CHANNEL OF DISTRIBUTION
Meaning
A channel of distribution refers to the path products or services take from the manufacturer
or producer to the end consumer. Key aspects include:
Types of Channels
❖ Direct channel: Manufacturer sells directly to consumer (e.g., online sales, company-
owned stores).
❖ Indirect channel: Manufacturer sells through intermediaries (e.g., wholesalers,
retailers, distributors).
Channel Members
1. Wholesalers: Buy in bulk and sell to retailers.
2. Retailers: Sell products directly to consumers.
3. Distributors: Intermediaries that facilitate product movement.
4. Agents: Represent manufacturers in sales or distribution.
Benefits
• Increased reach: Expanding market reach.
• Improved efficiency: Streamlining product distribution.
• Specialized services: Leveraging intermediaries' expertise.
Considerations
i. Channel conflict: Potential conflicts between channel members.
ii. Channel management: Managing relationships and logistics.
iii. Cost and margin: Impact on pricing and profit margins.
, Examples
a. Online marketplaces: E-commerce platforms.
b. Retail stores: Physical stores selling products.
c. Franchising: Authorized businesses selling products or services.
Channel functions
Channel functions refer to the activities performed by channel members to facilitate the flow
of products or services from the manufacturer to the end consumer. Key functions include:
1. Sorting: Sorting products into categories, grades, or sizes.
2. Accumulation: Collecting products from various sources.
3. Allocation: Breaking down large quantities into smaller units.
4. Assortment: Offering a variety of products to customers.
5. Transportation: Moving products from one location to another.
6. Storage: Holding products until needed.
7. Promotion: Promoting products through advertising, sales promotions, etc.
8. Risk-taking: Assuming risks associated with inventory, transportation, etc.
9. Financing: Providing financial support or credit to customers.
10. Information gathering: Collecting market data and feedback.
Factors to be considered in channel selection
1. Product Characteristics
• Perishability
• Complexity
• Value
Meaning
A channel of distribution refers to the path products or services take from the manufacturer
or producer to the end consumer. Key aspects include:
Types of Channels
❖ Direct channel: Manufacturer sells directly to consumer (e.g., online sales, company-
owned stores).
❖ Indirect channel: Manufacturer sells through intermediaries (e.g., wholesalers,
retailers, distributors).
Channel Members
1. Wholesalers: Buy in bulk and sell to retailers.
2. Retailers: Sell products directly to consumers.
3. Distributors: Intermediaries that facilitate product movement.
4. Agents: Represent manufacturers in sales or distribution.
Benefits
• Increased reach: Expanding market reach.
• Improved efficiency: Streamlining product distribution.
• Specialized services: Leveraging intermediaries' expertise.
Considerations
i. Channel conflict: Potential conflicts between channel members.
ii. Channel management: Managing relationships and logistics.
iii. Cost and margin: Impact on pricing and profit margins.
, Examples
a. Online marketplaces: E-commerce platforms.
b. Retail stores: Physical stores selling products.
c. Franchising: Authorized businesses selling products or services.
Channel functions
Channel functions refer to the activities performed by channel members to facilitate the flow
of products or services from the manufacturer to the end consumer. Key functions include:
1. Sorting: Sorting products into categories, grades, or sizes.
2. Accumulation: Collecting products from various sources.
3. Allocation: Breaking down large quantities into smaller units.
4. Assortment: Offering a variety of products to customers.
5. Transportation: Moving products from one location to another.
6. Storage: Holding products until needed.
7. Promotion: Promoting products through advertising, sales promotions, etc.
8. Risk-taking: Assuming risks associated with inventory, transportation, etc.
9. Financing: Providing financial support or credit to customers.
10. Information gathering: Collecting market data and feedback.
Factors to be considered in channel selection
1. Product Characteristics
• Perishability
• Complexity
• Value
