MEANING OF A CHANNEL OF

DISTRIBUTION

A distribution channel is the

network of businesses,
individuals, and intermediaries
facilitating the journey of a
product or service from the
manufacturer to the end
consumer. It encompasses the
various pathways used to deliver
goods to their final destination,
such as wholesalers, retailers, and
the Internet.
 DEFINITION OF A CHANNEL OF
DISTRIBUTION

The channel of distribution or

trade channel for a product is the
route taken by the title of the
goods as they move from the
producer to the consumer or
industries user.
 TYPES OF DISTRIBUTION
CHANNELS

1. Manufacturer-consumer.
2. Manufacturer -retailer-consumer.
3. Manufacturer -wholesaler-retailer-consumer.
4. Manufacturer -agent-retailer-consumer.
5. Manufacturer -agent- wholesaler -retailer-
consumer.
1. Manufacturer-consumer:
In the typical retail model,
manufacturers sell their products
to wholesalers, distributors and
retailers, who then sell those
products to customers through brick-
and-mortar or online retail store.
This is the shorts and simplest
channel involving direct sale of
goods and services by the producers
to the consumer. No middleman or
intermediary is present between the
producer and the consumer.
2. Manufacturer -retailer-consumer:

A manufacturer takes raw

materials and transforms them
into a finished product through a
production process. A retailer is a
business that sells goods to
consumers for personal or
household use. Consumers are
individuals who buy goods and
services for personal
consumption.
3. Manufacturer -wholesaler-retailer-
consumer

A distribution channel, in simple

terms, is the flow that a good or
service follows from production or
manufacturing to the final
consumer/buyer. Distribution
channels vary but typically
include a producer, a wholesaler,
a retailer, and the end
buyer/consumer.
4. Manufacturer -agent-retailer-
consumer:

Wholesaler creates a link between

manufacturer and retailer
whereas as retailer is a link
between manufacturer An agent
facilitates to reduce the distance
between the manufacturer and
the wholesaler.
When the retailers are few or
geographically concentrated,
distribution through agents may
be more economical than through
wholesalers. For instance, a
manufacturer may employ selling
agents and brokers to sell his
products to retailers.
 5. Manufacturer-agent-wholesaler-
retailer-consumer

In this route, the producers use

the services of agent middlemen
and sole selling agents for the
initial dispersion of goods. The
agent, in turn, may distribute to
wholesalers, who in turn sell to
retailers.
 CHOICE OF A CHANNEL OF
DISTRIBUTION

1)Product Considerations
2)Market Considerations
3)Company Considerations
4)Middle Considerations
 1. Product Considerations

a) Unit value
b) Perishability
c) Bulk and weight
d) Standardization
d) Technical nature
e) Product line
f) Age of the product

Unit value
Unit value refers to the specific
value for a single component or
item within a group or entity. It
can be useful in many different
industries and situations, and
understanding it can help
professionals properly price
goods.
 Perishability

Perishability is the quality of a

food, beverage, or another
product that makes it expire or
spoil quickly. It's necessary for
perishable foods to be fresh in
order to be safe for human
consumption.
 Bulk and weight

Heavy and bulky products are

distributed directly to minimize
handling costs. Coal, bricks,
stone, ect.
 Standardization

Standardization is a framework of
agreements to which all relevant
parties in an industry or
organization must adhere to
ensure that all processes
associated with the creation of a
good or performance of a service
are performed within set
guidelines.
 Technical nature

Technical nature means a

characteristic that places an item
outside the training and expertise
of an individual who regularly
performs plan reviews.
 Product line

A product line refers to a group of

products marketed under one
brand and sold by the same
company. A product line is
essential, especially since when
consumers become familiar with a
particular brand they begin to
branch out to different try
products.
 Age of the product

A product's age is the time from

when the product was created to
either the present or "the time of
interest" (: 600) for the
researchers.
 Market Considerations

a) Consumer and industrial

market
b) Number and location of
buyer
c)Size and frequency of order
d) Buyer habits
 Consumer and industrial
market

