You'll learn everything there is to know about the various forms of distribution networks. A manufacturer may intend to sell his or her goods to consumers directly or indirectly.
In the case of indirect distribution, a producer may choose to sell his or her products through a short channel with few intermediaries or through a long channel with several intermediaries.
As a result, different types of channel networks exist, each with a different number and type of middleman.
Long or short channels, single or multiple (hybrid) channels, and intensive, limited, or exclusive delivery are all possibilities. The channel length could include any number of intermediaries or be direct to customers.
The following are some examples of distribution channels:
A. Direct Line –
1. Buying from a manufacturer's plant
2. Direct-to-consumer sales
3. Sales by mail order
4. Increasing Sales by Opening Own Stores
B. Marketing Platform (Indirect) –
1. Channel with only one stage
2. Channel with two levels
3. Channel with three levels
2. Channel with two levels
C. Multi-Channel Delivery System or Hybrid Distribution Channel.
Three Main Types of Distribution Channels: Distribution Channels: Overt, Indirect, and Hybrid
Top two types of distribution channels: Channels of Distribution: Overt and Indirect
The distribution networks, also known as exchange channels, can be divided into two categories:
1. Sales via direct channels;
2. Sales via indirect channels.
Type #1: Direct Channels: The manufacturer will sell directly to his customers, bypassing middlemen like wholesalers and retailers:
I By building a retail store;
(ii) By salesmen on the road;
(iii) By running a mail-order company.
These networks take the most direct path to the customer. Certain items, such as industrial machinery, are sold directly to consumers. High-priced products, such as computers and luxury cars, are often sold directly. Some manufacturers open their own retail stores in a variety of locations and offer their products directly to the public. The Bata Shoe Company Shops are the best example. Manufacturers often attempt to sell from their own mail order departments.
All of this indicates that manufacturers are now taking action to specifically target customers. Although this is true for certain types of products, the services of intermediaries such as wholesalers and retailers are often needed in the delivery of goods to consumers.
Indirect Channels (Type #2):
The following are examples of indirect delivery channels:
(i) Producer-Consumer Relationship (industrial goods with high technical content)
(ii) Producer-Retailer-Consumer (through big box stores)
Producer—Wholesaler—Consumer (iii) (most industrial products)
(iv) Producer-Wholesaler-Retailer-Consumer-Producer-Wholesaler-Retailer-Consumer-Producer-Wholesa (most consumer goods)
(v) Producer-Sole Agent-Wholesaler-Retailer-Consumer-Producer-Sole Agent-Wholesaler-Retailer-Consumer-Producer-Sole Agent- (usually for a prescribed geographical area).
When there are few consumers and the products are expensive, the first channel, from the manufacturer to the customer, is preferable. It is often purchased by industrial users. Complex machinery involving high technology, computers, and luxury cars all fail in this category. Buyers can be approached directly in this situation, and products can be sold via a personal approach.
When the purchasers of products are major retailers including department stores, chain stores, mega markets, or consumer cooperative stores, the second channel, from the producer-retailer to the customers, is preferred. Since the majority of the products are imported by these major retail distributors to be distributed to customers, wholesalers may be bypassed in these situations.
Electrical appliances, fans, radios, ready-to-wear clothes, and a number of other products fall into this group. This channel is also appropriate when the products are perishable and prompt delivery is needed. The maker, on the other hand, would be responsible for shipping, warehousing, and financing.
In the distribution of industrial products, the third channel, from the producer-wholesaler to the customer, can be used effectively. Industrial products are those that are used for further processing rather than for resale. This is a shorter channel, and the producer has removed the retailer from the equation. Business houses, government departments, consumer cooperative shops, and other customers are involved in this case.
The fourth channel, from manufacturer to wholesaler to retailer to customer, is the longest but most famous in the distribution chain. It's used to market a wide range of everyday consumer goods, particularly where demand is cyclical and a large number of similar products are available. When the demand for the products is highly competitive, this channel is preferred.
This channel is also appropriate when the producer meets the following criteria:
(a) The producer's product line is reduced.
