Distribution channels play a vital role in business by ensuring efficient product
distribution, expanding market reach, and enhancing customer satisfaction. They
facilitate the movement of goods from manufacturers to consumers, handling tasks such
as warehousing, transportation, and inventory management.
In business, a distribution channel refers to means or route through which products or
services are transferred from the producer or manufacturer to the end consumer. It
encompasses a series of intermediaries, such as wholesalers, retailers, and distributors,
who facilitate the movement and exchange of goods in the market
There are three major distribution channels and they are:
▪ Direct distribution channels
▪ Indirect distribution channels
▪ Hybrid distribution channels
FUNCTION OF THE CHANNEL
[Link] primary purpose of any channel of distribution is to bridge the gap between the
producer of a product and the user of it, whether the parties are located in the same
community or in different countries thousands of miles apart.
2. A close study of the market is extremely essential. A sound marketing plan depends
upon thorough market study.
3. The distribution channel is also responsible for promoting the product. Awareness
regarding products and other offers should be created among the consumers.
4. Creating contacts or prospective buyers and maintaining liaison with existing ones.
5. Understanding the customer’s needs and
adjusting the offer accordingly.
6. Negotiate price and other offers related to the product as per the customer demand.
Distribution channels are normally expected to perform the following functions:
1. Collection of information about customers, competitors and other entities which
can affect a company’s marketing efforts
2. Provide for storage and physical movement of the goods.
3. They place orders on the manufacturers of the goods for delivery to end users or
other customers
4. They canvass the sales of the products they handle through effective
communication. They do the actual ‘selling’.
5. They are the link transfer of ownership of the goods from one party (the
manufacturer) to another (end user).
6. They agree on the terms of sale with the manufacturer so that the transfer of
ownership and possession can be smooth and does not affect the end-user.
7. They also provide credit facilities to their buyers
8. They help the manufacturer to effectively run trade and consumer promotions
Distribution Channel – Characteristics and Role
● Place Utility – As they help in moving the goods from one place to another;
● Time Utility – As they bring goods to the consumers when needed;
● Convenience Value – As they bring goods to the consumers in convenient shape, unit,
size, style and package
TYPES OF CHANNELS
1. Sales Channel
2. Delivery Channel
3. Service Channel
1. Sales channel motivates buyers, share information between the company and its
consumers, negotiates bargains for consumers and finances the transactions.
2. Delivery channel meant only for physical
part of the distribution.
3. Service channel performs after sales
service.
Principal Components of the Distribution Process
● Order processing
● Stock levels or inventory
● Warehousing
● Transportation
Order processing is the first ofthe four stages in the logistical process. The efficiency
of order processing has a direct effect on lead times. Orders are received from the sales
team through the sales department.
Inventory, or stock management, is a critical area of DM because stock levels have a
direct effect on levels of service and customer satisfaction. The optimum stock level is a
function of the type of market in which the company operates.
Warehousing -Currently, many companies function adequately with their own on-site
warehouses from where goods are dispatched direct to customers. When a firm
markets goods that are ordered regularly, but in small quantities, it becomes more
logical to locate warehouses strategically around the country.
Transportation usually represents the greatest distribution cost. It is usually easy to
calculate because it can be related directly to weight or numbers of units. Costs must be
carefully controlled through the mode of transport selected amongst alternatives, and
these must be constantly reviewed.