Distribution
It is a process of delivering the product to the end user by the manufacturer in a cost effective manner. A distribution channel consists of a producers, consumers or users and the various middlemen like wholesaler, selling agents and retailers(dealers) who intervene between the producers and consumers.Therefore, the channel serves to bridge the gap between the point of production and the point of consumption thereby creating time, place and possession utilities. For example, if you're a detergent manufacturer, it doesn't make sense to ask your customers to drive to your factory in order to buy their washing machine soap. Instead, it make much more sense to use distribution channels like supermarket chains.
Type of distribution channels are broadly classified as
It is a process of delivering the product to the end user by the manufacturer in a cost effective manner. A distribution channel consists of a producers, consumers or users and the various middlemen like wholesaler, selling agents and retailers(dealers) who intervene between the producers and consumers.Therefore, the channel serves to bridge the gap between the point of production and the point of consumption thereby creating time, place and possession utilities. For example, if you're a detergent manufacturer, it doesn't make sense to ask your customers to drive to your factory in order to buy their washing machine soap. Instead, it make much more sense to use distribution channels like supermarket chains.
There are certain factors which should be kept in mind before choosing a distribution channel
- Nature of the product
- The market
- The business
- Legal issues
Type of distribution channels are broadly classified as
- Direct Channel or Zero Level Channels- In this type of channel the manufacturer sell the product directly to the customer instead of selling it to the intermediary. Direct Channels includes retail outlet, mail order selling, internet selling, etc.
- Indirect Channels- The channel through which the manufacturer takes help of one or more middle man to transfer the product to the consumer then that channel is called Indirect Channel. Indirect Channels have been classified into 3 type
- One Level Channel- In this method intermediary is used.In this method the product or goods are directly sold to the retailers instead of selling it to the wholesaler or agents. For example-used to sell expensive watches. This method is used to sell FMGC (Fast Moving Consumer Goods).
- Two Level Channel- In this method the products or goods are sell to the wholesaler first, then the wholesaler sell it to the retailer and then the retailer sell it to the end user or consumer.In this the wholesaler buy the goods in large quantity from the manufacturer who sell it to the retailer in small quantity. This method is used to sell tea, soap, sugar, ghee, etc.
- Three Level Channel- In this method an agent is added between the manufacturer and the wholesaler. The agent helps in reducing the distance manufacturer and the wholesaler. Some big companies who can not directly contact the wholesaler take the help of agent to reach to them. And such companies send their agents to all the regions and sell the product to them.It is nothing but the addition of an agent to a two level channel.
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