PROMOTION AND DISTRIBUTION

INTRODUCTION
The term “Promotion” is originated from the Latin word “promovere” which
means to move forward. Marketers use the word “promotion” as a
communicative activity, the purpose of which is to move forward a product,
service or idea in a channel of distribution.
MEANING
Promotion includes “all the tools in the marketing mix whose major role is
persuasive communication.
Promotion is a marketing tool, used as strategy to communicate between the
sellers and buyers. It assists in spreading the word about the product or
services or company to the product.
DEFINITION
According to Philip Kotler, “ promotion includes all the activities the company
undertakes to communicate and promote its products to the target market.”
According to W.J. Stanton, “Promotion is the element in an organisation’s
marketing mix that serves to inform, persuade and remind the market of the
organization or its products.”
According to Dale Yoder, “Promotion is defined as a movement to a position in
which responsibility and prestige are increased.
FEATURES OF PROMOTION
 Promotion is a communication tool :
Promotion is a marketing a tool, used as a strategy to communicate
between the sellers and buyers. Through promotion the seller tries to
influence convince the buyers to buy their products or services.

 Fundamental Components of the marketing mix :

Promotion is one of the essential elements of the marketing mix along
with the product, product, price and place. It includes Advertising, Sales
promotion, Direct marketing, Publicity.

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  Improves the sales of the products/Services :
Promotion is a marketing a tool that involves enlightening the customers
about the goods and services offered by an organization. Sales can be
increased by giving offer, coupon, discounts.
 Powerful tool of competition :
Promotion helps people know that the right product at right price is
available at the right place. In a competitive market without promotion ,
practically no sale is affected.
 Creates and stimulates demand for a product :
A promotion mix is a marketing strategy where a business will use short
term campaigns to spark interest and create demand for a product,
service or other offers.
 Reminder Tool :
Promotion mix aims to stimulate repeat purchase of products and
services. Promotion mix aims to stimulate repeat purchase of products
or services.
 It is customer centric :
Promotion tools offer creative ways for businesses to market their goods
or services. These tools can be effective in highlighting and increasing
awareness of new brands, encouraging customer loyalty.

IMPORTANCE OF PROMOTION
1. Awareness: Marketer should undertake the communicational mix to
create the awareness of the product or services in respect of brand
name, features.
2. Attitudes: Promotion helps to create positive attitude in the minds of
the consumer. It communicates about various features of the products
to the customer.
3. Brand Loyalty: Promotion helps to create brand loyalty to the
consumers. This leads to continuous purchase of the same products and
also they will recommend the same products to other customers.
4. Brand Image: Clever promotion helps the business to form the desired
brand image and brand personality in the minds of the customers.

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5. Increase in the life span of the products: Promotion helps to
increase the life of the products in the market.
6. Helps in creating reminder value: Promotion mix aims to stimulate
repeat purchase of products or services. Frequent repetition of the
advertisements of the products helps to bring positive attitude in the
minds of the consumers.
7. Expansion of the market: Promotion helps to market the products in
local to national, national to international level.
8. Educating the customer: Promotional tools inform the customers
about different products existing in the market and also educate them in
what they should look for in an apt product.
9. Enhances the standard of living: Promotion helps in the rising
standard of the people. The promotional activities increase the standard
of living by providing the better goods at a lower rate due to large scale
production and selling.
10. Large scales selling: Promotion helps in the large selling of goods and
services. Sales promotion is the result of large – scale production. It can
be achieved by only by appropriate methods of large scale selling.
11.Creates more employment opportunities: Promotion helps to
create more employment opportunities. People can gain employment
opportunity with the help of promotional activities because promotional
activities cannot be performed without the help of an effective sales
force and the specialists in various fields.
12. Beneficial for new product launch: Promotion helps to create the
awareness about new or existing products and services in the market
that will accomplish consumers needs or solve their problems.

TYPES OF PROMOTION: There are various promotional tools such are as

follows:
1. ADVERTISING: The word advertising is derived from two Latin Words Ad
and Verto. Ad means towards and Verto means I turn. It means to turn the
people’s attention to a specific thing.

