DISTRIBUTION

CHANNELS
MADE BY: ARPITA BARIK
ANJALI CHOUDHURY
What Is a Distribution Channel?
• A distribution channel is a chain of businesses or
intermediaries through which a good or service
passes until it reaches the final buyer or the end
consumer.
• Distribution channels can include wholesalers,
retailers, distributors, and even the internet.
• It refers to the methods used by a company to
deliver its products or services to the end
consumer. It often involves a network of
intermediary businesses such as manufacturers,
wholesalers, and retailers. Selecting and
monitoring distribution channels is a key
component of managing supply chains.
Direct and Indirect Channels

• Channels are broken into two different forms—direct and indirect.

• A direct channel allows the consumer to make purchases from the manufacturer while
an indirect channel allows the consumer to buy the goods from a wholesaler or
retailer.
• Indirect channels are typical for goods that are sold in traditional brick-and-mortar
stores.
• Generally, if there are more intermediaries involved in the distribution channel, the
price for a good may increase. Conversely, a direct or short channel may mean lower
costs for consumers because they are buying directly from the manufacturer.
Types of Distribution Channels

•A distribution channel connects the producer and the consumer. Several intermediaries function in
between them. The number of intermediaries determines the length of a channel. It is also called
channel levels or type of channels.
 Direct Channel/ZERO level/
Direct marketing

• It means making goods available to

consumers directly by the
manufacturer, without involving any
intermediary. Eg: Mail order selling,
Internet selling, Selling through own
sales force/ own retail outlets ( eg.
Bata, McDonald, Eureka Forbes etc.)
ONE LEVEL
In this type, the intermediary is the retailer firm directly supplies the
product to retailer who sells the product directly to customers. Eg: Maruti
Udyog sells its cars through company approved retailers

TWO LEVEL CHANNELS

Under this channel, the manufacturer sells to one or more retailers who in turn
sell to the ultimate consumers. This is the most commonly adopted distribution
network for most consumer goods like soaps, oils, clothes,rice,sugar etc

Three level Channels

This is the longest Channel of distribution. In this path, one more
middlemen is added . So there are three intermediaries’ involved-
agents, wholesalers and retailers. Manufacturers use their own selling
agents or brokers who connect them with wholesalers and then the
retailers.
 Function Of Distribution Channels

•Logistics and Physical Distribution: Marketing channels are responsible for

assembly, storage, sorting, and transportation of goods from manufacturers to
customers.
•Facilitation: Channels of distribution even provide pre-sale and post-purchase
services like financing, maintenance, information dissemination and channel
coordination.
•Creating Efficiencies: This is done in two ways: bulk breaking and creating
assortments. Wholesalers and retailers purchase large quantities of goods from
manufacturers but break the bulk by selling few at a time to many other channels
or customers. They also offer different types of products at a single place which is
a huge benefit to customers as they don’t have to visit different retailers for
different products
• Sharing Risks: Since most of the channels buy the products beforehand, they
also share the risk with the manufacturers and do everything possible to sell it.

• Marketing: Distribution channels are also called marketing channels because

they are among the core touch points where many marketing strategies are
executed. They are in direct contact with the end customers and help the
manufacturers in propagating the brand message and product benefits and other
benefits to the customers.
Factors determining Choice of channels

It is essential to make right choice of channel of distribution. The

choice of the appropriate channel depends on various factors

• Product related factors

• Market related Factors
• Company Related factors
• Competitive factors
• Environmental Factors
 Product Related Factors

(a)Nature of Product:
The Industrial products are usually technical, and expensive products purchased by few
customers. It requires shortest channel (Direct Channel). Consumer product are
standardized products which can be easily sold through intermediaries.

b) Perishable Vs Non - perishable products

Perishable products like fruits, vegetables and dairy products are best sold through short channels.
While non-perishable products like soaps, toothpaste etc. require longer channels to reach wide
spread consumers

(c) Unit value

When unit value of a product is high direct channel is effective. Eg: Gold, jewelry, Car etc.. On the
other hand less costly product like cosmetics, detergents, soaps are sold through longer channels.
2.MARKET RELATED FACTORS

•The following factors relating to the market are particularly significant in the choice of a channel of
distribution.

a. Nature of Market: In a consumer market longer channels are used whereas in industrial market
shorter channels are preferred.
b. Size of the market: In case the number of buyers is small , shorter channels are used.
But indirect channels are required when the market consists of large number of
customers.
c. Geographical situation: If the buyers are concentrated in a limited area, direct selling
can be used. But widely scattered customers require the use of middlemen.

