Channels of Distribution in Marketing and Types of Distributors

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What is a channel of distribution?

A channel of distribution in marketing also known as a chain of distribution or marketing channel is a business chain or intermediaries through which the manufacturer or producer passes his products to the final consumer. Usually, the manufacturer cannot effectively get his goods to the buyer or the final consumer without the help of middlemen. Channels of distribution can include agents, wholesalers, retailers, and also the internet.

Channels of distribution are part of the process of the manufacturer reaching his goods to the final consumer, which is the downstream process. It helps to answer the question that relates to how to get these products to the final consumer. This channel is also referred to as placement, and it is part of the marketing strategies of a company. It is certain that marketing strategies include product, promotion, price, and place.

The distribution channel is the path through which every good and service must travel in order to reach the final consumer/intended consumer. The reversed relationship states the route of payment from the final consumer to the manufacturer.

Channels of distribution can be long or short depending on the number of intermediaries involved in delivering a product or service, or the number of intermediaries required to deliver a product or service. This means that it is possible for goods and services to find their way to the final consumer through multiple channels (a combination of short and long channels). When the number of ways a consumer is able to find products increases, the manufacturer’s sales tend to increase correspondingly. This on the other hand can also lead to some complexities in some instances thereby making distribution management difficult. The longer a channel of distribution becomes, the less the producer’s profit tends to be. This is because each intermediary/middleman will charge a manufacturer for its service.

Types of channels of distribution

A manufacturer can decide to sell his products to the final consumers either directly or indirectly. In the case of direct distribution, the manufacturer has an option of using a short channel that consists of few intermediaries, or he can involve a large number of intermediaries. The different types of distribution channels have different numbers and types of middlemen. There are basically two types of channels of distribution namely the direct and indirect channels. However, there is a third type called the hybrid channel.

Direct channel (zero level channel)

A direct channel of distribution is the shortest and simplest channel through which a manufacturer passes his products to the final consumer. It does not involve any middleman and because of this, it creates a good and direct relationship between the manufacturer and the consumer. A direct channel takes the shortest route to the final consumer. This happens when the producer directly sells certain goods such as industrial machines directly to the consumers. Also, through the direct channel, the producer sells expensive goods such as computers and luxury vehicles directly to consumers. Some of these producers set up their own mail order departments to enable them to sell their products directly to the consumers.

The direct distribution channel is a key indicator that the producers are taking steps to approach the consumers directly. While this is possible for certain goods, it does not apply to every type of goods. It still indicates that the services of intermediaries are often relevant and important in the process of distributing goods to the final consumers.

For example, a final consumer making direct order to a rice-producing company via mail and direct selling like the Oriflame company.

A better example can be expressed as;

Producer → (own sales team) → Consumers

Here, the producer has its own sales team/marketing department to reach these products to the final consumer.

The manufacturer can embark on direct distribution through the following;

  • The opening of retail shops
  • Employing traveling salespersons
  • Mail-order business
  • Door-to door sales
  • Selling at manufacturer’s plant

In a direct distribution, the manufacturer can make decisions relating to all aspects of contact with the consumer. One of the aspects is how the manufacturer’s own sales team is to contact the customers. Also, it includes how frequently they should send out a catalog.

There are many reasons why a producer uses the direct channel as well as the reasons why a producer does not use this form of channel. The reasons why a producer chooses to use the direct channel include;

  • The firm possessing marketing expertise.
  • Adequate financial resources for investing in marketing.
  • The ability of a firm to carry out marketing activities at a reasonable cost.
  • When there are no available suitable intermediaries to handle the product.
  • If the buyers prefer direct marketing to indirect marketing.
  • When competitors are following direct marketing.

There are also disadvantages that accompany the adoption of a direct marketing channel such as;

  • When the consumers are countless or unnumbered and, having direct contact with them tends to be difficult.
  • When consumers are very large in number (in multi-millions or billions), it is always difficult to establish a direct relationship with them.
  • The process tends to suffer when the producers are not proven to be good sales associates/middlemen, that is the absence of expertise.
  • The requirement of large investment.

Indirect channel 

In the indirect channel of distribution, the manufacturer carries out distribution through third parties who are the intermediaries. A firm can design more than one channel and we classify these channels based on the number of intermediaries that exist between the producer and consumer. These intermediaries are the sales agents that distribute the goods while retailers sell directly to the final consumers.