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 Advertising is any paid form of non-personal presentation and promotion of
ideas, goods, or services. It is an impersonal mass communication that the
sponsor has paid for and in which the sponsor is clearly identified.
DEFINITIONS
According to American marketing association, “Any paid form of non-
personal presentation and promotion of ideas, goods and services by an
identified sponsor.
According to S.R. Hall, “Advertising is salesmanship in writing, print or
pictures or spreading information by means of the written and printed
works and the pictures.”
FEATURES OF ADVERTISING:
 Form of publicity: Advertising is to advertise a product or service of a
company, for commercial purposes. Publicity is to publicize a product,
service or company to provide information.
 Paid form of publicity: Advertising requires the advertiser to pay to
create create an advertising message, to buy advertising media slot, and
to monitor advertising efforts. The sponsor must pay for it other person
whose media is employed.
 Non personal Communication: Advertising is a non-personal
communication reaching a large group of buyers. The communication is
speedy by permitting the advertiser to speak to hundreds or thousands
of people with in a shorter period.
 Mass Communication: Advertising is simply a visual or audio way to
communicate with the masses through all forms of media.
 Identified Sponsor: Advertisement is given by an identified company or
firm or individual. Advertisements are identifiable with their sponsor.
The producer sponsors advertisement campaign by employing a suitable
media.
 Tool for promotion: Advertising is an element of promotion mix of an
organization.
 One way communication: Advertising is a one-way communication
where brands communicate to the customers through different
mediums. There is no face-to-face contact between customers and
advertiser.

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  Speedy way of Communication: Advertising is a speedy medium of
communication. Besides being speedy, its operational areas is extremely
vast.
2. PERSONAL SELLING: Personal selling is also known as face-to-face selling
in which one person who is the salesman tries to convince the customer in
buying a product. It is a promotional method by which the salesperson uses his
or her skills and abilities in an attempt to make a sale.
According to Philip Kotler, “Personal selling is a type of personal or local
presentation by the firm’s sales force for the motive of making sales and
building customer relationship.”
In the words of Cundiff and Still, “Personal selling is basically a method of
communication. It involves not only individual but social behavior each of the
person also in face contrast salesman and prospect influences the other”.
FEATURES: The main features of personal selling are:
 Personal Form: An interactive relationships exists between the sellers
and the buyer in personal selling.
 Face-to-face interaction: In personal selling the buyers and sellers have
face to face interaction. This closeness allows both the partners to
observe each other’s action closely.
 Better Response: When the seller personally explains the utilities of the
product to the customers they do pay some attention and listen to the
information.
 Improves Relationship: When the seller and the buyer meet together, it
improves the relation between them.
 Better convincing: Personal selling is the most effective form of
promotion. The salesperson can convince the buyer by demonstrating
the use of the product.
 It provides immediate feedback: Personal selling provides immediate
feedback about the product. If customers like the product, they will buy
or they may reject.
 It is two way communication: In personal selling, the seller gives
information about the product and at the same time, the buyer gets a
chance to clarify his doubts.

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  Distraction in message is minimised: Since personal selling involves
face-to-face communication between seller and buyers, it helps to
minimize the distraction in message.
3. PUBLIC RELATION: Public relations refer to the various of programs
conducted by a company to promote and protect the image of the company,
its products and policies in the eyes of public. Thus, it aims to manage public
opinion of the organization.
E.g. Large Corporates such as Dabur, L&T, Tata Consultancy, Bharti Enterprise,
Services, and PSU’s such as Indian Oil, GAIL and NTPC have joined hands with
government to clean up their surroundings, build toilets and support the
Swachh Bharath Mission.
According to Philip Kotler, “Public relation means building good relations with
the company’s various publics by obtaining favourable publicity building up a
good corporate image, and handling or heading off unfavourable rumours,
stores and events.
FEATURES OF PUBLIC RELATIONS:
 Smooth functioning of business: It helps in analyzing trends, predicting
their consequences, counseling organizational leaders and implementing
planned programme of action, and thus helps in smooth functioning of
business and achievement of objectives.
 Building corporate image and Brand Equity: Public relations covers a
wide range of tactics, tools and programmes to promote and protect
company’s image and products.
 Launching new products: The good image promotion itself lends
credibility to new launches of the organizations.
 Press Relations: The public relations department is in contact with the
media to present true facts and a correct picture about the company.
Otherwise, news can get distorted if it is taken from some other source.
 Counselling: The public relations department advise the management
on general issues that affect the general public and the goodwill of the
company.
 Corporate Communication: The public relations department promotes
the image of the company by communicating with the public and the
employees of the organization.

