Channels of Distribution
Category : Banking
Channel of Distribution
According to Slant-on: "A channel of distribution for a product is the root taken by the title to the goods as they move from the producer to the ultimate consumer or industrial user".
According to McCarthy: "Any sequence of institutions from the Producer to Consumer, including one or any number of middlemen, is called a Channel of Distribution.
Channels of distribution are one of the most powerful and important marketing mix elements. They play a major role in making a finished product available and accessible to the ultimate consumers and industrial buyers. Once the product is ready for the market the producer has to find some way to reach the product from the point of production to the point of consumption. A marketing channel is the path that is treated in the direct or indirect transfer of title to a product as it moves from producer to consumer. It consists of a network of institutions or series of intermediaries that are used to reach a market.
(i) Transfer of title to the goods involved.
(ii) Physical movement of goods from point of production to point of Consumption.
(iii) Storage of Goods.
(iv) Providing Product information. Customer Service etc.
Distribution of Consumer Goods:
(i) Producer \[\to\] Consumer
(ii) Producer \[\to\] Retailer \[\to\] Consumer
(iii) Producer \[\to\] Wholesaler \[\to\] Retailer \[\to\] Consumer
(iv) Producer \[\to\] Agent \[\to\] Retailer \[\to\] Consumer
(v) Producer \[\to\] Agent \[\to\] Wholesaler \[\to\] Retailer \[\to\] Consumer
Classification of Middleman:
According to American .Marketing Association: "Wholesalers sell to Retailers or other merchants and or industrial, institutions and commercial users but they do not sell in significant amounts to ultimate consumers.
According to Manson and Rath: A person or firm that buys merchandise and re-sells it to either retailers for subsequent resale to the consumer or to business firm for industrial and business use is called a Wholesaler.
The wholesaler occupied a predominant position in the chain of distribution. They collect goods from different sources, assemble them under one roof and facilitate convenient purchasing by the retailers. They provide product information and valuable advice to the retailers. The main advantage enjoyed by the producer is that the wholesaler enable them to sell their goods to several thousand small retailers to whom the goods cannot be sold directly from the factory Wholesalers are in two forms?
(a) General Merchandise Wholesaler: Such a wholesaler never restricts himself to the variety of goods that he handles. In fact he may deal with highly unrelated product line
For Example?A wholesaler dealing with hardware goods along with stationery items.
(b) General Line Wholesaler: It deals with a Specific Product line or closely related goods. Example ? A wholesaler dealing with only medicines or only cosmetics in the field of marketing of industrial goods that are called Industrial Distributors.
(c) Retailer: Retailing includes commercial function and activities incident to selling to the ultimate consumer. In other words, retailing is selling final consumer products to householders.
According to Stanton, "Retailing includes all activities directly related to the sale of goods and services to the ultimate consumer for personal non-business use".
Functions of Retailer
(i) Buying & Assembling
(ii) Storing of goods
(iii) Undertakes risk
(iv) Credit sales
(v) Providing information to the customers.
Essential of a Success Retailer
(i) Acceptability to the customer,
(ii) Satisfactory location of shop.
(iii) Good display of goods,
(iv) Reasonable price
(v) Storing of wide variety of goods as per customer choice & liking.
Agent or Middleman
(a) Broker: Brokers operate to bring the buyer and seller together they generally deal with food product, sugar, tea, textiles', machinery etc. The brokers generally specialize in a narrow range of products and possess in-depth knowledge of market condition in their area of specialization.
Brokers bring the buyers and sellers together and negotiate between them. They receive a commission for their services from the parties involved in the negotiations. They do not undertake the wholesaling functions such as carrying inventory, facilitating creditor risk-taking. They only bring the buyer and seller together. A broker does not receive payment until the product is sold and has to ensure the best deal for the customer. The broker also has to ensure the best deal for the customer. The broker also has to ensure the timely delivery of the customer's order.
(b) Commission Agent: They deal with agricultural products of several producers. They provide warehousing facilities and payment is normally on the basis of fixed commission. Commission agents are a type of agent who procure goods on consignment and transport them to bigger markets to sell them for the best price in the market. They deduct the commission and the transportation costs and pay the rest of the money earned to the producer. This is a common practice in selling seafood?s, agricultural product.
(c) Manufacturer?s Agent: A manufacturer's agent acts as a representative of several producers but generally confines his activities to a particular territory or geographical area. Such an agent displays the following features
· He is rarely involved in credit collection and risk bearing.
· He has usually little freedom to negotiate the terms and conditions regarding price sales etc.
· He collects purchase orders from different customers, places the same with the producers who intend to deliver the goods directly to the customers.
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