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Tuesday, 21 June 2011

Define the Channels of Distribution and discuss the main kinds of Channels of Distribution

The channel of distribution means the route at which the goods moves from prducer to the consumer. The connection between producer and consumer may be direct or indirect. When the producer supplies the goods directly to the consumer it is called direct channel. If the producer sells the goods to the consumer through the middleman like wholesalers and retailers it is called indirect channel.

Types or Kinds of Channels of Distribution :-
Following are the important kinds of channel of distribution.

1. Producer to Wholesaler to Retailer to Customer :-
This channel of distribution is the most important. Producers sells the goods in large quantity to few wholesalers. The wholesalers sell the goods to the retailers. Retailer sell the goods in hands of a consumer. For example various goods like sugar and cloth is sold through this channel in India and Pakistan.

2. Producer to Retailer to Consumer :-
Sometimes a producer adopts this channel and supplies the goods directly to the retailer. The profit of wholesaler is saved in this channel. Retailer profit also increases and control of producer supply of goods increases. Now the sales by producers to retailers have become very common as the scale of production has increased.

3. Producer to Consumer :-
Some producers adopt the direct channel and they supply the goods directly to the consumers without any middleman. Generally those goods which are produced on small scale, these are a sold directly to the consumer. Some agricultural and industrial goods are sold door to door to the consumers, it is an example of direct channel.

4. Producer Through Agent to Wholesalers to Retailer to Consumer :-
According to this channel producers contacts with the agents and pay commission to them for selling the product. The broker or agent supplies the goods to the wholesaler who supplies to retailers. Retailer supplies the goods to consumers. Many people prefer to adopt this channel.

5. Producers Through his own Relation to Consumer :-
In this channel if a producer is producing the goods on large scale and reputation of the firm is good than he establishes his own retail shops. Producer supplies the gods directly to these shops. Consumer is familiar with these shops. Different firms product like shoes, clothing is sold on their own retail shop.


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