The indirect distribution channel is divided into four levels namely;

  • One level channel
  • Two-level channel
  • Three-level channel
  • Four level channel

One level channel

This distribution channel only involves one intermediary who moves goods from the producer to the consumer. The intermediary involved in one level channel is the retailer and this channel enables the producers to maintain control and approach a large number of potential customers as well as the process of distribution. The manufacturer transfers the title and risk to the retailers who sell these goods to the consumers. This in turn gives the manufacturer some relief from the burdens of selling the goods to the consumers all by himself.

This form of indirect distribution suits the distribution of consumer durables and products that possess high value. Some of these products include refrigerators, washing machines, and industrial products.

Two-level channel

The two-level channel of distribution involves two intermediaries reaching the goods of the producer to the final consumer. These two intermediaries are the wholesalers and retailers, they are the link between the manufacturer and the final consumer. It is the most common and traditional channel which enables the manufacturer to cover a large market area. When the producer transfers or sells his products to the wholesaler, the wholesaler then sells these products to the retailers. Finally, the retailers sell them to the end consumer.

This channel is the best fit for the producers that have limited finance, producers with a narrow product line, and those who need expert services and promotional support from wholesalers. Also, it is mostly suitable for those products that possess a widely scattered market.

Three-level channel

This channel is very long, it involves three intermediaries/middlemen. These intermediaries are agents, wholesalers, and retailers. The producer uses this channel when he wants to fully relieve himself of the challenges of distribution by handing over his entire product to sales agents. These agents, in turn, distribute these products to few wholesalers. Each wholesaler on the other hand will distribute the product to a number of retailers who will finally sell it to the final consumers.

What usually happens here is that manufacturers appoint and use agents to get in touch with the wholesalers and retailers. This channel is also suitable for producers with a limited product line and customers that are spread over a wide geographical area. It is as well suitable for a wider distribution of various industrial products.

Here is a three-level channel of distribution example; Producer→Agent→Wholesaler→Retailer→Customer

Four level channel

This is the longest channel of distribution which involves four intermediaries. That is, goods pass through four intermediaries before getting to the final consumer. This happens mostly with agricultural producers, products such as crops, fruits, and vegetables. Though central and state government intervention has eliminated some intermediaries from the channel.

An example here is an automobile manufacturer who sells his cars through authorized dealers. 

Four Level Channel

Producer→Distributor→Agent→Wholesaler→Retailer→Customer

Hybrid Channel or Multi-Channel Distribution System

This happens when a single producer sets up two or more channels of distribution to reach out to one or more segments of consumers. That is why it is also called the multi-channel distribution system. Recently, the use of hybrid distribution channels has increased greatly. Producers use hybrid distribution channels to increase efficiency and reduce chaos.

Though hybrid channels have advantages to the producers with large and complex markets, they are usually harder to control than the direct and indirect channels. They tend to generate more conflicts as more distribution channels keep competing for more consumers and sales. When a company adopts a new channel, each of these new channels helps the producer to expand his sales and market coverage. With this, he also gains more opportunities to channel his products and services such that they will meet the specific needs of different segments of customers/consumers.

An example of a hybrid channel is when a producer sells directly to the first segment of consumers, uses direct-mail catalogs and telemarketing to the second segment of consumers, makes direct sales to the first business segment, and the second business segment through its own salesmen.

Parties involved in the channel of distribution

Manufacturers

A manufacturer or producer is a person or firm that produces finished products from raw materials through the use of tools, machines, equipment, and processes. After producing these goods, he sells them to the consumers either directly or through wholesalers, distributors, or retailers, or also to other producers for further production. In essence, manufacturers can produce either consumer goods or capital goods.

Distributors

Distributors are those professionals involved in buying products, storing them, and selling them through a specific route. They are in charge of handling the movement of goods from the producer to the consumer. These distributors work with different companies at the same time to market, transport, and sell goods through different means. They help to enhance the market of a producer thereby exposing the company to a large audience and customers. Also, these distributors are capable of offering technical supports and warranty on behalf of the manufacturer.

