Channels of distribution

Presented by,Manoj k mathew

S4 mbamacfast

Channels of Distribution

• A channel of distribution or trade channel is defined as the path or route along which goods move from producers or manufacturers to ultimate consumers or industrial users. In other words, it is a distribution network through which producer puts his products in the market and passes it to the actual users.

These channels of distribution are broadly divided into four types

• Producer-Customer• Producer-Retailer-Customer• Producer-Wholesaler-Retailer-Customer• Producer-Agent-Wholesaler-Retailer-

Customer

Producer-Customer

• This is the simplest and shortest channel in which no middlemen is involved and producers directly sell their products to the consumers. It is fast and economical channel of distribution. Under it, the producer or entrepreneur performs all the marketing activities himself and has full control over distribution.

Producer-Retailer-Customer

• This channel of distribution involves only one middlemen called 'retailer'. Under it, the producer sells his product to big retailers (or retailers who buy goods in large quantities) who in turn sell to the ultimate consumers.

Producer-Wholesaler-Retailer-Customer

• This is the most common and traditional channel of distribution. Under it, two middlemen i.e. wholesalers and retailers are involved. Here, the producer sells his product to wholesalers, who in turn sell it to retailers. And retailers finally sell the product to the ultimate consumers.

Producer-Agent-Wholesaler-Retailer-Customer

• This is the longest channel of distribution in which three middlemen are involved. This is used when the producer wants to be fully relieved of the problem of distribution and thus hands over his entire output to the selling agents. The agents distribute the product among a few wholesalers. Each wholesaler distribute the product among a number of retailers who finally sell it to the ultimate consumers.

Factors consider while selecting distribution channel

• Product Consideration• Market Consideration• Other Considerations

Product Consideration

• The type and the nature of products manufactured is one of the important elA new product needs greater promotional efforts in the initial stages and hence few middlemen may be required. ements in croducts of low unit value and of common use are generally sold through middlemen.hoosing the distribution channel.

Market Consideration

• Another important factor influencing the choice of distribution channel is the nature of the target market. If the number of prospective customers is small or the market for the product is geographically located in a limited area, direct selling is more suitable. While in case of a large number of potential customers, use of middlemen becomes necessary.

Other Considerations

• There are several other factors that an entrepreneur must take into account while choosThe distribution costs of each channel is also an important factor because it affects the price of the final product. Generally,a less expensive channel is preferred. But sometimes, a channel which is more convenient to the customers is preferred even if it is more expensive.ing a distribution channel.

Distribution Channels