What is a channel of distribution?
Distribution system means the movement of goods from the production area to the consumption area and that involves a lot of functions. These functions are carried on and performed by various agencies that participate in the distribution system.
The channel of distribution is said to be a network of various institutions that perform a lot of interrelated and coordinated functions in the movement of goods from producers to the consumers. In this, intermediaries play an important role. Goods are not sold directly to the potential buyers or consumers. Variety of intermediaries called middlemen are used for this purpose. With the help of these middlemen, producers can transfer their goods or services to the consumers. Channels of distribution are divided into two groups:
- Direct selling by manufacturers,
- Use of middlemen like agents, retailers, wholesalers etc.
Producers have to involve agents, retailers and wholesalers to sell the consumer goods of daily use. Dealers help the producers by selling durable consumer goods on their behalf through show rooms. Manufacturers sell capital goods all by themselves. Sometimes, agents or dealers are involved for supply of such goods. Role of middlemen in the distribution ° system lies in the marketing functions which they perform. Businessmen involve them for selling the goods because they are the specialized people and that helps them to perform various functions more effectively, and efficiently and at a lower cost.