The use of distributors in the channel of distribution can either be simple or complex depending on the method adopted. The manufacturer of a product may sometimes overlap the methods of distribution. Distributors help a product to grow thereby making the company be more reputable. That is, distributors help in improving the image of a company or firm. Here, they have their own established networks which a firm/producer may have no idea about.

These distributors most times have individual agents or a business firm that makes up part of their established networks. Some distributors have specialized market segments as well as genres of products like computer networking or technology wholesalers, and also car dealers who work with specific brands.

Agents/brokers

These are companies or individuals that serve as an extension of the manufacturing company. They function usually in the area of presenting the manufacturer to the wholesaler, retailer, or the final consumer (majorly). They are not the direct owners of the product, but they take charge of the product in the process of distribution. Usually, the producer pays them a commission for their services. 

To avoid complex responsibilities attached to marketing, big producing firms appoint an agent to serve as a link between the producer and the wholesaler. These agents are usually sales agents possessing a wide distribution network, salespersons, wholesalers, and retailers. These agents perform the functions of marketing and distribution on behalf of the producers thereby earning a large profit margin. 

There is another type of agent called C&F, meaning carrying and forwarding. They distribute goods to the wholesalers and retailers on behalf of the producers without reselling them. Their main function is to transfer the goods on behalf of the producer. Such channels of distribution take this form;

Manufacturer → Agent → Wholesaler → Retailer → Consumer

Wholesalers

Wholesalers are those merchants who serve as the intermediaries between the producers and the retailers or industrial consumers. These producers can be the primary producers, manufacturers, or importers. What they do is that they buy goods in large quantities with the purpose of selling them to the retailers who further sell them to consumers in units.

Wholesalers do not relate directly and individually with consumers, that is, they do not sell commodities on the basis of price-meal. They only serve as a link between the producers and the retailers. Though the description looks as if wholesalers do not produce commodities by themselves but serve only as traders who engage in buying and selling activities. But practically, we have so many cases whereby the wholesaler combines both production, wholesaling, and retailing activities, carrying out the functions of buying and selling in bulk.

Retailers

Retailers are the last link in the channel of distribution that serves as the intermediary between the wholesalers and the consumers. Retail means to cut, that is why the primary function of a retailer is to cut bulk goods into smaller units and it implies the direct opposite of wholesale.

It is very easy to refer to the retailer as the most important intermediary in the channel of distribution. This is because, in the present day, industrial mass production moves towards the direction of the requirements of the final consumers. Retailers are the middlemen who are directly in touch with the final consumers. This makes them occupy a strategic position in the entire distribution system.

From this, it is obvious that one important feature of the retailer is to buy goods in bulk from the wholesaler and sell them in units to the consumers. Because the retailer is directly connected to the consumers and transfers goods directly to them, he has to deal with people based on their varieties of tastes and temperaments. Now, these temperaments of consumers refer to consumer behavior. The wholesaler must be full of skills and tactics in dealing with different types of consumers. He has to put in efforts to please the consumers by giving them the best personal attention and possible service available. The retailer is bound to possess certain features like the home delivery service/door-to-door services.

Consumers

A consumer is someone who purchases goods for personal use. Consumers aim at making orders on products or services for personal, household, social uses, and other needs that do not directly relate to entrepreneurial or business activities.

Types of distributors

As it is above, distributors are those professionals involved in buying products, storing them, and selling them through a specific route. That is, they assist the producer in storage facilities after buying from him to avoid over-stock of products in the factory. They as well take charge of conveying goods from the producer to the final consumer. 

The following are the types of distributors;

  • Exclusive distributors
  • Intensive distributors
  • Direct distributors
  • Selective distributors

Exclusive distributors

Exclusive distributors are the authorized distributors a company signs an agreement or a contract with to work with the company’s product within a geographical location. Here, it is restrictive in nature, that is only one distributor has the authorization to distribute a company in a single geographical area. Usually, they possess a high level of trust in terms of representing the producer well. Working with one distributor gives the producer more control over how they represent the product and the people they are selling to. Exclusive distributors help the producer to have more protection over the brand of his product.

Intensive distributors

Intensive distributors are those distributors that are specialists in maximizing the number of outlets where a firm’s product is available. Such a distributor possesses high skills in intensive distribution and usually works best within the industries where consumers switch in-between brands usually when their first choice is unavailable.