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4. PUBLICITY: Publicity is also a way of mass communication. It is not a paid
form of mass communication that involves getting favourable response of
buyers by placing commercially significant news in mass media.
Publicity involves giving public speeches, giving interviews, conducting
seminars, offering charitable donations, inaugurating mega events by film
actors, cricketers, politicians etc.
DEFINITION:
In the words of William J Stanton, ”Publicity is any promotional
communication regarding an organization and its products where the message
is not paid for by the organization benefiting from it."
FEATURES:
 Mass Communication: Publicity is not a paid form of mass
communication that involves getting favourable response of buyers by
placing commercially significant news in mass media.
 Lower Costs: Publicity can be done at much lower cost than
advertising. Company needs to spend a little amount to get the event
or function publicized.
 Effect: Publicity message is more likely to be read, viewed, heard, and
reacted by audience. It has a high degree of believability as it is given
by the third party.
 Repetition: Frequency or repetition of publicity in mass depends upon
its social significance or the values for news. Mostly, it appears only
once.
 Non-paid Form: Publicity is not a paid form of communication. It is not
directly paid by producer. However it involves various indirect costs.
For E.g. a firm needs some amount for arranging function, calling press
conference, decorating of stage etc.
 Part of public relations: Publicity is a part of broad public relations
efforts and activities. Public relations includes improving, establishing,
and maintaining direct relations with all publics.
 Control of producer: Company has no control over publicity in terms
of message, time, information and medium. It comes through mass
media like radio, newspaper, television etc.

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  Improves company image: Sales promotion is undertaken for a wide
variety of purposes. They may include promotion of new product,
pollution control, special achievement of employees.
5. SALES PROMOTION: Sales promotion refers to short term incentives which
are offered to the ultimate customers to encourage them to make immediate
purchase of the product or service.
Sales promotion is that part of the promotional mix where the business uses
many short-term customer-oriented strategies to stimulate the demand for its
product by making it look more attractive.
Definition:
According to Philip Kotler, “Sales promotion consists of diverse collection of
incentive tools, mostly short-term, designed to stimulate quicker or greater
purchase of particular product or service by consumers or the trade.
W.J.Stanton defines sales promotion as all those activities other than
advertising, personal selling and publicity that are intended to stimulate
customer demand and improve the marketing performance of sellers.
FEATURES OF SALES PROMOTION
 Introduction of new product: To induce buyers to purchase a new
product, free samples may be distributed or money and merchandise
allowance may be offered to business to stock and sell the product.
 To attract new customers: New customers may be attracted through
issue of free samples, contests and similar devices.
 Induce present customers: Present customers may be induced to buy
more by knowing about a product, its ingredients and uses.
 Competitive advantage: Sales promotion may be undertaken to meet
competition from a firm.
 Increase in sales: Buyers may be encouraged to use the product in off
season by allow showing them the variety of uses of the product.
 Increase in number of business buyers: Retailers may be induced to
keep in stock more units of a products so that more sales can be
affected.
PROMOTION MIX
Promotional mix refers to the blend of several promotional tools used by the
business to create, maintain and increase the demand for goods and services.

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A promotional mix is a combination of marketing methods including
advertising, personal selling, public relations, sales promotion and direct
marketing to achieve a specific marketing goal.
FACTORS AFFECTING PROMOTION MIX
1. Types of the product: The type of product plays an important role in
deciding on promotion mix. Product can be categorized in terms
branded products, non-branded products, luxury products etc. All these
types of products need different promotional tools.
2. Uses of the product: Product may be industrial product, consumable
and necessity product or may be luxurious product that affects selection
of promotion tools and media.
3. Complexity of product: Product complexity affects selection of
promotional tools, Personal selling is more effective for complex
technical, risky and newly developed products as they need personal
explanation and observation. On the other hand, advertising is more
suitable for simple and easy-handled products.
4. Market penetration: A product having good market penetration is well-
known to the buyers. In that situation, middlemen are motivated to
spend more on advertising.
5. Market size: If there is limited number of buyers, direct selling is
enough. But if the market size is large the promotional tool is mainly
advertising.
6. Characteristics of buyers: Experienced buyers of industrial product need
personal selling. The experience of buyers, the time available for
purchase, influence of friends, retailers etc. are the factors affecting
promotion mix.
7. Cost of promotion: The cost of the media of advertising and sales
promotion tools should also be considered while deciding the promotion
mix.
8. Budget availability: The budget availability with a company has to be
considered while deciding the promotion mix because promotion tool
utilization keeps adding the cost.
9. Pricing strategy: Pricing influences promotion strategy. If the brand is
priced higher than the competitor’s price, personal selling is used. If the
price is comparatively low only little promotion is needed.

