Types of chennel of distribution
The types of chennel of distribution are
as follows;
I.
Channels based on the middlemen.
II.
Channels based on the type of goods and services
III.
Channels based on national and international markets
The producer takes upthetask of distributing
the goods either through his own company showrooms or branches or through
his sales team. Producer himself
exercises direct control over thr distribution.Some producers sell goods right
from the doors of their factory directly to the consumers.
The manufacturer collects orders from
the consumers through post or mail or phone and delivers the products
themselves. Some producers send the catalog of their products directly to the
consumers and receive orders over post or phone. Then they distribute goods to
the demanding consumers.
This is also a direct channel where
there is no middleman. A website is created by the producer and through
internet the product order is received and
delivery of goods
is made from the nearest godown of the producer.
The manufacturer establishes branches all over the country or in other countries also. The producer first enrolls few consumers. These consumers are asked to bring in more consumers. Various commissions are paid to the senior and junior consumers according to their turnover. All consumers directly purchase from the producer’s branches.
The large scale producer outsources the
warehousing, transporting and distribution functions to a third party on
contract. The contractor may process orders, collect payments and carry out
customer service also. He is paid
commission on the basis of turnover.
Multi-National Companies outsource distribution function and concentrate on
their core production function.
The VARs receive the products from the
manufacturers, incorporate them as if their own products by adding value
enhanced service and sell them to customers. VARs provide highly skilled
technical support so that the customer can have world class
satisfaction. Microsoft India has appointed Avnet and Redington as VARs in
India. A solar panel producer may have builders as VARs and the builders offer
solar panel as additional facility to the buyers of flats, etc.
An agreement is entered in between the
producer and channel partner. The producer trains the technicians of the
partner and provides certification that quality product and service is assured
from the partner. Channel partner and producer work in cooperation to attain
their respective goals. The USA computer Technology Company Dell has channel
partners in India namely,
Ingram Iris, Redington, Neoteric, HCL,
etc. System Integrators (SIs), VARs, Consultants, Managed Service Providers
(MSPs), Independent Software vendors (ISVs) are also called channel partners.
Producers adopt this channel to
distribute goods or services in the home country and foreign countries. (Read
separate chapter on Franchising in another lesson)
The producer appoints a network of
retailers. The storage, warehousing, transport and distribution functions are
undertaken by the producer himself.
Branded and well established products can be routed through this channel.
The
manufacturer engages wholesalers
to purchase products from them
as soon as the production is
over. The storage, warehousing, transport and distribution functions are
carried out by the wholesalers. These wholesalers contact retailers and
sell goods in small quantities to them. Wholesalers may deal ina variety
of products from different producers. Finally retailers sell goods to
individual end consumers.
In addition to the above channels of
distribution, the middlemen, agents play the role of producers and wholesalers.
They gather the agricultural produces or fishes from boats operators. They
collect orders from the wholesalers and bring the goods to the place of
wholesaler. Agents perform their functions for a commission based on their
turnover.
To retain the control over the relationship with consumers, the manufacturer appoints authorized dealers. They receive all the goods produced by the manufacturer and sells them in smaller quantities to retailers. Authorised Dealers use the brand name of the manufacturer and deal with one producer only. Authorised Dealers provide the service of installation of machinery to the consumers. Sports Utility Vehicles (Cars) are sold through authorized dealers only.
Fast moving consumer goods (FMCG) like
provision items, clothes, etc. every customer buys to utilise and exhaust them.
Next day or week or month fresh purchases need to be made. There are durable
goods used by consumers like refrigerator, television, LED bulbs, fan, laptop
etc.
They are used continuously for years
together. Next purchase is made after some years. Further they need to be
installed, serviced and spare parts for replacement. The retail stores for
FMCG goods are
far more in number than durable goods retailers. But the distribution
channels are the same for both of them.
Industrial machinery and equipment need shorter channel of distribution. The industries that use the products are less in number. Technical support from producer or dealer is required for installation, operation and maintenance of the machinery. The producer sells the machinery through his salesmen or authorized dealers. MRI - Magnetic Resonance Imaging Scanner used in hospitals to produce images of body structures are sold through authorized dealers or wholesalers to customers.
Services can never be stored. A banking
transaction or a mobile connectivity is created for the particular customer at
the specific
time. Mostly direct channel is operated
by all producers through branches. Even in Information Technology (IT)
companies, a software is created and modified to suit the customer’s
needs. Insurance companies have branches and employ agents to connect with policyholders. Producer’s
website is of greater use in
connecting with the consumers in services marketing.
The national or country level middlemen
are already dealt with in detail in the previous paragraphs. The international
distribution of goods and services consists of two sub systems. They are
domestic distribution system and foreign distribution system. There are export
merchants, export trading houses, export agents, state trading organisations,
joint ventures, licensees, franchisees etc. performing the functions of
middlemen.
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