For example, a consumer prefers consuming Pepsi but when Pepsi is not available, he goes for Coca-Cola instead. So in this instance, we can draw a conclusion that Pepsi lost out on a sale because its distributor did not succeed in stocking the product and this forced the consumer to switch to a close substitute, otherwise its competitor.

Oftentimes, brands gauge the success of an intensive distributor on the basis of the number of retailers he is able to secure so far.

Direct distributors

A direct distributor skips the middleman by selling the manufacturer’s products directly to the store rather than taking them to the retailer’s distribution center. Usually, this distributor has a faster rate of turnover. With this, it is easier and faster for him to restock goods that are selling faster than the store expected. Direct distributors are very fast in providing service and meeting demand. Because of this, retailers love to work with them.

Selective Distributors

Selective distribution is the type of distribution method that operates between the intensive and exclusive distributions. Here, it involves the use of more than one but less than the entire intermediaries and distributors involved in carrying the products of the company based on the specific rules the company sets up. 

Companies with intensive distributors want their products in many possible places but this is not the case with selective distributors. Producers select/choose the retailers they would prefer to carry their products, they then appoint a distributor to deliver products to consumers as well as providing high-quality customer service to them.

A selective distributor usually works within specialized industries with a limited retail outlet. Here, the producer works with a selective distributor who can sell the goods to niche retailers that sell their products.

Functions of a channel of distribution

The functions of distribution channels are numerous though they fall within three major categories. The categories of these functions are;

  • Transactional functions
  • Logistical functions 
  • Facilitating functions

A) Transactional Functions

The transactional functions have to do with the various transactions that take place while conveying goods from one channel to another. These functions include buying, selling, risk-bearing, etc., and it is the parties involved in the channel that carry out the functions. The producer/manufacturer sells the goods to different intermediaries who then sell them to the final consumers. The conveyance of goods also includes a change in the title of goods from one to another.

Financing

Usually, the middlemen make advance payments to the producer for goods and services. This, in turn, helps in providing working capital to the producers to enable them to carry out their daily operations. There are times that the producers may extend credit, but usually, the intermediaries make payment in advance even before the final consumers buy and consume the products.

Assists in merchandising

As a result of merchandise, distribution channels help in creating awareness to customers about the product. In the course of visiting a retail shop, the middlemen draw the attention of customers to the product through an attractive display of the product. This increases the consumer’s awareness and interest in the product. These strategies, especially attractive display, helps to complement the sales of a company and also serve as silent salesmen at the retail outlet.

Provides market intelligence

It is through channels that the producer receives feedback on his product. The producer gains more intelligence about the market. This is because marketing channels are in direct and consistent contact with the final consumers.

Assortment of products

Channels lead to customer convenience because they help to facilitate the convenience of the consumers. Consumers are able to buy goods conveniently in units, packs, and also in varieties. For a company/producer to achieve economies of scale, they purchase raw materials and the services of middlemen in bulk. The producer sells in bulk, but consumers get them in smaller units. There is always a need to break these bulk products into smaller units and channel intermediaries are responsible for carrying out this function.

Price stability

Also, channel intermediaries work to maintain the stability of price in the market. Most times, these intermediaries absorb a rise in price and continue charging the consumers at the same initial price. This price stability is necessary because of the competition that takes place between the middlemen. Also, the producer maintains price stability by lowering his overhead expenses.

Promotion

Mostly, the middlemen design sales incentive programs with the aim, of building traffic amongst customers at the retail outlets. Marketing channels are responsible for activities such as advertising, sales promotion, and personal selling;  which makes them become more useful to the producer in terms of achieving a greater share in the market sales and coverage of the products. 

Provides salesmanship

Marketing channels help in providing salesmanship as they help to introduce and establish new products in the market. In most instances, buyers or consumers work based on the recommendations of the middlemen. These middlemen, through their persuasive selling and one-on-one communication, establish products in the market. Also, they are responsible for providing pre-sale and after-sale services to the buyers/consumers.

Standardizing transactions

Marketing channels carry out another function which is the standardizing of transactions. They standardize the distribution of goods in such a way that customers do not have to negotiate or bargain with the sellers in any aspect such as price, method of payment, quantity, or the location of products. Through this, most of the stages of the flow of products take place through automation from the producers to the consumers.

