Mill Lane
5 a.m.: the vans leave
At five every morning, the vans leave the Mill Lane bakehouse.
7 a.m.: loaves on the shelves
By seven, Lena's loaves are on the shelves of the High Street, Market Square and Park Road shops.
Later: cafés and hotels
A smaller van goes out to the cafés and hotels that buy Lena's bread and her own-name crackers.
That second half is place, the third P of the marketing mix, after product and price: making the product available where and when customers want to buy it.
The route a product takes from the business that makes it (the producer) to the person who buys and uses it (the consumer) is its distribution channel.
Who can stand along the route
The producer
The business that makes the product. Lena's Bakery bakes its bread at Mill Lane and packs its crackers there too.
The wholesaler
A business that buys large amounts from producers and sells them on in smaller amounts to shops (breaking bulk). It stores the stock and delivers it. It does not sell to the consumer.
The retailer
The business that sells to the consumer: a shop, a supermarket, a café, a website. It takes a share of the price for putting the product in front of buyers.
The consumer
The person who buys and uses the product: the commuter with a warm loaf under her arm.
Every business standing between the producer and the consumer is a go-between (an intermediary). Channels are named by how many go-betweens they have: their levels.
| Channel | The route | Lena's example |
|---|---|---|
| Zero-level (direct) | Producer → consumer | Loaves sold in Lena's own three shops |
| One-level | Producer → retailer → consumer | Crackers sold to a café, which sells them to its customers |
| Two-level | Producer → wholesaler → retailer → consumer | Crackers sold to a food wholesaler, which supplies delis (an offer Lena is weighing) |
Lena's 'wholesale' trade is a one-level channel: In her accounts, Lena calls the $240,000 she earns from cafés and hotels 'wholesale', because she sells to them in bulk. In a distribution channel the word is narrower.
A wholesaler
- A business in the middle that sells on to other businesses.
The cafés
- They sell her crackers straight to their own customers.
- So they are retailers, and that channel has one level.
Today 85% of Lena's revenue, $1,360,000 of $1.6 million from bread, cakes and lunches in her shops, comes through the zero-level channel. The other 15%, $240,000, comes through the cafés and hotels. Each route gives Lena something and costs her something.
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A commuter buys a $3 loaf at the High Street counter. Nobody stands between Lena and her customer, so the whole $3 comes to Lena's Bakery.
That is a zero-level channel (direct distribution): the producer sells straight to the consumer.
Direct can be a counter or a website: Direct does not have to mean a shop. From October, customers can order on Lena's own website by 8 p.m. and collect their bread the next morning from any of her shops.
Still zero-level: The website belongs to Lena, and no one else takes a share of the price.
Direct in the same way
- A farm selling eggs at its gate
- A phone maker selling through its own app
What Lena gains
- She keeps the whole price: $3 a loaf, with nothing paid to a go-between
- Control over freshness: loaves reach the shelf by seven, straight from Mill Lane
- Control over the brand: her staff, her green wheat-ear sign, her way of serving
- She hears every day, face to face, what customers like and what they miss
What it costs her
- Rent, staff and fittings for every shop: the Station Road shop alone cost $120,000
- Only people near her shops can buy: three streets, soon four
- Her own vans and deliveries, and every unsold loaf is her loss
When it matters most
- The product spoils fast, like bread baked this morning
- The brand rests on how the product is made and served
- The customers are close by, or can be reached through a website
So selling direct gives Lena the whole price and full control, but reaching one more street means opening one more shop. Station Road shows the scale of it: a five-year bank loan of $120,000 to reach commuters who never walk past the other three shops.
The whole price is not the same as more profit: Lena keeps all $3, but out of it she pays the rent, the counter staff and the loaves that do not sell.
A go-between takes a share of the price, and it also pays those costs itself. Comparing channels means comparing what is left after the costs, not only the price.
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Two offers on Lena's desk: Two businesses want to sell Lena's products for her, one in town and one across the region.
Brightmart
- The town's biggest seller of bread.
- Wants Lena's loaves in its four supermarkets in town.
- 400 a day, paying $2.25 each and selling them at $3.
Harvest Lane Foods
- A food wholesaler.
- Wants her crackers for the 80 delis and farm shops it supplies across the region.
- 4,000 packets a month at $1.75 each.
Brightmart would be a one-level channel: one go-between, a retailer, stands between Lena and the shopper.
Harvest Lane would be a two-level channel: the wholesaler buys in bulk and splits it into boxes for each deli, and the deli, a retailer, sells to the shopper.
Where the money for a packet of crackers goes
Lena sells to Harvest Lane: $1.75
70% of the $2.50 the cafés pay her. A packet costs Lena $1.00 to make, so she earns $0.75 on each.
Harvest Lane sells to the deli: $2.50
It keeps $0.75 a packet for storing the crackers, splitting the order into boxes and driving them to 80 shops.
The deli sells to the shopper: about $3.50
It keeps about $1.00 for the shelf space, the staff and the customers who already come through its door.
