Distribution Channel

The distribution of goods is the most important

activity in the process of marketing. Distribution
Channel is the set of marketing institution
participating in the marketing activities in the
movement or the flow of goods or services from the
primary producer to ultimate consumers.
The SSI has to take positive steps to bring his products
to the attention of potential customers in order to
create a demand for them. Once a product is
accepted by a customer, the SSI has to consider ways
and means of arranging for its supply to his
consumers.
Distribution Channels are grouped into two major
groups: (i) Direct Channel & (ii) Indirect Channel
In direct channel, there are no middlemen and
marketing functions are performed by the producer or
manufacturer and goods directly pass on from him to
the consumer.
In an Indirect channel there are more than one
middleman in distribution, linking producer and
consumer. They perform the marketing functions.
Middlemen in Distribution
There are two types of middlemen in Distribution.
1- Merchant Middlemen, who buy and sell goods on
their own risk, i.e. the wholesaler and the retailer
2- Agent middlemen who do not take ownership title
to the goods but actively negotiate the transfer of
ownership right from the seller to the buyer i.e.
selling commission agent or broker.
Types of Distribution Channels
Channels of distribution can be divided into the direct
channel and the indirect channels. Indirect channels
can further be divided into one-level, two-level, and
three-level channels based on the number of
intermediaries between manufacturers and
customers.
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. Direct channels are usually used by
manufacturers selling perishable goods, expensive
goods, and whose target audience is geographically
concentrated. For example, bakers, jewellers, etc.
Indirect Channels (Selling Through Intermediaries)
When a manufacturer involves a
middleman/intermediary 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.
Two-Level Channel (Manufacturer to Wholesaler to
Retailer to Customer): Wholesalers buy the bulk from
the manufacturers, breaks it down into small
packages and sells them to retailers who eventually
sell it to the end customers. Goods which are durable,
standardised and somewhat inexpensive and whose
target audience isn’t limited to a confined area use
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 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 of a
certain percentage commission. The agents can be
categorised into super stockists and carrying and
forwarding agents. Both these agents keep the stock
on behalf of the company. Super stockists buy the
stock from manufacturers and sell them to
wholesalers and retailers of their area.
Whereas, carrying and forwarding agents work on a
commission basis and provide their warehouses and
shipment expertise for order processing and last mile
deliveries. Manufacturers opt for three-level
marketing channel when the user base is spread all
over the country and the demand of the product is
very high.
Export promotion has been defined as “those public
policy measures which actually or potentially enhance
exporting activity at the company, industry, or
national level”. Although many forces determine the
international flow of goods and services, export
promotion is one of the principal opportunities that
governments have to influence the volume and types
of goods and services exported from their areas of
jurisdiction. Government of India, like in almost all
other nations, has been endeavoring to develop
exports. Export development is important to the firm
and to the economy as a whole.
Export Promotion strategy promotes only the
industries that have potential for developing and
competing with foreign rivals. Since the goal is to
trade abroad, there becomes competition, which in
turn remedies the returns to scale. The main goal of
the export promotion is to prepare the “potential”
industries for competition with the foreign rivals. So
the industries at their childhood must be protected
for a while.
Institution Support for Marketing and Export
The success of marketing depends solely on well
established institutional set-ups and timely
assistance without any hassels. Although the
institutional set-up for marketing has been broad-
based, it is biased towards international marketing
in preference to international markets. With a view
to assisting SSI, the Govt. and other agencies have
reserved certain items to be purchased from them.
The NSIC and SSIC assist SSI in selling their products
to the Govt. The khadi and village industries
commission and the Handicrafts and Handlooms
have their own distribution agents and their
Moreover, the Govt. has established trade centres to
cater to the marketing needs of the SSI sectors. The
NSIC and STC help this sector to export its products.
National Small Industries Corporation Ltd (NSIC) !
The National Small Industries Corporation Ltd. (NSIC), an ISO
9000 certified company, since its establishment in 1955, has
been working to fulfill its mission of promoting, aiding and
fostering the growth of small-scale industries and industry
related small-scale services/businesses in the country.
Over a period of six decades of transition, growth and
development, the NSIC has proved its strength within the
country and abroad by promoting modernization, up
gradation of technology, quality consciousness,
strengthening linkages with large and medium enterprises
and enhancing export projects and products from small-
scale enterprises.