Matching buyers and sellers

Channels of distribution are useful in matching the needs of buyers and sellers. Usually, most of the sellers do not know the exact location to reach out to buyers as well as buyers do not know the exact location where they can reach out to potential sellers. Looking from this point of view, marketing channels play a vital role in matching the needs of buyers and sellers. This helps to strive for a balance between the needs of the potential buyers and sellers.

Take Risk

Middlemen taking ownership of the products and keeping them in their custody is a risky venture. That is, holding these goods in the warehouse as well as transporting them involve risks of damage, destruction, theft, etc. Here, the producers transfer title risks to the middlemen, and these middlemen take the title of the goods as they are in transit to consumers. This shows that transferring title also transfers risk. The middlemen face such risks as non-recovery of money for the credit facilities they offered.

B) Logistical Functions

Logistical functions have to do with functions relating to transportation, grading, and storage. Transportation involves the physical movement of goods from one geographical area to another. Middlemen have to make sure the goods they store undergo transportation at the right time thereby making them available to the consumers. It is a necessity for one to properly assort and store goods in the right place.

Ease in the distribution process

Channels of distribution help to routinize the producer’s sale. Fixing the route of conveying goods to the final consumer automatically solves the problem for selling the product is as they distribute the goods which the producers produced at the right time and distributed at the right place as well as to the right consumers.

Storage and transportation

Once the production process is completed, there is a need for proper storage facilities until the time these goods reach the consumers. The middlemen carry out this important function of storage thereby helping them to adjust to the changes in customer demand in the market. 

There are specialized intermediaries whose primary function is to store goods and this eases the producer the stress of investing in his own system of storage. Those who partner in transportation and logistics come to rescue the producer in this respect. The producer has to convey these products to where they will be available to the consumers for purchase.

Time and place utility

Marketing channels also play a very big role in creating time and place utility for consumers. They help consumers in buying goods and taking them to the place where the consumers can easily access them at the time of need. This in essence helps in reducing the distance between the producer and the consumer within the buying space.

Producers use channels of distribution because of some factors like transportation, risk, place, and time utility. There is a very large number of consumers who are usually scattered across the globe. The company on its own will not be able to manage contact with customers without the help of intermediaries.

Through the existence of middlemen, customers enjoy the benefits because the middlemen who are in close contact with them deliver the needful products in the hands of the consumers. This reduces the number of efforts consumers have to put in before obtaining the product of their needs. The presence of intermediaries helps both the producers and consumers to save more time, energy, and money. For this reason, the producer uses marketing channels to service the needs of consumers.

Consumers will always expect products to be available at the right time, quantity, place, and in the right assortment. A company’s attempt to achieve all these on its own will turn out to be highly ineffective and inefficient.  When intermediaries are available, they help to perform these functions thereby servicing the needs of customers efficiently.

Producer-consumer contact 

The Channel of distribution helps to maintain close contact between the producer and the consumers. In gathering some relevant information with regard to the product and the consumer behavior, the channel of distribution is highly needful.

Transfer of title

The marketing channel substantiates the transfer of the product’s title usually through sales and purchases. This makes it possible to convey the right product to the right place, at the right time, and at the right price to the right customers.

C) Facilitating Functions

The facilitating functions help to ease the different functions that the intermediaries have to perform. This smoothens the activities of these intermediaries such as financing, credit facilities, maintenance, pre-sale services, after-sale services, etc. In present days, the purchase of goods mostly has different services like loan facilities, credit facilities, free servicing, etc., accompanying them. 

 Helps in the production function

the producer delivers the marketing problem to the hands of the middlemen so that they (producer) can pay more attention to the production function. They utilize their services best through the selling of the product. The producer can profitably use his finance in production where the rate of return will be greater instead of using that finance to organize marketing.

Pricing

In the course of pricing a product, the producer should always welcome suggestions from the middlemen because they are directly close to the final consumers.  Also, the middlemen know what these consumers can pay for the product. Pricing may differ by markets or products depending on the channel of distribution.

Information provider

Middlemen serve as information providers, they inform the producer about his market condition. The information relates to changes in demography, consumer preference, new brand, or new competitors in the market. These are information that the producer must seek. Because the middlemen are present in the market, they provide this information accurately at no additional cost.