d. Size of order: If the size of order is small, as in the case of most consumers products,
large number of intermediaries may be used. But if size of order is large, direct channels
may be used.
3. Company related factors
The characteristics of the company influences the choice of distribution channels.
They are

(a) Financial strength: A company having large amount of funds can create its own
channel of distribution. But financially weak companies will have to depend upon
middlemen.
(b) Desire for control: Companies which want a tight control over distribution prefer direct
channels. Otherwise indirect channels may be used.
(c) Management: If the management of a firm has sufficient knowledge and experience of
distribution, it may prefer direct selling. On the other hand, firms whose management has
not sufficient knowledge have to depend on middlemen.
•4. Competitive factors The choice of
channel is also affected by the channel
selected by competitors in the same
industry. If the competitors have selected
a particular channel, the other firm may
also like to select the similar channel.
Sometimes, we may avoid the channels
used by the competitors
5. Environment factors
Environmental factors include
factors such as economic
condition and legal constraints.
eg: In a depressed economy,
marketers use shorter channels
to distribute their goods.
 How to Select the Right Distribution Strategy for any Business?

Item Type
• Depending on the type of purchase decision that customers make when deciding to buy a
produced item, the recommended distribution method may be different.
• There are three types of purchase decisions: routine, limited and extensive.
Customer Base
• Some of the methods of direct distribution include e-commerce, direct mail and
manufacturer-run storefronts. Nowadays, distribution through direct mail is less common
due to technological advances, but some companies that have a user base that is used to
purchasing goods in this manner may continue to opt for this distribution method.
Warehouse Capabilities and Logistics

• Whether a company uses a direct or indirect distribution strategy depends on whether

they are willing or able to invest in aspects such as a transportation fleet, shipping
personnel and a warehouse for storing goods. This isn’t something that a manufacturer
should enter into blindly — acquiring these necessary factors involves a considerable
upfront investment.
• Business will need to weigh the pros and cons of conducting your own distribution versus
using an intermediary when deciding on a distribution method.
What Are Some Technologies that Aid in Distribution?

Automation
• Automation capabilities can increase the speed at which work is completed and free up employee time.
• This ability is offered for various tasks, and specific functionality differs based on the distribution software vendor
that you go with.

Internet of Things (IoT)

• The internet of things is especially helpful in increasing productivity in the distribution process. Many distribution
systems include RFID tracking that enables users to scan items and track their locations geographically and within
the workflow. This helps users visualize the movement of inventory in real time.
Cloud-Based System
• The proliferation of cloud-based distribution software enables users to access solutions anytime and anywhere.
This is especially helpful in the distribution industry where employees may need to look at data not just when
they’re seated at their desks, but also when they’re working hands-on in a distribution center.
 What Are Some Common Distribution Software Features?
Sales Order Management
• Sales order management functionality
often includes the ability to input
orders and then transmit them to
manufacturing so that items can be
produced to meet customer needs.
• Some programs enable this process to
occur automatically and can receive
customer information from different
touchpoints.
CRM
• CRM tools can assist users in looking at customer
information in real time to see historical purchasing
information, products that are currently being waited
on and payment method.
• This can improve the customer experience along with
keeping distributors knowledgeable of varied customer
expectations.
Inventory Management
• Inventory management features include the ability for employees to look at capacity, shortages and on-hand stock.
• This assists with planning and review of demand processes.
• Some distribution programs can use inventory information and demand planning to automatically reorder materials
needed to meet anticipated needs.

E-Commerce
• E-commerce features assist companies in developing an online shopping platform to manage and coordinate sales with
customers.
• These tools often contain support for web analytics so that organizations can track the products that clients are most
interested in along with other relevant data points.

Logistics Management
• These features enable transportation management and route planning.
• This may include selecting which items should be shipped together for the most efficient shipping process along with
helping delivery drivers optimize their driving hours.
 The channels of distribution, add the following characteris­tics in
marketing:

• Place utility, as they help in moving the goods from one place
to another
• Time utility, as they bring goods to the consumers when
Characterstics Of needed;
• Convenience value, as they bring goods to the consumers in
Distribution Channel conve­nient shape, unit, size, style and package;
• Possession value, as they make it possible for the consumers
to obtain goods with ownership title;
• Marketing tools, as they serve as vehicles for viewing the
market­ing organization in its external aspects and for bridging
the physical and non-physical gaps which exist in moving
goods from the producers to the consumers;
• Supply-demand linkage, as they bridge the gap between the
producers and consumers by resolving spatial (geographical
distance) and temporal (relating to time) discrepancies in
supply and demand.
Thank you