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Distribution Channels

A set of interdependent organizations (also called marketing intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

A channel may be direct or Indirect.

Why are Marketing Intermediaries Used?

The use of intermediaries results from their greater efficiency in making goods available to target markets. Through the intermediaries, the firm can achieve more than it can achieve on its own : Contacts, Experience, Specialization, Scale of operation.

Purpose: match supply from producers to demand from consumers.

Types of Channel
Direct Channel Also called Zero level channel A channel that has no marketing intermediary between the producer and the consumers. Indirect Channel A channel that has one or more marketing intermediary(ies) between the producer and the consumers.

Number of Channel Levels

Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.

Zero-level channel Direct Producer 1-level channel Producer 2-level channel Producer Retailer Consumer


Wholesaler Wholesaler



3-level channel Producer



Factors considered while designing channel

Product and Market Characteristics. Company Characteristics.

Middlemen/ intermediary considerations.

Environmental factors.

Channel Design Process

Identify Target Customer

Analyzing consumer service needs and buying behavior.

Setting channel objectives - Fast delivery, More service, Meet the competition.

Identifying major channel alternatives-In terms of Number and

Type of intermediaries, and Responsibilities of members.

Evaluating major channel alternatives

1. Economic criteria 2. Control criteria

Channel Organization/ Distribution systems

Conventional Distribution Channel Vertical Marketing Systems (VMS)
Corporate VMS Contractual VMS Administered VMS

Horizontal Marketing Systems

Hybrid Marketing Systems

Channel conflicts
Vertical conflict

Horizontal conflict

What is Retailing
Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non-business use. Retailer is a business enterprise that sells goods or services directly to the end customers for personal, nonbusiness use.

Functions of retailers
Retailers provides important functions that increase the value of the products they sell to consumers and facilitate the distribution of those products for those who produce them.

Important functions of retailers are: Providing an assortment of products and services.

Supermarkets like Reliance Fresh carry around 20,000-30,000 SKUs, While Hypermarkets like Big Bazaar carry around 2,00,000 SKUs

Breaking bulk Holding inventory Providing customer service.

Wholesaling Functions
Selling and promoting Buying and assortment building Bulk breaking Warehousing Transportation Financing Risk bearing Market information Management services and counseling

Major Wholesaler Types


Full-service Limited-service Manufacturers Specialized