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A distribution channel can be described “as an organized system of marketing institutions and their interrelationships that promote the physical flow of goods and services along with title that confers ownership from producer to consumer or business user. It also connotes the network of organizations that creates time, place and possession utilities for consumers and business users.
Examples: movement of textbooks from publishers to bookshops, movement of agricultural products from farm to the commodity market.
Types of Distribution
Distribution could be grouped into the following;
1. Dual Channel Distribution: This refers to movement of products through more than one distribution channel to reach the same target consumers.
(a) Manufacturer—> Wholesaler—> Consumers
(b) Manufacturer—> Wholesaler—> Retailers
2. Reverse Channel Distribution: This relates to backward movement of goods from users to producers. This is the situation when consumers are expected to supply certain information before goods and services could be distributed. For instance, registration of car owner allow manufacturers to send proper notification in the event of recall.
3. Wholeselling Intermediaries: This is a broader term whereby firms sell products primarily to retailers or to other wholesalers or business users and only in insignificant amounts to ultimate consumer. These include agents and brokers who perform important wholesaling activities without taking title to goods which differentiates it from merchandising.
4. Sakes Channel: This is part of the distribution which involves the buying, selling and transferring title. The participants in this marketing channel are the manufacturers, retailers, consumers and transportation company.
5. Facilitating Channel: These include public storage firms, insurance companies, finance companies, market research firms and several other types of firms also frequently participate as facilitating organisations in various marketing channels. It is essential that both the sales and facilitating channels are usually needed to create time, place and possession utilities. .
Channels of Distribution
Channels of distribution connote the medium through which products pass from manufacturers to consumers. Factors that inform the channel decision are:
I. The size of the customers base
ii. Nature of the products
iii. Consumers behavioural pattern
iv. Perishability of product
v. Technical complexity etc
Levels of Distribution Channels
(a) Two level: Manufacturer–>Consumers
(b) Three level: Manufacturer–>Retailer–>Consumers
(c) Four level: Manufacturer–>Wholesaler–>Retailer–>consumer
(d) Five level: Manufacturer–>Agent–>Wholesaler–>Retailer—>consumers.
■ Distributor: This is a marketing intermediary who purchases products from the domestic firm and assumes the trading risks.
■ Agent: This is a marketing intermediary who does not take title to the products that develop a marketing strategy and establish contacts.
■ Wholesaling: This involves the activities of those persons or establishments that sell to retailers and other organisational buyers for industrial, institutional and commercial use but do not sell in significant amounts to the final consumers.