Distribution Channels is the route or the path taken by a product as it moves from producer to consumer. This channel or the route, which connects the producer with the consumer in the transfer of ownership of a product may be direct or indirect. A channel of distribution is called direct when the manufacturer supplies the goods directly to the ultimate consumer and uses no intermediaries. Here the marketing functions are carried out by the manufacturer or producer himself.
If a manufacturer sells the goods to the consumers through one or more than one middlemen or intermediaries, the channel is called indirect. In the indirect channel of distribution, the function of buying, selling, transporting storing, risk-taking etc are undertaken by the middlemen. The number of middlemen from the point of production to the point of consumption vary with the nature of the product marketed , the financial strength of the producer, the number of consumers, the marketing experience of the manufacturer etc we brief examine the channel distribution for consumer goods and for industrial goods.
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Types of distribution channels
There are four major types of a channel of distribution: for marketing of consumer goods.
- Direct Channel
- Indirect Channel
- Selective Distribution
- Intensive Distribution
Direct Channel of Distribution:
The direct channel is constituted where the manufacturer or the producer supplies goods directly to the consumer. The manufacturer in one stage channel performs all the marketing functions himself. No middleman is involved.
In the direct channel of distribution, the manufacturer attempts to reach the consumers through his.
- Own retail stores
- House to house selling
- By mail
- By sales from the factory door.
The manufacturer to consumer link no doubt appears to be a simple and low-cost method of distribution, but it is not practicable for marketing of a lot of consumer goods. Imagine for a moment, the difficulties which producer of soap, hairpins, toothpaste, shoe polish, cigarettes, beverages etc. will face in selling the goods directly to the consumers.
Indirect Channel of distribution:
Exclusive Destitution channel. Marketing of goods first to a retailer who in turn sell t to a consumer is a favorite method with the moat of the manufacturers of consumer goods such as clothes, machinery, automobiles, furnitures etc .The reasons for selecting this channel of distribution are.
- Better control on the supply of goods
- Speedy disposal of product
- Lesser expenses on selling
- Better training of sale people
- Rapid feedback.
Selective Distributive Channel:
The marketing through wholesalers is one of the widely used and most important channels of distribution. This channel of distribution enables the manufacturer to sell goods in a lot to a few selected wholesalers who sell it to retailers, who in turn sell it to the consumer.
The wholesalers acting as a middlemen take title to the goods, assume risks, appoint dependable retailers, provide goods on cash as well as a credit and thus spreads sale on a wider market for the products of the manufacturer. The examples of goods in this area include drugs, hardware, tobacco, groceries, toys, foods products etc
Example of intermediaries in indirect channels of distribution:
The product goes from the manufacturer to the wholesaler, to the retailer and finally to the consumer. Lesser consumable items, for instance, household soaps and cosmetics, are typically sold through this model.
Intensive Distribution Chanel:
In intensive distribution channel, the producers use many wholesalers and retail middlemen for the promotion of the product. The producer uses this route of marketing for saturating the market with the product. The chief responsibility for advertising and promoting the trade falls on the producer.
Channels of Distribution for Industrial Goods
The distributional channels through which the industrial goods travel differ from those of consumer goods. N the distribution of industrial goods, there are fewer middlemen and shorter channel of distribution. Retailers are not required in this channel the most commonly used channels of distribution for industrial goods are as follows;
- Direct channel: manufacturer to industrial user, sometimes by way of factory branch.
- Indirect Channel
- Manufacturer to wholesaler to the industrial user.
- Manufacturer of agents to the industrial user.
The reasons for relatively short and fewer channels of distribution for industrial goods are as under;
- Technical information: the industrial goods are mostly purchased by the industrial users in large quantities. They are, therefore, purchased directly from the manufacturer or the source of supply.
- Purchase in bulk:
The industrial user buys products mostly of technical nature. The technical information regarding the performance, standard of the product, the installation of machinery, the maintenance service etc. cannot be reliably furnished through the middleman. The industrial user thus wants direct dealing with the manufacturer so as to get full technical information of the product from him. The middleman is thus eliminated from the channel of distribution.
- Direct contact:
another reason for a short channel of distribution for industrial goods is that most of the industrial markets are generally concentrated in a small geographical area. The purchasers of industrial goods directly contact the sellers and thus there does not arise the need of the agent.
- Contact on telephone, Fax etc:
The industrial users generally purchase goods in bulk. The cost of direct correspondence or contact on telephones, wireless, or in person etc is negligible on the total purchase. The buyer, therefore, eliminates middleman and contact the manufacturers directly for the purchase of industrial goods.
The Importance of distribution Channels:
Distribution channels frequently require the help of others in order for the marketer to reach its target market. But why exactly does a company need others to help with the distribution of their product? Would not a company that handles its own distribution functions be in a better position to exercise control over product sales and potentially earn higher profits?
Also, does not the Internet make it much easier to distribute products thus decreasing the need for others to be involved in selling a company’s product?
While on the surface it may seem to make sense for a company to operate its own distribution channel (i.e., handling all aspects of distribution) there are many factors preventing companies from doing so. While companies can do without the assistance of certain channel members, for many marketers some level of channel partnership is needed.
For instance, marketers who are successful without using resellers to sell their product (e.g., Sony Computers sells mostly through the Internet and not in retail stores) may still need assistance with certain parts of the distribution process (e.g., Sony uses parcel post shippers such as FedEx and USPS). In Sony’s case creating their own transportation system makes little sense given how large such a system would need to be in order to service Sony’s customer base. Therefore, by using shipping companies Sony is taking advantage of the benefits these services offer to Sony and to Sony’s customers.
Functions of Distribution Channels
- The main function of a distribution channels is to the association the gap between production and consumption.
- A thorough study of the market is really essential. A good marketing plan depends upon the detailed market study.
- The distribution channels is also responsible for promoting the product. Awareness regarding products and other offers should be created among the consumers.
- Creating contacts or prospective buyers and maintaining a link with existing ones.
- Understanding the customer’s needs and modifying the offer consequently.
- Discuss price and other offers related to the product as per the customer demand.
- Storage and distribution of goods
- Providing to the financial requirements for the smooth working of the distribution chain.