(b) The producer's financial resources are minimal.
(c) Wholesalers deal with specialized merchandise.
(d) Products are not subject to change because of fashion trends.
(e) Wholesalers and retailers may assist with promotions.
Some producers use the final channel, which runs from the manufacturer to the sole agent to the wholesaler to the retailer to the buyer. The single agent receives the entire supply of products for further distribution. In turn, the sole agent can distribute to wholesalers, who, in turn, distribute to retailers. The manufacturer can appoint a single sole selling agent or appoint sole selling agents by region.
He wants to give the selling agents the risk of promoting the products. He does not want to take the risk of sale and instead wants to focus on production. He reduces his marketing expenses as well as the costs of maintaining a sales organization and sales force.
However, by doing so, he runs the risk of relying solely on selling agents, putting himself at the mercy of his salesperson. If the producer's relationship with the selling agent deteriorates, or if the selling agent fails to deliver the products, the producer may suffer a significant loss. However, selling by selling agents is popular in the marketing of agricultural products.
Distribution Channels – Primary and Indirect Distribution Channels with Examples
A manufacturer may intend to sell his or her goods to consumers directly or indirectly. In the case of indirect distribution, a producer may choose to sell his or her products through a short channel with few intermediaries or through a long channel with several intermediaries. As a result, different types of channel networks exist, each with a different number and type of middleman.
Different Types of Distribution Channels:
1. Zero-level direct channel:
It is the quickest and most straightforward method of direct delivery of products from the producer to the consumer.
Since there is no intermediary, it is referred to as a zero-level delivery channel.
It allows the maker and the consumer to have a clear relationship.
2. Indirect Channel:
Indirect sale happens when a company uses one or more intermediaries to market and deliver their product to consumers. A distribution network transports goods from the point of production to the point of consumption.
The following are examples of indirect distribution networks:
One-Level Channel (a):
This distribution channel requires the use of a single broker to move products from the producer to the consumer. The title and risk are passed from the manufacturer to the supplier, who then sells the products to consumers. This channel of distribution helps producers to maintain leverage when reaching out to a wide number of potential buyers.
(b) Channel with Two Levels:
The goods are transferred from the manufacturer to the customer via two intermediaries in this distribution channel. Wholesalers and retailers serve as a connection between producers and consumers in this scenario. This network helps the producer to enter a wide market. It is one of the most widely used distribution channels for consumer goods.
(c) Channel with Three Levels:
Manufacturers use the services of agents or brokers to communicate with wholesalers and retailers in this channel of distribution. Agents are appointed by producers in major markets who associate them with wholesalers and retailers. It's best for producers with a small product line and consumers spread over a large geographic region.
Direct, indirect, and hybrid distribution channels are the three most common types of distribution channels.
1. Direct Channel (Zero Level): A producer's shortest channel of distribution of products and services is the zero level channel, in which there are no intermediaries between the producer and the customer.
(i) If the company specializes in marketing.
(ii) Whether the organization can carry out the marketing activities at a fair price.
(iii) If the company has sufficient financial capital to devote to marketing.
(iv) The commodity cannot be handled due to a lack of appropriate middlemen.
(v) Direct marketing is favored by the consumers.
(vi) If the rivals use direct marketing tactics.
It is one of the oldest methods of selling products and services and was commonly used by manufacturers prior to the industrial revolution.
The manufacturer will use one of the following marketing strategies by using the direct channel of distribution:
Manufacturer's Plant Sales:
Direct sale is one of the earliest, simplest, and cheapest methods of product distribution. Under this scheme, farmers sell directly to customers, and it is usually favored for perishable goods such as bread, milk, ice cream, fish, meat, egg, vegetables, and agricultural products, among others.
These goods are sold directly to customers because if they are stored or traded for an extended period of time, they lose their value or become unfit for use.
Direct-to-Consumer Sales:
For door-to-door promotions, the retailer recruited salespeople. They go from door to door, selling the latest product to consumers. Dealers who don't know what they're selling, need a high profit margin, or don't want to stock unknown goods will benefit from this method.