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 10.Level of competition: promotional efforts are designed according to the
type and intensity of competition. All promotional tools are aimed at
protecting the company’s interest against competition.
11.Distribution strategy: If the products are directly sold by the producer
personal selling is the tool of promotion. Personal selling advertising is
required for market penetration. If the product passes through a longer
channel more importance should be given to advertising and less
importance to personal selling.
12.Buyer-Readiness Stage: Communication tools differ in cost effectiveness
at different stages of buyer readiness. Advertising and publicity play the
most important and crucial roles in the awareness building stage.

PHYSICAL DISTRIBUTION
Physical distribution is defined as the process of physical movement of goods
from the producer to the customer. It is an important marketing function
which describes marketing activities that involves flow of raw materials from
the suppliers to the factories for production and also the movement of finished
goods from production to the final user.
DEFINITION:
According to Philip Kotler, “Physical distribution involves planning,
implementing, and controlling the physical flow of materials and final goods
from the point of origin of use to meet consumer needs at a profit.”
According to W.J.Stanton, “Physical distribution involves the management of
the physical flow of products and the establishment and operation of flow
system.”
FUNCTIONS OR COMPONENTS OF PHYSICAL DISTRIBUTION
Following are the components of physical distribution:
1. Order Processing: Order processing is the first point of distribution
activity. The functions involved in order processing are receiving order,
handling the received order, granting of credit for the item ordered,
generating invoice, dispatching of order and collecting the bills.
2. Storage and warehousing: Storage deals with the storing of goods In
proper condition till the time it is ordered by the customer. Goods that
cannot be generally made available throughout the year need to be

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 stored. Warehouses act as centres of storage and by providing the
functionality it helps businesses meet the demands of customers.
3. Inventory control: Inventory control refers to the process of efficient
control of goods that are stored in the warehouses. Businesses need to
maintain adequate levels of inventory in order to ensure uninterrupted
fulfillment of orders. The level of inventory needs to be optimal, it
should not be too less or too more, as less inventory results in out of
stock goods, lost business and unhappy customers, while a high level of
inventory requires huge investment.
4. Material Handling: Material handling refers to the activities that are
associated with the movement of goods from the site of manufacturing
till it is loaded to the transport. Proper material handling results in
minimizing the wastage of goods during transport, reduces unnecessary
movement of goods, facilitates quick order processing and efficient
goods movement
5. Transportation: It is a very essential component of physical distribution
which plays a crucial role in movement of the stored goods from
warehouse to the customers. The process of transporting involves
loading and unloading of goods and their movement from one place to
another. Choosing the right transportation mode is of utmost
importance as it determines the retail price of the product.

DISTRIBUTION CHANNELS
Channels of distribution are channels of business or intermediaries which a
product or service travels through before reaching the final customer.
Distribution channel is a movements of goods or services between
manufacturer or to the end user or consumer or customer. The main parts or
elements of distribution channels are producers, intermediaries and
consumers.

DEFINITION
According to Philip Kotler, “It is a set of independent organizations involved in
the process of making a product or service available for use or consumption.”
to the goods as they move from the producer to the ultimate consumer or
industrial users.”