The consumer market is

made up of companies
selling products to
individuals. On the contrary,
the industrial market
comprises companies selling
products to other companies.
a)
Number and location of
buyer

When the number of

prospective buyers is small
or the market is
geographically located in a
limiter area, direct selling is
easy and economical. In case
of large and widely scattered
markets, use of wholesale
and retailers becomes
necessary.
Size and frequency of order

Direct selling is convenient

and economical in case of
large and infrequently
orders.When articles are
purchased very frequently
and each purchase order is
small,middlemen may have
to be used. A manufacturer
may use different channels
for different types of buyers.
He may sell directly to
departmental and chain
stores and may depend upon
wholesalers to sell to small
retail stores.
 Buyer habits

Buyer behaviour refers to the way a

buyer acts while making a purchase.
It refers to the way in which a buyer
takes decision to actually buy a
product or not. Buyer behaviour is
also termed as “consumer buying
behavior”. A buyer also may be a
customer, is the person who actually
buys the product or service.
Company Considerations

a) Market standing
b) Financial resource
c)Management
d) Volume of product
e) Desire for control of channel
f) Services provided by
manufacturers
 Market standing

Market standing refers to the

position of an enterprise in
relation to its competitors. A
business enterprise must have a
strong standing in terms of
offering competitive products to
the customers and also serve
them to their satisfaction.
 Financial resource

For individuals, these could

include savings accounts, stocks,
bonds, real estate, retirement
funds, and insurance policies. In
contrast, for businesses, financial
resources often include a
combination of working capital,
equity, loans, lines of credit, and
other investments.
 Management

Management is how businesses

organize and direct workflow,
operations, and employees to
meet company goals. The primary
goal of management is to create
an environment that empowers
employees to work efficiently and
productively.

Volume of product

Production volume is the number

of products a company makes.
Measuring production volume is
important because it can help you
know what your company can
produce.
 Desire for control of channel

Firms which want to have close

control over the distribution of
their products use a short
channel. Such firms can have
more aggressive promotion and a
thorough understanding of
customers' requirements. A firm
not desirous of control over
channel can freely employ
middlemen.
 Services provided by
manufacturers

A company that sells directly has

itself to provide installations,
credit, home delivery, after-sale
service, and other facilities to
customers. Firms which do not or
can’t provide such services have
to depend upon middlemen.
 Middle Considerations

a) Availability
b) Attitudes
c)Services
d) Sales Potential
e) Costs
f) customer and competition
g) Legal constraints
 Availability

When desired type of middleman

are not available, a manufacturer
may have to establish his own
distribution network . Non
availability of middlemen may
arise when they are handling
competitive products or they do
not like to handle more brands.
 Attitudes

Attitudes include beliefs

(cognition), emotional responses
(affect) and behavioral tendencies
(intentions, motivations). In the
classical definition an attitude is
persistent, while in more
contemporary conceptualizations,
attitudes may vary depending
upon situations, context, or
moods.
 Services

Trade in services records the

value of services exchanged
between residents and non-
residents of an economy,
including services provided
through foreign affiliates
established abroad. This indicator
is measured in million USD and
percentage of GDP for exports,
imports and net trade.
 Sales potential

Sales potential is the number of

sales a company predicts it can
earn during a specific timeframe.
It's also the amount of money for
which it can sell a product. The
sales amount factors into the
expected market share and
performance of the company's
product or service.
 costs
In international trade, such costs
may include the transport cost
from origin to destination, taxes
(or tariffs) imposed by importing
nations' governments, the costs
of infrastructure to facilitate
trade, the costs of
communications, and foreign
exchange costs.
 Customer and Competition

How does product market

competition affect a firm's
relationship with its suppliers?
Customers tend to have greater
product market power, faster
growth opportunities, and better
access to capital markets than
suppliers, thus skewing the
relative bargaining power of the
trading partners (Helper, 1990).
 Legal constraints

Government regulations regarding

certain products may influence
channel decision. For instance,
liquor and drugs can be
distributed only through licensed
shops.