Question
Explain the concept of distribution and its channels.
✓
Answer
- Consumer cannot satisfy his need for the product if it does not reach in time as per the order placeD.
- The product may be of very good quality, advertisement and sales promotion programs may be effective and product may be in good demand but if it is not available in the market on time, consumer cannot satisfy the need for the same.
- It is a mar on the reputation of a business firm.
- As a result, sale of the product decreases.
- Not to make this happen it is necessary to conduct effective distribution of the product.
- Concept of distribution :
- Distribution means arrangement of making finished product available at a place where it is required, when it is required and in whatever quantity it is required.
- Manufacturer cannot come in direct contact with consumers when existing and probable consumer class is large and spread in wider range.
- In this circumstance manufacturer make his product reach to consumers through various intermediates. E.g car manufacturers appoint nationwide distributers.
- Care is taken to make the product reach to the consumers at the lowest at the lowest cost and dealers get required quantity of products.
- Distribution of the product includes transportation and storage of product.
- Distributor inform manufacturers important information of the market.
- Channels of distribution :
- Direct sale :
- Meaning : When manufacturing himself sells the product from his factory or his own shop is called direct sale.
- This is the easiest way and shortcut to distribution.
- There is no level in this type of distribution.
- So it is called zero level distribution system.
- Sale through post, through door to door salesman, and online shopping are known as direct sale.
- Manufacturer comes in direct contact with consumers in direct sale.
Limitations :
- Limitation of this type of distribution is that the manufacturer cannot reach to large number of consumers.
- This system is not suitable for every product.
- Indirect sale or sale by mediator :
- When the manufacturer appoints one or more mediators to sell the product or service, it is called indirect sale or sale through mediators.
- In this method, mediators reach the large group of consumers.
- This type of distribution method is used when the price of the product is less and its utility in daily life is more e.g. cooking gas cylinder distribution system, distribution of milk.
- Following are three type / channels of distribution by mediators.
- Single layer distribution system :
- In this distribution method retailer is the only mediator.
- Manufacturer supplies his product to retailer and the retailer provides it to consumers.
- Normally when the product is of special quality this type of distribution system is createD.
- Double layer distribution system :
- In this distribution method wholesales buys the product from manufacturers in bulk and supplies the same in less quantity retailers.
- Product is reached to the consumers through this retailers.
- In this method, the wholesaler purchases large quantity of product from the manufacturers, so the risk of manufacturer reduces.
- Often wholesaler provides storage service too.
- Sometimes manufacturer forms retailer’s structure under each wholesaler as a result product reaches up to the last consumer.
- This type of distribution system is suitable for daily consumable product like soap, cream, tooth-paste, battery, shaving cream, various spices, hair oil etc.
- Three layer distribution system :
- In this type of distribution system three mediators work between consumers and manufacturers,
- Product is distributed first of all to the agent or consignee from the manufacturer.
- Agent sends it to different wholesalers.
- These wholesalers send products to the retailer of his area and retailers sell them to consumers.
- In this distribution system working is easy because manufacturer has to perform dealings related to product and finance with wholesaler only.
- This distribution system is more suitable when only limited products are manufactured or the product is accepted universally in the market.
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