Promotional activities

Marketing channels do not only help in distributing the goods of the producer, but they also play a vital role in promoting sales by adopting promotional activities like advertising, personal selling, and sales promotion. Wholesalers advertise the goods they deal with while retailers help in increasing sales by displaying the products in ways that would attract the customers.

Finance management

Every manufacturer has limited resources in one way or the other, middlemen help manufacturers in availing adequate financial resources. Marketing channels help in managing finance by remitting the advance amount to the producer at the time they gave orders and providing credit facilities to the consumers.

Aiding communication

Channel members or intermediaries help to inform the producers about changes, consumer tastes, habits, and the nature of the market. It is necessary for every producer to be aware of the changes in the market and make necessary adjustments to fit into those changes. The intermediaries are the link connecting producers and consumers. They also provide information to the consumers about the product, services, quality, etc.

Bulk breaking and sorting

Intermediaries help in breaking bulk thereby enabling consumers to buy the goods in units.

Elimination of middlemen in the channel of distribution and reasons

This happens when the manufacturer sells his products directly to the retailers or consumers thereby eliminating the middlemen. Or in some cases,  wholesalers skip retailers and sell directly to the consumers. Elimination of middlemen has some advantages and it also implies the direct channel of distribution where the producer skips the intermediaries and sells directly to the final consumer.

As the emphasis has been, the term ‘middlemen’ means the intermediaries that exist between the producer and the final consumer. In a traditional channel of distribution, the intermediaries are the wholesalers and the retailers. By selling directly to retailers or consumers, manufacturers are eliminating the middlemen. On the other hand, wholesalers can also skip retailers by selling directly to the consumers. Eliminating middlemen possesses some advantages over a straightforward process of distribution.

In some cases, the consumers have their own share in eliminating middlemen. This happens when they prefer to buy directly from the manufacturer to save some costs. However, this does not usually happen but it is a factor that contributes to the elimination of middlemen in the channel of distribution.

Here are some of the reasons for the elimination of middlemen; 

Cost Saving

Cost-saving is the primary reason why producers eliminate middlemen. They sell further up the food chain thereby saving money. Manufacturers in this case sell directly to the final consumers especially with the help of the internet which has contributed greatly to expanding markets. Instead of paying middlemen in order to promote products and resell, the producers design their own websites where they take orders and sell goods directly to the final consumer.

Middlemen usually pull up the cost of a product and it reflects in the selling price. The presence of middlemen in the market increases the cost of distribution and the entire burden rests on the final consumer in form of high prices of goods.

Better value

Usually, the elimination of middlemen creates a better value for both the buyer and sellers from the perspective of money. Every step taken in the channel of distribution involves a middleman adding to his costs. This causes the consumer to pay a higher price for the goods because he is paying for the actual cost of the product. This is because the retailer also expects his own profit as the buyer buys the goods. A producer easily sells to the consumer at lower prices while still generating greater gross profits for himself by eliminating middlemen.

Efficiency

Skipping steps in the distribution channel reduce the number of logistics and transportation required in the movement of goods from manufacturer to consumer. This increases efficiency significantly. It is possible for manufacturers to skip wholesalers and restock retail shops. Also, companies can offer products through websites and when the consumers send in orders, they will quickly ship them to consumers who will purchase them. The time of response on customized orders also has made distribution more efficient over time as companies have eliminated steps in the distribution process. This increases customer satisfaction and revenue.

Environmental impact

Eliminating middlemen also has an indirect benefit which is a better environmental impact, that is environmental preservation. Through the minimization of the number of heavy-duty trucks as well as the travel time of conveying products from one step to another, the producer reduces the level of air pollution. In addition to this, local farmers seize such opportunities to merchandise their fresh agricultural products to their local buyers. By this, they reduce the level of wastage that comes as a result of delays in conveying perishable goods thereby improving freshness.

Black marketing

Middlemen sometimes practice black-marketing, creating artificial scarcity (hoarding) leading to high demand for these products. This causes the price of the product to rise and only the consumers suffer the effect.

Failure passing on benefits to customers

There are instances in which the intermediaries fail to pass some benefits to the final consumers such as samples, price cut, etc., which the producer offers. For example, a producer of generators added a sample, say a football in the package. When it gets to the retailer, he may remove the football and sell it separately to another buyer meanwhile the football came together with the generator.

