The role of Channel of distribution of goods
A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. Distribution channels can include wholesalers, retailers. distributors, and even the Internet.
Distribution channels are part of the downstream process, answering the question “How do we get our product to the consumer?” This is in contrast to the upstream process, also known as the supply chain, which answers the question “Who are our suppliers?”
A distribution channel is the path by which all goods and services must travel to arrive at the intended consumer. Conversely, it also describes the pathway payments make from the end consumer to the original vendor. Distribution channels can be short or long, and depend on the amount of intermediaries required to deliver a product or service.
Goods and services sometimes make their way to consumers through multiple channels a combination of short and long. Increasing the number of way create a complex system that sometimes makes distribution management difficult. Longer distribution channels can also mean less profit catch intermediary charges a manufacturer for its service.
Channels of distribution indicate routes through which goods and services flow or move from producers to consumers. In the ever widening markets, especially in consumer goods, marketing channels have a distinctive role in the implementation of marketing plans and strategies.
The institutions specializing in manufacturing, wholesaling, retailing and many other areas join forces in marketing channel arrangements to make possible the delivery of goods to industrial users or customers and to final users. The same is true for the marketing of services too.
The word ‘channel’ has its origin in the French word for canal. The term ‘Channel of distribution’ connotes a pathway taken by goods as they flow from the point of production to the point of ultimate consumption. In the words of Cundiff and Still, a channel of distribution is “a path traced in the direct or indirect transfer of title to a product as it moves from a producer to utility. Late consumers”. The pathways through which goods move from producers to ultimate users/consumers, distribution channels include intermediaries also who participate in the flow.
Role of Channels of Distribution:
In the present widening market, distribution channels play an important role in achieving marketing objectives of an organization. A manufacturer creates value utility in the product or service but time and place utilities are created by distribution channels. In the words of Drucker, “both the market and the distribution channels are often more crucial than the product. They are primary, the product is secondary”.
Distribution channels help in the following ways:
(i) Enhance Efficiency: The components of distribution channels enhance the efficiency of the system. A system of manufacturers directly dealing with consumers will be less efficient than the decentralized system involving distribution agents.
(ii) Smooth Flow of Goods and Services: The distribution channels smoothen the flow of goods and services by creating possession, time and place utilities.
(iii) Reducing Cost of Transactions: The cost of transactions is minimized if they are undertaken regularly. The distribution through intermediates will be possible if products are standardized. The terms and conditions of purchase, sale, payments will be standardized resulting into increased number of transactions. Instead of casual transactions, routine dealings will reduce the cost of marketing.
(iv) Facilitate Search: The buyers and sellers search for each other in the market to transact for products and services. This function is facilitated by distribution agents. These intermediaries remain in touch with sellers and buyers, thus facilitate exchange.
(v) Less Stocks of Goods: In the absence of distribution agents manufacturers are required to keep large stocks of goods. When middlemen enter the chain of distribution then stocks are maintained by large number of intermediaries and it reduces the burden of producers.
(vi) Proximity to Consumers: The intermediaries are more near to the consumers as compared to the producers. They are in direct touch with the users of goods and services and understand their reactions to the supplies. The intermediaries help producers in knowing the reactions of consumers to the goods and services brought out by them. This information is of immense value to producers in planning for their products.