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IMPORTANCE OF DISTRIBUTION CHANNELS
 Timely delivery of products: This is one of the important function of
distribution channels. Distribution channel helps in the delivery of
products to customers on the right time. If products are not available at
the right time to customers, it may disappoint him. It has removed all
distance barriers for businesses while performing their operations.
 Provides market information: Distribution channel is served as the
medium through which business acquire all required information from
the market. It takes all information like demand, price, and nature of
competition in the market from it’s different intermediaries involved in
its distribution channel.
 Maintain stock of products: Distribution channel has an efficient role in
maintaining sufficient stock of goods. It helps in maintaining the supply
of goods as per the demands in the economy. Distribution channels
performs functions of storing the products in warehouses and supplying
them according to demand in the market.
 Promotion of goods: Distribution channels helps in marketing &
promotion of products. There are several middlemen’s who are involved
in the distribution system of business. These intermediaries inform the
customers about the product.
They introduce them with new products & explain them to its
specifications. Customers are induced & motivated to buy these
products by intermediaries.
 Provide finance: Business gets financial assistance from the distribution
channel. Intermediaries involved in distribution channel buys goods in
bulk from producers. These intermediaries give payments to producers
while purchasing.
Then these middlemen sell these goods to customers in quantities
demanded by them. They even provide credit facilities to the customers.
However, producers get timely payment & are saved from blocking of
their funds through credit selling.
 Generates employment: Distribution channel generates employment in
the economy. There are huge number of people who are involved in the
distribution system of businesses. These people are wholesaler, retailers

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 & different agents. All these people earn their livelihood through
working in these distribution channels.
 Distribution of risk: Risk is something which is associated with each &
every business. Distribution channels save the producers from the risk of
delivering products to customers safely & timely. It becomes the duty of
intermediaries that are involved in the channel to deliver it to customer
safely.

TYPES OF DISTRIBUTION CHANNELS

Channels of distribution can be divided into
1. Direct channel
2. Indirect channel
1.Direct Channel or Zero-level Channel (manufacturer to Customer)
Direct selling is one of the oldest forms of selling products. It doesn’t involve
the inclusion of an intermediary and the manufacturer gets in direct contact
with the customer at the point of sale.
Some examples of direct channels are peddling, brand retail stores, taking
orders on the company’s website, etc.
Manufacturers Customers
Direct channels are usually used by manufacturers selling perishable goods,
expensive goods, and whose target audience is geographically concentrated .
For example, bakers, jewelers, etc.
2. Indirect Channels (Selling Through Intermediaries)
When a manufacturer involves a middlemen to sell its product to the end
customer, it is said to be using an indirect channel. Indirect channels can be
classified into three types:
 One-level Channel (Manufacturer to Retailer to Customer): Retailers
buy the product from the manufacturer and then sell it to the
customers. One level channel of distribution works best for
manufacturers dealing in shopping goods like clothes, shoes, furniture,
toys, etc.
Manufacturer Retailer Customers

 Two-level Channel (Manufacturer to Wholesaler to Retailer to

Customer): Wholesalers buy the bulk from the manufacturers, break it

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 down into small packages and sell them to retailers who eventually sell
them to the end customers. Goods that are durable, standardized and
somewhat inexpensive and whose target audience isn’t limited to a
confined area use two-level channel of distribution.
Manufacturer Wholesaler Retailer Customers

 Three-level Channel (Manufacturer to Agent to wholesaler to retailer

to Customer): Three-level channel of distribution involves an agent
besides the wholesaler and retailer who assists in selling goods. These
agents come in handy when goods need to move quickly into the market
soon after the order is placed. They are given the duty to handle the
product distribution of a specified area or district in return for a certain
percentage of commission.
Manufacturer Agent Wholesaler Retailer Customers

FACTORS AFFECTING CHOICE OF DISTRIBUTION CHANNEL:

The decision about choice of a channel of distribution depends on several
factors. A company has to consider all these factors and make an appropriate
choice. The following are the factors.
1. MARKET RELATED FACTORS: Since the channels of distribution operate in
the market. The market related factors are very important. There are several
forces in the market which dictate the choice of channels of distribution.
The following are the market related factors to be considered:
 Size of Market: If the number of customers is small like in case of
industrial goods, short channels are preferred while if the number of
customers are high as in case of convenience goods, long channels of are
used.
 Geographical Concentration: Generally, long channels are used if the
consumers are widely spread while if they are concentrated in a small
place, short channels can be used.
 Quantity Purchased: Long channels are used in case the size of order is
small while in case of large orders, direct channel may be used.
 Customers: The ultimate purpose of any channel of distribution is to
distribute the goods to the customers. Therefore the requirements and

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 the nature of the customers should be considered while deciding the
channel of distribution.
 Competition: One has to consider the channels of distribution arranged
by the competitors. This choice represents the wisdom and experience
of the competitors. It also means that the competitors have been
successful in using such channels over the long run. A company can
adopt such channels of distribution if found suitable to itself.

