Conventional Distribution System

  • Post last modified:10 August 2023
  • Reading time:9 mins read
  • Post category:Sales Management
Coursera 7-Day Trail offer

Conventional Distribution System

Traditional distribution channels are the most common distribution channels. Traditional distribution consists of producers, wholesalers and retailers who act independently. This channel guarantees the flow of goods from producers to end customers via wholesalers and retailers.

Traditional sales channels are important to businesses because they define the phase of the final product and how it reaches the consumer. In traditional sales channels, each level works individually and is mutually exclusive.

Therefore, the coordination between these three is the biggest challenge for such a system. In addition, channel competition is very common and leads to sales disruptions. For this reason, companies are now starting to develop integrated channels (vertical or horizontal marketing systems).

Traditional distribution channels consist of one or more independent producers, wholesalers, and retailers. Each is a separate company trying to maximise its own profits, perhaps even at the expense of the entire system. No channel member has sufficient control over other members, and there is no formal way to assign roles to resolve channel conflicts.

According to Kotler and Armstrong (2001), a conventional distribution channel is a channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximise its own profits even at the expense of profits for the system as a whole. In this case, the intermediary either functions independently or contracts with a supplier or other intermediary. In addition, traditional sewer networks tend to be fragmented as manufacturers, wholesalers and retailers actively negotiate prices with each other.

Distribution channels in marketing are useful tools in marketing because they act as a series of processes that require the transfer of ownership of goods from the point of production to the place where consumers use them. The traditional sales role is literally a well-designed traditional approach to delivering the desired product to the target market.

According to Philip Kotler, traditional distribution channels consist of one or more independent manufacturers, wholesalers, and retailers, each aiming to maximise profits at the expense of the profits of the entire system.

Traditional distribution channels are primarily used for all consumer goods, from clothing to groceries. This channel originates from manufacturers working in the supply chain and distributes products nationwide. The manufacturer’s job is to pay huge amount of money to the media to promote their products. In addition, products are passed through the supply chain to wholesalers or distributors. The job of wholesalers/distributors is to receive large quantities of all products for efficiency. A wholesaler is an intermediary between a retailer and a manufacturer.

However, some have their own retailers so that consumers can buy directly from wholesalers. Wholesalers can divide large quantities into small quantities and hand them over to individual retailers. Comparable other communication channels, traditional channels require a place of purchase for customers such as retailers and wholesalers.

It is based on consumer buying behaviour towards the target buyer of the product. Retailers can also buy directly from manufacturers and wholesalers and sell to consumers. The advantage of a retailer is that he can buy in bulk, with strong customer loyalty, an attractive offer for the brands he runs. If the target market cannot be reached, or if the sales channel shifts due to the closing of the store, the conventional sales channel will change.

The fundamental disadvantage in traditional distribution channels during a recession, destabilising relationships between producer intermediaries. For example, if a product cannot be sold at any level, a wholesaler, retailer, or distributor may decide to discontinue the production of the product. Manufacturing needs to be flexible at this point in order to reduce the risk of selling new products on the market.

Traditional sales channels assume that each company operating on this channel is a separate group and operates. Traditional distribution channels are fragmented networks in which manufacturers and consumers are loosely connected to each other through intermediaries in the exchange process.

Types of Conventional Channel

Direct Distribution Channels

A consumer goods manufacturer has the option of selling directly to his customers. There are no intermediaries in this channel; it is the shortest and easiest.

When it comes to selling directly to end users, there are three options:

  • Through own sales stores, i.e. several locations.
  • Orders can be placed by mail or over the phone.
  • By sales agents on the road.

Indirect Distribution Channels

The indirect channel is one in which a manufacturer distributes his items through middlemen. To finish the distribution process, a chain is followed.

Some of the indirect channels are as follows:

One Level Channel of Distribution

A producer may enlist the assistance of intermediaries to distribute his goods; intermediaries might be a store or a wholesaler. The manufacturer provides retailers and wholesalers direct access to him through this distribution route.

This is also the simplest, most straightforward, oldest, and most widely used distribution route. These channels are best used when the goods require elaborate outlets and is purchased in large quantities. It is also appropriate for perishable items that are used often and have a consistent demand.

Two Level Channel of Distribution

A producer may choose to distribute his products through two intermediaries. Wholesalers and retailers are two possible intermediaries. For many consumer items, this is the most conventional route. The producer sells vast amounts of his items to wholesalers through this route.

Wholesalers deliver items to retailers in modest quantities, according to their needs. A wholesaler is required to coordinate the retailers in locations where the size of the retailing institutions is modest and extensive. This sophisticated approach is also required for products that require a balanced or equal distribution.

Multi Level Channel of Distribution

Manufacturers can sell goods to consumers with the help of three or more intermediaries. These intermediaries are distributors, wholesalers and retailers. This is an extension of the above channels and is required if complex distribution deployments are required.

This is the longest sales channel and is mainly used by small businesses that cannot afford to establish their own sales force. Manufacturers usually shift the risk of selling a product to a sales partner and focus on production. Manufacturers with diverse product portfolios, large-scale consumer goods manufacturing, and domestic and international markets commonly use this channel.

Article Source
  • Scott, G. Effective Selling and Sales Management

  • Theodoridis, C., Sarmaniotis, C., & Stalidis, G. (2019). Marketing Intelligence in Retail and Distribution Management. Bradford, West Yorkshire: Emerald Publishing Limited.

Sales Management

(Click on Topic to Read)

Leave a Reply