The café route, for comparison
Lena's van takes the crackers to the cafés, which pay $2.50 and sell them at about $3.50. One go-between, so Lena earns $1.50 a packet.
| The cafés now (one-level) | Harvest Lane (two-level) | |
|---|---|---|
| Lena receives per packet | $2.50 | $1.75 (70% of the café price) |
| Profit per packet (cost $1.00) | $1.50 | $0.75 |
| Packets a month | About 1,500, in 14 cafés in the town (18,000 in 2025) | 4,000, in 80 shops across the region |
| Profit a month | 1,500 × $1.50 = $2,250 | 4,000 × $0.75 = $3,000 |
| Who decides how the crackers are shown | Café owners Lena knows | 80 shop owners she never meets |
Each go-between takes a share of the price, so Lena's profit on a packet halves, from $1.50 to $0.75. But the wholesaler sells more than two and a half times as many, so on its own it would earn her $3,000 a month, a third more than the $2,250 the cafés bring. That is the heart of every channel decision: a thinner slice of a bigger cake.
What go-betweens give a producer
- Reach: shops and customers the producer could never serve on its own
- Lower costs for the producer: fewer deliveries and no shops to run
- The retailer's own customers, who already walk through its door
- A wholesaler stores the stock and splits big orders into small ones
What they take
- A share of the price, at every level
- Control: where the product sits, how fresh it is, what is said about it
- Contact: the producer hears less from the people who buy the product
- Power: a big retailer can push the price down or drop the product
Brightmart, weighed
- 400 loaves a day at $2.25 is $900 a day of new sales
- Brightmart keeps $0.75 of each $3 loaf, a quarter of the price
- The loaves would sit next to Brightmart's own $1.20 loaf
- A loaf bought at four in the afternoon was baked at two in the morning
One more go-between is worth knowing: an agent finds buyers for a producer in return for a commission, but never owns the goods. Lena has no need of one: she knows every café she supplies.
Lena's website and a delivery app called Doorstep both put her bread on a phone screen. They are different channels.
Her own website: zero-level
- Customers order from Lena and pay Lena.
Doorstep: one-level
- Customers order from the app, which sends a rider and keeps 30% of each order.
- The app is the retailer.
- A $3 loaf sold through Doorstep brings Lena $2.10.
Online is a place, not a level: Selling online (e-commerce) can happen in any channel. What decides the level is who stands in between, not whether there is a screen.
A producer's own website is direct. A marketplace or an app in the middle is one level.
What online adds
- Customers beyond her streets, ordering at any hour
- Orders arrive the night before, so Mill Lane bakes to order and wastes less
- Data on who buys what and when, straight from every order
What online costs
- Delivery: a fresh loaf must arrive fresh, and riders cost money
- A website to build and keep running, or 30% of every order to an app
- Rivals are one tap away, and nobody can smell the bread through a screen
So which channel matters most depends on the product, the customers and the business. Lena's two products point in opposite directions.
| What to ask | Points to a short channel | Points to a longer channel |
|---|---|---|
| The product | Spoils within a day, like this morning's loaf | Keeps for months, like a packet of crackers |
| The customers | Close by, or happy to order online | Spread over a region, buying in shops they already visit |
| Control | The brand depends on freshness and service | The product looks the same on any shelf |
| The business | Has shops, vans and staff of its own | Small, with no money to reach far on its own |
| The share of the price | Wants to keep all of it | Accepts less on each item to sell many more |
Lena's three decisions
Bread: keep it short
Her own shops and her own website. A loaf is at its best on the day it is baked, and freshness is what her brand promises.
Crackers: go longer
They keep for three months and need no explaining. Harvest Lane reaches 80 shops she could never supply herself.
Brightmart: the hard one
$900 a day of new sales, against loaves sold hours old next to a $1.20 rival. A good answer weighs both sides, then decides.
Why a channel matters depends on the business: No channel is best on its own. Direct suits Lena's bread; it would not suit a jam maker selling in 30 countries.
When you say why a channel matters, name the product and the business, and use a figure from the case.
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How this comes up: A case describes a business that sells, or wants to sell, through a go-between: dealers, supermarkets, a wholesaler, an app.
The usual questions
- Four marks. Explain one advantage and one disadvantage for that business of selling through them.
- Two marks. Say what a distribution channel is, or give one reason why a channel suits a product.
- Longer answers on the marketing mix use the same ideas as arguments.
The four-mark pattern
- Name the advantage. The go-between gives reach: shops, customers or a service the business cannot offer on its own.
- Show it in the case. Harvest Lane would put the crackers in 80 shops, against 14 cafés now, and earn Lena $3,000 a month.
- Name the disadvantage. A share of the price goes to the go-between, or control over display and freshness is lost.
- Show it in the case. Lena would receive $1.75 a packet instead of $2.50, so her profit on each halves, from $1.50 to $0.75.
Two traps: Whose advantage? The question asks what the business gains, not the shopper. 'Customers can buy the crackers in more places' counts only once it becomes more sales for Lena.
No case, no second mark. 'Go-betweens reduce the producer's share of the price' is one mark. 'Lena gets $1.75 a packet instead of $2.50' is two.
Explain one advantage and one disadvantage for Lena's Bakery of selling its crackers through Harvest Lane Foods.
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