Channels of Distribution: Meaning, Objectives, Role, Factors, Functions and Strategies

A distribution channel is the network of businesses or intermediaries through which a good or service passes until it reaches the end consumer. Distribution channels can contain many levels or intermediaries, such as wholesalers or retailers, as products move from manufacturer to consumer. The introduction of eCommerce platforms has streamlined distribution enabling producers to sell directly to consumers. In this there are no intermediaries involved between the producer and the end consumer. The producer directly sells products to customers through methods such as company-owned online stores, direct sales representatives, or physical outlets.

• In the nature of things, channels are in a good position to perform this task, since they are in constant and direct contact with the customers.
• Since marketing is an exchange process between the buyer and the seller, channel members are considered exchange facilitators.
• For example, manufacturers may decide to use nontraditional channels such as the internet, mail-order channels, or infomercials to sell products instead of going through traditional retailer channels.
• The main objective of any distribution system is to make avail­able the product at right place in right quantity and at right time.

If the target market of your business is consumer-based, B2C, then retailing is necessary. However, if your market is business, B2B, then you won’t need retailers. Distribution channels can operate at different levels, each representing a stage in the process of getting products from the producer to the end consumer. Direct channels suit businesses whose target audience lives in a geographically confined area, who require direct contact with the manufacturer and are not that frequent in repeating purchases. But this doesn’t mean that all the services are always delivered using the direct channels. Channel members also store merchandise so that goods are available when consumers want to buy them.

Components of a Distribution Channel

Through their widespread network, they talk about the new products and help manufacturers create demand. Secondly, goods are stored by the middlemen while being transferred from manufacturers to consumers and released in the market depending on the demand. For example- in the case of jams and juices manufacturers have to store the fruits in the season, but the end products are available throughout the year. From manufacturers to wholesalers to medium size wholesalers to retailers and then to consumers. Except for certain kinds of industrial goods, however, the real comparison is between the manufacturer-direct-to-user channel and the retailer-direct-to-user channel. Provided adequate stock is always on hand at the retail outlet it is probably quicker and easier, in most cases, for the consumer or user to buy from the retailer.

• Who operate sales offices to perform wholesale functions, and retailers, who operate warehouses or otherwise engage in wholesale activities.
• However, there are certain instances when the producer sells goods directly to their customer, then such a channel is known as a direct channel.
• On the other hand, if a company sells an app for the iPhone which doesn’t require any particular expertise from the final user.
• Spending time with your family and at home is more important than spending time in a store.
• By strategically selecting and managing your distribution channels, you can effectively deliver your product to the right customers, enhance market reach, and maximize business success.

Regional centers are those larger centers that typically have one or more department stores as major tenants. Community centers are moderately sized with perhaps a junior department store; while neighborhood centers are small, with the key store usually a supermarket. Local clusters are shopping districts that have simply grown over time around key intersections, courthouses, and the like.

Distribution channels: definition, types, functions and examples

Covered shopping centers now come equipped with dozens of doors to the outside instead of two main entrances that usher crowds in and out through the anchor department store. That same trend paved the way for the flurry of freestanding Home Depots and TJ Maxx stores as well as discount giants like Wal-Mart. All are sapping customers from mid-market malls, already struggling. In addition https://1investing.in/ to the fresh success of freestanding discount stores, the Internet is drawing off even more customers who seek to buy books or music online. Discount houses are characterized by an emphasis on price as their main sales appeal. Merchandise assortments are generally broad including both hard and soft goods, but assortments are typically limited to the most popular items, colors, and sizes.

In this chapter, we will look at the basics of channels of distribution. We shall see that several basic functions have emerged that are typically the responsibility of a channel member. Also, it will become clear that channel selection is not a static, once-and-for-all choice, but that it is a dynamic part of marketing planning.

Functions of Distribution Channel – 9 Key Functions: Suggested by Philip Kotler

For example, Piggly Wiggly Food Stores, founded by Clarence Saunders around 1920, introduced self-service and customer checkout counters. Supermarkets are large, selfservice stores with central checkout facilities, they carry an extensive line of food items and often nonfood products. Stores vary in size, in the kinds of services that are provided, in the assortment of merchandise they carry and in many other respects. Most stores are small and have weekly sales of only a few hundred dollars.

Dual Distribution

Regular monitoring and measurement of channel performance enable companies to assess the effectiveness of their distribution channels. Retailers buy the product from the manufacturer and then sell it to the customers. One level channel of distribution works best for manufacturers dealing in shopping goods like clothes, shoes, furniture, toys, etc. In order to understand the importance of distribution channels, businesses need to understand that it doesn’t just bridge the gap between the producer of a product and its user.

Negotiation – The attempt to reach final agreement on price and other terms so that transfer of ownership or possession can be effected. Commerce Mates is a free resource site that presents a collection of accounting, banking, business management, economics, finance, human resource, investment, marketing, and others. The producer ought to choose such a channel of appropriation or distribution which is less expensive and furthermore helpful from different points.

Distribution channels and strategies look more at creating demand for a product or service by leveraging several strategies. The distribution strategy concerns primarily with bringing the product in front of customers, especially customers that are willing and ready to buy it. Channels make distribution simpler by reducing the number of transactions required to get a product from the manufacturer to the consumer. If the bookstore serves as a go-between, the number of transactions is reduced to nine.

Similarly, it may be important for the producer to maintain direct contact with customers so that quick and accurate adjustments can be made. Direct-to-user channels are common in industrial settings, as are door-to-door selling and catalogue sales. Indirect channels are more typical and result, for the most part, because producers are not able to perform the tasks provided by middlemen. Even though direct selling eliminates the intermediary expenses and gives more control in the hands of the manufacturer, it adds up to the internal workload and raises the fulfilment costs.

(A) Considerations Related to Product.

If you analyze the customers’ information like location, number, size, and the purchasing habits of customers, then it would give you an idea that what channel you should use for your business. Most important, whether your target customer is patient enough to travel and wait for your product. As vendors grow the size and scope of their distribution network, dedicated resources are often needed to ensure the success of the partner program.

It is important for businesses to consider the impact of distribution channels on pricing decisions to strike a balance between profitability, market competitiveness, and customer value. Understanding the pricing dynamics within the distribution channel helps companies determine the optimal pricing strategies and maintain a competitive edge in the market. The number of intermediaries involved in the distribution channel can influence the price. Longer distribution channels with multiple intermediaries typically result in higher prices due to the accumulation of markups and costs along the chain.

Channels usually represent the largest costs in marketing a product. The cost involved in the use of a distribution channel enters the price of the product that the ultimate consumer has to pay. Due to a wrong decision regarding the channel, distribution cost may be very high and sales might be very limited. A sound channel decision enables the firm to cut down costs and maximise sales revenue. Under this strategy the communications and promotional activities by the marketer to persuade consumers to request specific products or brands from retail channel members. The producer can concentrate on the production function leaving the marketing problem to middlemen who specialize in the profession, their services best utilized for selling the product.