Categories various types of distribution channels.
Classification of Distribution Channels
Distribution channels may be classified into two categories. Direct and Indirect.
(i) Direct Channels: It involves direct sale of goods and services by the producer to the consumer without the help of any intermediaries. This type of sale may be through direct mail supply, door to door sales or multiple shops. Direct sale is always economical as it reduces distribution costs.
Small producers or producers of perishable goods resort to direct sale. Big manufacturers also resort to direct sales by minimizing costs of distribution. They come into direct contact with the consumers by eliminating all kinds of middlemen.
Direct sales may also be undertaken in the following ways:
(a) Through Travelling Salesmen : The producers may employ salesmen who will procure orders directly from users and supply the goods out of the stocks of the company. The salesmen can enlighten the prospective buyers about the uses of the product and can explain its features also.
Example: The sale of water purifiers and vacuum cleaners by Eureka Forbes Ltd. is the example of sales through salesmen. The channel of distribution will be:
Producer
Travelling Salesmen
Consumer
(b) Through Retail Shop: The producers may set up their own retail shop or showroom at different places or at different locations of the same place. Example: Bata Shoes, Mc Donald, Raymond
(ii) Indirect Channels: Indirect channel of distribution may involve one or more middlemen. The manufacturers who do not have their distribution network or do not wish to face problems of distribution, use the services of middlemen under indirect selling.
There can be four types of indirect channels as follows:
(a) Through Retailers: In this channel the producer reaches the consumer by adding one intermediary called retailer. The producer supplies goods directly to the retailers who sell them to consumers. No wholesaler is involved in this channel. This channel can be shown as follows:
Producer
Retailer
Consumer
(b) Through Wholesalers: Under this channel the producer supplies goods to the wholesaler, who in turn sells them directly to the consumers. There is no retailer involved in this channel. The producer supplies goods in bulk but wholesaler sells them to retailers in small quantities. This channel may be shown as follows:
Producer
Wholesaler
Consumer
(c) Through Wholesaler and Retailer: This channel consists of two types of intermediaries called wholesaler and retailer. The producer supplies goods in bulk to the wholesaler, who if, tum sells in small quantities to the retailers. The retailer sells goods to the consumers as per their requirements. The distance between the consumer and the producer is increased in this channel. This channel may be shown as follows:
Producer
Wholesaler
Consumer
(d) Through Agent, Wholesaler, Retailer: This is the longest chain of distribution. The producer sells whole of its production to a sole-selling agent who in turn appoints wholesalers. The sole-selling agent assures the producer to lift whole of his production. The wholesaler then sells the goods to the retailer and then goods reach the consumer. In India some publishers follow this method of distribution. M/s Kalyani Publishers route all its stocks through a sole-selling agent, M/s Lyall Book Depot. This Channel may be shown as follows:
Producer
Agent
Wholesaler
Retailer
Consumer
The channels discussed earlier are not the only choice of companies. They may follow more than one channel depending upon the product demand and market segments.
Channels used for Distributing Consumer Goods: The goods which consumers use in day to day life are called consumer goods. Some goods such as eatables etc. are purchased and consumed in routine, some goods. such as T.V., refrigerator, furniture etc. are durable goods and are purchased after long gaps. The distribution channels for some consumer goods are described as follows:
Consumer Goods
(a) Consumer goods of daily use like sugar, salt, soap, toothpaste, detergents, stationary etc.
(b) Consumer goods like sports goods, auto spare-parts, videos etc.
(c) Durable consumer goods like furniture, cars, shoes etc.
Distribution Channel
- Agent, Wholesaler, retailer
- Wholesaler, retailer
- Manufacturer’s showroom, dealer
Channels used for Distributing Industrial Goods: These are the goods used by industrial consumers. Industrial goods are used to manufacture other goods.
The channels for these goods may be as follows:
Industrial Goods
(a) Goods like machines, Computers, etc.
(b) Goods like trucks, vans etc.
(c) Products like coffee, soyabeans, corn etc.
Distribution Channel
- Directly from manufactures to consumers.
- Manufacturer’s showrooms or through dealers.
- Through agents.