Marketing, a Strategic tool for business development,
is critical to the growth and survival of small
enterprise in today’s intensely competitive market.
NSIC acts as a facilitator to promote small industries
products and has devised a number of schemes to
support small enterprises in their marketing efforts,
both in and outside the country.
Consortia and Tender Marketing:
Small enterprises in their individual capacity face
problems to procure and execute large orders,
which inhibit and restrict their growth. NSIC
accordingly adopts Consortia approach and forms
consortia of units manufacturing the same
products; thereby easing out marketing problems of
SSIs. NSIC explores the market and secures orders
for bulk quantities. These orders are then
distributed to small units in tune with their
production capacity.
Single Point Registration for Government Purchase:
NSIC operates a Single Point Registration Scheme under
the Government Purchase Programme, wherein the
registered SSI units get purchase preference in
Government Purchase Programme, exemption from
payment of Earnest Money Deposit etc.
Buyer-Seller Meets:
Bulk and departmental buyers such as the Railways,
Defence, Communication departments and large
companies are invited to participate in buyer-seller
meets to enrich SSI units’ knowledge regarding terms
and conditions, quality standards, etc. required by
the buyer.
Exhibitions and Technology Fairs:
To showcase the competencies of Indian SSIs and to
capture market opportunities, NSIC participates in select
International and National Exhibitions and Trade Fairs
every year. NSIC facilitates the participation of the small
enterprises by providing concessions in rental, etc.
Participation in these events exposes SSI units to
international practices and enhances their business skills.
Export of Products and Projects:
NSIC is a recognized export house and exporting products
and projects of small industries of India to other
countries.
State Trading Corporation of India(STC)
The State Trading Corporation of India was set up in
May 1956 as an autonomous corporation to
implement the Govt. policies in regard to the
promotion and diversification of foreign trade. The
main objectives of the STC are
• To explore new mkt. for existing as well as new
products.
• To diversify and consequently increase India’s
export trade.
• To promote long-term export operations.
The corporation’s major export items are leather, rice,
jute goods, castor oil etc. The STC also provides
package of services with a view to encouraging to
produce more and market its products in foreign
countries, This include supply of raw materials
service, warehousing, exporting, marketing and
shipping facilities. The corporation deals in
agricultural products, chemicals, fat, leather goods,
textiles, imported cars and marketing. It also set up
an Industrial raw materials assistance division to
make off-the-shelf deliveries of imported raw
materials to manufacturers against import licenses.
Indian Institute of Packaging (IIP)
The main aims of IIP are to undertake research into
raw materials for the packaging industry, to develop
new types of packaging for export products, to
organize programmes on packaging technology and
to stimulate consciousness of the need for good
packaging.
Indian Institute of Foreign Trade (IIFT)
The Indian Institute of Foreign Trade (IIFT) was set up
in 1963 by the Government of India as an
autonomous organization to help professionalize
the country's foreign trade management and
increase exports by developing human resources,
analyzing and disseminating data and
conducting research. The IIFT is engaged in the
following activities:-
• Training of personnel in modern techniques of
international trade.
• Organization of research, area surveys, mkt.
surveys, commodity surveys etc.
Export Credit Guarantee Corporation of India(ECGC)
• The Export Credit and Guarantee Corporation were set
up as a Government undertaking in 1964 on the
recommendation of a study group on export finance. It
works on ‘no profit no loss’ basis.
• The main functions of the corporation are to provide
insurance to export risks and to finance exports. E.C.G.C.
helps exporters by furnishing guarantees to the financial
banks in order to enable them to provide sufficient
credit facilities.
• It further insures the exporter’s credit risks against both
commercial and political conditions and guarantees
payment to the exporters. The corporation provides
various types of insurance covers to suit the varying
Minerals & Metal Trading Corporation of India
(MMTC)
The Minerals & Metal Trading Corporation of India
was established by the Govt. of India on 1st October,
1963. The aim of the corporation is to broaden and
enlarge the scope of exports of Indian minerals and
ores and to arrange for the import of essential raw
materials for distribution to industrial units in the
country. Iron ore is the principal item of export
handled by the MMTC. The other items are
manganese ore, coal, ferro-manganese, ferro-silicon
and ferro-chrome.