Selling under this scheme can be expensive, but it can be minimized until the demand is understood. However, at first, when the market is unaware of the commodity, this device is superior, even at a higher cost.
Sales by mail order:
Shopping by post, mail order company, or sale by post are all terms used to describe how the post office plays a significant role in this process. It is a framework that promotes the growth of this system by impersonal selling, branding, ranking, standardization, and packaging.
Customers are contacted by mail, which includes catalogs, price lists, pamphlets, and other materials. Books, copies, magazines, drugs, watches, toys, small appliances, clothing, plants, jewelry, and so on all benefit from advertisement.
Sales from Own Stores:
Perishable and non-perishable goods manufacturers market their wares to consumers by opening their own retail stores. Manufacturers can move products quickly through retail stores and provide satisfactory service to consumers, resulting in positive word-of-mouth. It also aids producers in researching industry patterns, consumer preferences, and personal style trends. This device allows for two-way contact and has a fixed price.
There are a few disadvantages to using Direct Marketing Channels, which are mentioned below:
(i) It can be difficult to have direct contact with customers because they are numerous and spread out over a wide area.
(ii) It can be difficult to create direct communication with customers who number in the millions.
(iii) The method fails when the producers do not appear to be successful salespeople.
2. Indirect Channel: In this scheme, commodities are distributed by middlemen or intermediaries such as wholesalers' stockiest distributions and so on. There may be one middleman, such as a Sole Selling Agent, who distributes the goods to a variety of middlemen later, or there may be many middlemen when the producer distributes the products to a number of agents, wholesalers, or even retailers. Wholesalers sell to dealers, while retailers sell directly to customers.
Typical Indirect Distribution Channels are divided into four levels, as follows:
One-level Channel I There is only one intermediary between the manufacturer and the customer in this situation. It may be a distributor or a retailer.
This form of channel is used for specialty items such as washing machines, refrigerators, and industrial products where the intermediary is a distributor.
(ii) Two-level Channel – This channel has two intermediaries, namely wholesaler/distributor and retailer.
(iii) Three-level Channel – This channel has three intermediaries: distributor, wholesaler, and retailer, and it is often used for convenience goods.
(iv) Channel with Four Levels – There are four intermediaries here: an agent, a dealer, a wholesaler, and a retailer. This channel is identical to the two that came before it. Market durable goods are also sold via this channel.
3. Multi-Channel Delivery System or Hybrid Distribution Channel:
Many businesses have recently relied on a single channel to sell to a single consumer or market segment. Several businesses have recently introduced multi-channel delivery strategies, also known as hybrid marketing networks, as a result of the proliferation of consumer segments and channel options. When a single organization develops two or more marketing platforms to target one or more consumer groups, this is known as multi-channel marketing. Hybrid channel systems have become increasingly popular in recent years.
Consumer segment 1 is served directly by the manufacturer through direct mail catalogues and telemarketing, while consumer segment 2 is served by retailers. It sells to business segment 1 indirectly through distributors and dealers, and to business segment 2 directly through its salesforce.
Companies dealing with vast and diverse markets may benefit from hybrid networks. With each new platform, the company extends its distribution and consumer reach, as well as its ability to tailor its products and services to the unique needs of various customer segments.
Hybrid channel networks, on the other hand, are more difficult to handle and create conflict as more channels compete for consumers and revenues. For example, when IBM started selling low-cost products directly to consumers through catalogs and telemarketing, many of its retail partners cried "unfair competition" and threatened to drop the IBM line or give it less focus.
Direct and indirect distribution networks are the two types of distribution channels (With Examples and Methods)
A. Direct Route:
(Zero Level/No Intermediary) 1. Producer vs. Consumer
Indirect Channel (B):
Producer Retailer User...(One Level/Intermediary)
Producer, Wholesaler, Retailer, and Consumer (Two Level/Intermediaries)
Producers, Agents, Wholesalers, and Retailers (Three Level/Intermediaries)
