What is a channel of distribution? Explain briefly the channels of distribution used for consumer and industrial goods.
Channel of distribution is said to be a network of various institutions that perform various interrelated and coordinated functions in the movement of goods from producers to the consumers. Intermediaries play an important role as they are used for this purpose. Consumers easily get their goods through these middlemen as all the goods and services are transferred to them by the producers.
Channel of distribution is of two types:
- Direct selling by producers,
- Use of middlemen like agents, retailers etc,
In order to sell goods of daily consumption, producers have to involve agents, retailers etc. Dealers through showrooms help in selling the durable consumer goods. Capital goods are sold by the manufacturers. They perform various marketing functions efficiently and at a lower cost because they are the specialized people.
Distribution Channels for Consumer Goods: Consumer goods are the ones that are consumed by household customers. For example—clothing, shoes, food items, stationery, TV sets, electrical appliances etc. Consumers may buy them everyday or as and when their need arises. Retailers help in selling the durable consumer goods like cars, textbooks, shoes, furniture, clothing etc. Retail trade is carried on by the manufacturers themselves if they have their own showrooms like Bata Shoes Company, Woodland etc. Retailers and wholesalers help in distributing consumer goods like video recorder, auto spare parts, stereos etc. Daily consumed consumer goods like sugar, salt, edible oil, soap, paper, food grains etc. are distributed through agent, wholesaler and retailer.
Distribution Channels for Industrial Goods: Goods that are consumed by industry in order to produce more goods are called industrial goods. For example—machinery, equipment, electronic components, industrial raw materials etc. Producers supply high value industrial goods such as computers, aircraft, heavy machinery etc, directly to the buyers. Producers may use salesmen for this purpose. Less expensive items such as trucks, conveyor systems are supplied with the help of distributors. Industrial buyers procure many agricultural products like corn, coffee, etc, through agent middlemen. It is the agent or industrial distributor who procures the electrical components that are imported from foreign markets.