Entrepreneurship and Small Business (ESB) Certification Practice Exam

What is the term used for a distribution model with an agent, wholesalers, and retailers involved?

1. One-level distribution

2. Two-level distribution

3. Three-level distribution

4. Direct distribution

The correct answer is: Three-level distribution

The term used for a distribution model that involves an agent, wholesalers, and retailers is indeed three-level distribution. This model is characterized by the presence of three distinct layers in the distribution channel, where each layer plays a critical role in getting the product from the manufacturer to the end consumer. In this model, the agent acts as an intermediary who represents the manufacturer and connects them to the wholesalers. The wholesalers then purchase products in bulk from the manufacturer (or agent) and sell them to retailers. Finally, retailers take the product from wholesalers to sell directly to consumers. This multi-layer structure allows for more effective reach and distribution of products, especially in markets where direct access to consumers may be limited or less efficient. Understanding this distribution model is vital for businesses as it impacts pricing, inventory management, and market penetration strategies.