Choice of a channel of distribution involves the selection of the best possible combination of middlemen or intermediaries. The Government may impose certain restrictions on the wholesale trade of a particular product arid takeover the distribution of certain products. Usually a manufacturing unit having a sound financial base can easily distribute the goods without appointing middlemen by opening their own sales depots and branches. But when they set up distribution channels through contracts with franchisees, independent dealers, or large retailers, they cannot readily replace these channels with company-owned stores or Web sites if conditions change. This may be business-to-business B2B or business-to-customer B2C distribution.
This channel is used by manufacturers that specialize in producing shopping goods. Through the use of the right place, a company can increase sales and maintain these over a longer period of time. Channels used for competitive products may also influence the choice of distribution channels. Companies can design their distribution channels to make products and services available to customers in different ways. Does it have established distribution network or does it need to extend its distribution option How much control does it want over distribution? Wholesalers Unlike agents, wholesalers take title to the goods and services that they are intermediaries for. They have lesser dependence on undertaking intermediaries. Broker: A broker is an agent who makes bargains for others and receives brokerage for his services.
Emphasis is on full co-operation and flexibility in approach. How and when to we market these products? While increasing the number of ways a consumer can find a good can increase sales, it can also create a complex system that sometimes makes difficult. Clear messages regarding products and their functionalities need to be passed on to attempt to keep clear communication regarding a or brand all the way to the end user. He is usually paid a commission on the sale proceeds. These buyers usually directly purchase from the manufacturers. These are: Direct In this channel, the manufacturer directly provides the product to the consumer.
It can include , retailers, distributors, and even the internet. Authority: A factor has the authority to receive payments and to issue receipts for them. Commission Agent: He is an agent employed to sell goods on behalf of and at the risk of his principal. Channel 1, called a direct marketing channel, has no intermediary levels; the company sells directly to consumers. The number of buyers of the product affects the choice of a f channel of distribution.
In consumer markets, this is typically a retailer. He receives brokerage at a fixed percentage of the volume of transaction. This price will often help decide the type of distribution channel. They may be busy in dealing with the competitive products. Retailers, Wholesalers are the common channels of distribution. In this case the manufacturer sells directly to customers. Another useful aspect of this model was the information available regarding customers and their needs and requirements.
A wholesaler typically buys and stores large quantities of several producers' goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. Has the capacity to maximize sales and market shares. In addition, a newer method is the internet which itself is a marketplace now. This helped the company predict market trends and segment its market. Distribution channel decisions often involve long-term commitments to other firms.
The purchasers of industrial goods directly contact the sellers and thus there does not arise the need of the agent. A broker has no such authority to receive payments and issue receipts. Also included in the channel are the intermediaries that are involved in this movement in any capacity. . All others merely finance the business. In indirect channel of distribution, the functions of buying, selling, transporting, storing, are undertaken by the middlemen.
Moreover, all of the institutions in the channel are connected by several types of flows. This channel may become necessary for large producers who sell through hundreds of small retailers. Notice how scale economies are often employed exploited to lower costs. These types of distribution channels are effective for the promotion of drugs, hardware, tobacco, toys, food products etc. Care must be taken to understand the data and the measures used before drawing conclusions. You have a second product line for small businesses.
In contrast, many companies have used imaginative distribution systems to gain a competitive advantage. The creative and imposing distribution system of FedEx made it a leader in the transportation industry. An example of this is when a consumer recycles and makes money from this activity. The through which from the to the or payments for those products travel from the consumer to the vendor. Therefore, management must design its channels carefully, with an eye on tomorrow's likely selling environment as well as today's. The intermediary may have incentives to push another product first at the expense of others.