2. PRODUCT RELATED FACTORS: Since it is the product which is to be

distributed, the product characteristics also have to be analysed while
choosing a channel of distribution. Different products are different in nature
and this nature of the products requires different types of channels.
The following product factors have to be considered:

 Perishable and Non-Perishable Products: If the products are highly

perishable, the channel must be short or even direct marketing would
be suitable. This is because long channels of distribution with a large
number of intermediaries delay the distribution of goods. Products like
milk, flowers etc. require very fast distribution.
 Nature of the product: In case of industrial goods, short channels like
zero level channel or first level channel should be preferred and
consumer goods can be distributed through long channel.
 Seasonality: Some goods have a seasonal nature either in terms of
production or consumption and such goods require different types of
distribution channels.
 Variety Offered: If a manufacturer has a wide range of goods, he can opt
for direct distribution of the goods since a large number of products are
available. If a producer has very few product, he has to distribute them
through long channels of distribution.
 Value of product: Products of high unit value suit shorter channels of
distribution or even direct marketing, but products of low unit value
which are mass consumed require longer channels of distribution.

3.COMPANY FACTORS: A company has to look within and understand itself

while choosing a channel of distribution. It has to understand its requirements,
strengths and weaknesses.

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The following company factors have to be considered:

 Company’s Financial Strength: The companies having huge funds at

their disposal go for direct distribution. Those disposal without such
funds go for indirect channels.
 Extent of Control Desired: Short channels are used if management
wants greater control on the channel members otherwise a company
can go in for longer channels.
 Reputation of the Company: A well-established company with a strong
reputation will find it easy to have longer channels of distribution. This is
because channel intermediaries are generally willing and enthusiastic to
be associated with strong companies.
 Company’s Marketing Policies: Every company will have policies
regarding marketing and these policies will also lay down norms relating
to channels of distribution and these policies will also have a strong
influence on the choice of channels of distribution.
 Past Experience: An established company will already have well
established channels of distribution. The company will also have
experience in matters of dealing with such channels of distribution.

4. CHANNEL RELATED FACTORS: The channels of distribution choosing should

be appropriate from the view point of the company. These channels must be
examined and then a proper choice must be made.

The following factors of the channel must be considered:

 Ability of the channels: Well established and strong channels have the
ability to distribute goods effectively over a wide area. They can
promote and sell even unknown products. Newly established channels
of distribution however cannot do these.
 Financial Strength of the channels: Financially strong channels of
distribution can distribute the goods well and also finance the
manufacturers directly or indirectly. They can lift the goods from the
manufacturers by paying cash immediately which indirectly amounts to
financing the manufacturers.
 Ability to provide after sales service: Some products require a long term
after sales service. In such a case it should be decided as to who has to

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 provide the after sales service whether the manufacturer or a member
of the channel of distribution.

5. ENVIRONMENTAL FACTORS: A company’s channel choice depends on

certain environmental factors. Environment in this context means the
environment within which the company, the channels of distribution, the
consumers etc. are present.

 Economic Situation: The prevailing economic situation in the country

affects all the economic activities. Therefore, a company has to be aware
of the prevailing economic condition. During an economic boom, the
sales of all the products will naturally good and channels of distribution
will be more than willing to take up distribution of products. During a
recessionary period, the general sales come down as a result of which
channels of distribution become reluctant to take up distribution.
 Legal factors: A company is free to decide about its channels of
distribution as long as its activities are legal. There are certain legal
factors however which must be considered while deciding channels of
distribution and arrangements with them.
 Fiscal Structure: Fiscal structure in this context refers to certain indirect
taxes levied by the state governments on products. There is no
uniformity in this matter and clarity is absent in certain cases. Therefore,
such matters must also be considered while deciding on channel of
distribution.
6. COMPETITIVE FACTORS: Policies and channels selected by the
competitors also affect the choice of channels. A company has to decide
whether to adopt the same channel as that of its competitor or choose
another one.

MIDDLEMEN: Middlemen are independent business concern standing

between the producers and the ultimate consumer. Middlemen are also called
as intermediaries.

In short Middlemen are an intermediary or agent between two parties

especially: a dealer, agent, or company intermediate/exporter.Importer
between the producer of goods and the retailer or consumer.