Duplicate products

Some immoral retailers mix genuine products with duplicate products and sell them to the consumers. This can have a negative effect on the image of the producer if there is no prompt action taken.

Selling expired goods

Some retailers do take advantage of the ignorance of some buyers and sell expired goods to them. These expired goods are dangerous to one’s health and can lead to death in some cases.

Selling beyond the M.R.P

M.R.P stands for the maximum retail price. Some retailers exceed this price thereby manipulating the “local taxes extra” to their own advantage. This also means that the retailers are exploiting consumers.

Failure of prompt replenishment of exhausted stock

There are times in which the middlemen fail to restock their stores with those stocks that they have exhausted early enough. This causes the consumer to wait for a longer period of time to get what he wants thereby causing many inconveniences for the consumer.

Poor after-sale service

In the case of some products like durables, after-sale service is a requirement. The attitude of some middlemen towards this can be irritating to the buyers. Some middlemen fail to extend these after-sale services to the consumers as extended earlier at the time of sale.

Poor image projection

Some middlemen fail to represent the image of the manufacturers as required thereby not giving them prominence.

No faithfulness

As a link between the producer and the consumer, it is mandatory for the middleman to be faithful to both (producer and consumer). He should be able to extend the consumers’ complaints and suggestions to the producers. The middleman should also extend every relevant information from the producers to the consumers. Many middlemen are not faithful in carrying out these responsibilities.

Frequently asked questions

What are the 4 channels of distribution?

Basically, there are 2 types of channels of distribution namely the direct and indirect channels. As the name implies, the direct channel is the shortest marketing channel because it does not involve any intermediary. The indirect channel involves intermediaries in reaching out goods to the final consumer. On the other hand, the indirect channel falls into 4 classes. The 4 indirect channels of distribution are as follows; 

  • One level channel of distribution
  • Two-level channel of distribution
  • Three-level channel of distribution
  • Four level channel of distribution

One level channel involves only one intermediary in reaching out to the final consumer, this intermediary is the retailer. A two-level channel involves two intermediaries passing goods to the final consumer, the producer passes his goods to the wholesaler, the wholesaler passes it to the retailer who then passes it to the final consumer.

For the three-level distribution channel, three intermediaries are involved in passing the producer’s products to the final consumer. These intermediaries include the agent, wholesaler, and retailer. The four-level channel is the longest channel of distribution which involves four intermediaries. That is, goods pass through four intermediaries before getting to the final consumer. These intermediaries include the distributor, agent, wholesaler, and retailer. The goods pass in that order until they get to the final consumer.

What are the 5 channels of distribution?

The 5 channels of distribution include the categories of the channel based on their levels. This includes both the direct and the indirect channels of distribution. The 5 channels include the zero-level channel, one-level channel, two-level channel, three-level channel, and four-level channel of distribution.

The one to four-level channels has been explained above. The zero-level channel of distribution is basically the direct channel that does not involve any intermediary in reaching out to the final consumer. The producer in this case has direct contact with the final consumer. In essence, the five types of channels of distribution are channels based on the number of intermediaries or levels.

What is meant by channel of distribution?

A channel of distribution or marketing channel is a business chain through which the manufacturer or producer passes his products to the final consumer. Usually, the manufacturer cannot effectively get his goods to the buyer or the final consumer without the help of middlemen. Channels of distribution can include agents, wholesalers, retailers, and also the internet.

Channels of distribution are part of the process of the manufacturer reaching his goods to the final consumer, which is the downstream process. It helps to answer the question that relates to how to get these products to the final consumer. This channel is also referred to as placement, and it is part of the marketing strategies of a company. It is certain that marketing strategies include product, promotion, price, and place.

What are the various types of distribution channels?

There are 2 basic types of distribution channels namely;

  • Direct distribution channel
  • Indirect distribution channel

The direct channel (zero-level channel) does not involve any middleman or intermediary in reaching out to the final consumer. That is, goods do not need to pass through the intermediaries before getting to the final consumer. The producer has direct contact with the final consumer.

The indirect distribution channel does involve intermediaries in reaching out to the final consumer. Here, the manufacturer carries out distribution through third parties to pass the goods to the consumer. These intermediaries are the sales agents that distribute the goods. Retailers sell directly to the final consumers.

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