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 TYPES OF MIDDLEMEN: Middlemen can be classified into two categories,
namely merchants and agents.
1. MERCHANTS: Merchants includes- Wholesalers and Retailers
They buy and re-sell their goods. They take ownership of inventory and bear
the expense of storing and distributing the product. They make money by
selling the goods at a higher price than its cost to them.
Merchant middlemen range from a shopkeeper to a large multinational
corporation with international operations. Larger middlemen may focus on a
core competency, such as delivery, advertising, warehousing etc.
2. AGENTS: Agents includes brokers, Commission Agent, manufactures agent .
They specialize in negotiations involved in transactions. They do not take
ownership of what they are selling. Instead, they make money by charging a
commission or a fee for facilitating a transaction.
For example, brokers act as intermediaries between investors and the
securities exchange. They provide trading services, investment advice, and
solutions to their clients and charge a brokerage fee in return.
WHOLESALING: Wholesaling includes all activities involved in selling goods
and services to those buying for resale or business use.
Wholesalers are those firms engaged primarily in wholesaling activity.
Wholesalers buy goods at large scale mostly from producers and sell mostly to
retailers, industrial consumers and other wholesalers.
DEFINITION:
According to Philip Kotler, ”Wholesaling consist of the sale and all activities in
selling goods or services to those who buy for resale or business use”.
According to American Marketing Association, “Wholesalers sell to retailers or
other merchants and or industrial, institutional and commercial users, but do
not sell in significant to ultimate consumers”.
FUNCTIONS OF A WHOLESALER:
A wholesaler performs the following functions:

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 Assembling: A wholesaler buys goods from producers who are scattered
far and wide and assembles them in his warehouse for the purpose of
the retailers.
 Storage: After arranging and assembling the products from producers,
wholesaler stores them in his warehouse and releases them in proper
required quantities as and when they are required by retailers. Thus, a
wholesaler performs the storage function in order to save the goods
from deterioration and also make these goods available when they are
demanded.
 Transportation: Wholesalers buy goods in bulk from the producers and
transport them to their own godowns. Also, they provide transportation
facility to retailers by transporting the goods from their warehouses to
the retailers shops.
 Financing: A wholesaler provides credit facility to retailers who are in
need of financial assistance.
 Risk-bearing: A wholesaler bears all the trade risks arising out of the
sudden fall in price of goods or by way of damage/spoilage or
destruction of goods in his warehouse. The risk of bad debt as a result of
non payment by retailers who have purchased on credit also falls on the
wholesalers.
 Grading and packing: A wholesaler sorts out the goods according to
their quality and then packs them in appropriate containers. Thus, he
performs the marketing function of grading and packing also.
 Providing Marketing Information: Wholesalers provide valuable market
information to retailers and producers. The retailers are informed about
the quality and type of goods available in the market for sale, whereas
the producers are informed about the changes in tastes and fashions of
consumers so that they may produce the goods of the desired level of
taste and fashion.
 Facilitating Disbursement and sale: Wholesalers sell their goods to
retailers who are scattered far and wide. Retailers approach them when
their stocks are exhausted from further replenishment.

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RETAILING:
Retailing is the sale of goods and services to the ultimate consumer for
personal, family or household use.
Retailer is the final channel of distribution where small quantities of goods or
services are sold directly to the consumer for their own use.
DEFINITION:
According to Philip Kotler,” Retailing includes all the activities involved in
selling goods or services to the final consumer for their personal, non-
business use”.
According to Candiff and Still, “Retailing consists of those activities involved in
the selling directly to ultimate consumers”.
FUNCTIONS OF RETAILING: Retailers have many important functions to
perform to facilitate the sale of goods. These functions include
 Buying and assembling of goods: A retailer performs the dual functions
of buying and assembling of goods. The responsibility of a retailer is to
identify the most economical source for obtaining the goods from the
suppliers and passing on the advantages to the customer.
 Warehousing and storing: The retailers perform the functions of
warehousing and storing. They store the goods in bulk and make them
available as per the requirements of the consumer.
 Strategic goal: The primary function of a retailer is selling the products
to the customers for which various techniques or business practices are
being adopted by the retailer to achieve the strategic goals.
 Credit facility: The prime focus of a retailer is on maximizing customer
satisfaction by delivering quality products and services both on cash as
well as credit basis.
 Management of risk: A retailer needs to have robust risk management
capabilities. Various kinds of risks can be involved in a retail business
which a retailer should be well prepared with like loss or damage of the
products due to deterioration in quality, spoilage or perishability.
 Grading: A retailer performs the crucial function of grading for all those
goods which at times are either left upgraded by the wholesalers or
producers so that the customers readily accept the goods.

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  Direct communication: The retailers are the direct point of contact or
communication with the customers, hence they gather information
regarding the changing tastes and preferences of the consumers, pass
on the customer feedback to the producers for continuous improvement
in service delivery.
 Helps in launching new products: Retailers act as a vital channel for the
launch of new products in the market as they are the direct interface
with the consumers and can communicate directly with the target
consumers about the new product features and advantages.
 Promotion of the product: The retailers are responsible for the product
promotion and advertisement by planning the product displays and
visual merchandising for attracting the customers.
TYPES OF RETAILING:
1. Store retailing: This includes different types of retail stores like
department stores, speciality stores, supermarkets, convenience stores,
catalogue showrooms, drug stores, discount stores, extreme value
stores etc.
2. Non-store retailing: Non-store retailing is a type of retailing where the
transactions happens outside conventional shops or stores. It is further
divided into two types- direct selling (where the company uses direct
methods like door-to-door selling) and automated vending (installing
automated vending machines which sell offer a variety of products
without the need of a human retailer).
3. Corporate retailing: It involves retailing through corporate channels like
stores, franchises, and merchandising conglomerates. Corporate
retailing focuses on retailing goods of only the parent or partner brand.
4. Internet retailing: Internet retailing works on a similar concept of selling
small quantities of goods to the final consumer, but they serve a large
market and don’t have a physical retail outlet where the customer can
go and touch or try the product.
5. Service retailing: Retailers not always sell tangible goods, retail offerings
also consist of services. When a retailer deals with services, the process
is called service retailing. Restaurants, hotels, bars, etc. are examples of
service retailing.

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E-RETAILING
The Electronic retailing also called as e-retailing or internet retailing, is the
process of selling the goods and services through electronic media .
In simple words, the sale of retail goods and service online is called as
electronic retailing. E.g. Walmart, Flipkart, Amazon, Myntra, Olx, Meesho etc.
ADVANTAGES OF E-RETAILING
1. Less time retailing: E-Retailing consumes less time in searching and
purchasing of goods or services to traditional business. Here customers
need not to wait for the shopping.
2. 24x7 Services: E-Retailing provides 24x7 services i.e. customers can buy
goods and services anytime. So, time does not act as a barrier, wherever
the vendor and buyers are.
3. Better customer satisfaction: E-retailing enables better customer
services (grievance and redressal).
4. No geographical constraints: E-retailing do not face any geographical
constraints, the whole world becomes a market.
5. Privacy of shopping: E-retailing offers privacy of shopping to customers.
6. Countless searching of products: It enables consumers search through
countless products and services.
7. Wide range of products are available: Consumers can go with the plenty
of products which are available in online marketing.
8. Easy payment: Payment procedure in online marketing is not
complicated. Consumers can go with any options of payments as they
wish.
9. Products are less expensive: Products are less expensive when it is
purchased through online.
10.Effective education to customers: It provides more effective education
to customers.
DISADVANTAGES:
1. Quality of the products: Consumer may not sure about the quality of
the products.
2. No bargaining: Consumers will miss the opportunities of bargaining in
the retailing.

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3. Consumer may not trust the online payment: Comparatively offline
payment system, online payment involves more risk.
4. Physical touch: Decision just by looking at the image of the products not
by physical check.
5. Delay in delivery of goods: Product won’t be delivered at a immediate
purchase.
6. Absence in emotional attachment: Emotional attachment with the seller
don’t occur.
7. Not suitable for perishable products: E-retailing is not suitable for
perishable goods like flower, milk, vegetables, etc, it is mainly meant for
non-perishable goods.
8. Does not permit customers to personal touch and feel: Like offline
shopping, online shopping won’t provide personal touch and feel to the
customers.
9. Large capital is needed: E- retailing requires huge capital to the
business.
10.Accessories are necessary: To order products or services in e-retailing,
accessories like mobile, laptop, internet are necessary. If it won’t
supported by these , it won’t work.

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