Functions of Distribution Channels

Functions of Distribution Channels

The functions of distribution channels are to promote products, manage inventory levels, transport products, offer a variety of products, conduct market research, and provide financing.

Some important functions performed by distribution channels are as follows:

• Sorting: Middlemen acquire the goods from various suppliers and arrange them into familiar groups based on their size, quality, shape, etc.
  
  
• Accumulation: Intermediaries/middlemen maintain a huge volume of stock to ensure a continuous supply of goods.
  
  
• Allocation: Sorted goods are then packed in small marketable quantities (such as 250 gm, 500 gm and 1 kg) for sale.
  
  
• Assorting: Middlemen procure a variety of goods from different manufacturers and provide them to the customers in the combinations desired by them. Example: Rice is obtained from Dehradun as well as Punjab to cater to the varying customer preferences.
  
  
• Product promotion: Producers have the onus of undertaking marketing and promotional activities. However, at times, the middlemen also contribute their bit in acts such as discounts, special displays and stock clearance sale.
  
  
• Risk-taking: Intermediaries have to bear the risk of the distribution of goods and services; for instance, the risk arising from damage or spoilage of goods when they are transported from one place to another or when they are stored in the warehouse. Primarily, channels of distribution result in the following benefits:
  
  
  • Convenience to customers: It enables customers to have multiple items in a single store.
    
    
  • Wider customer reach: It enables an organisation to reach a large and wide geographical area with efficiency in distribution.
    
    
  • Reduces cost: It assists an organisation to reduce cost as retailers stock the shelves with the products, in turn, cutting additional stocking and delivery expenses.
    
    
  • Quick feedback: It facilitates quick customer response and provides an insight into how a product can be made better. Broadly, there are two types of distribution channels: Direct channel and Indirect channel.

Types of Channel

Direct channel

In this type of channel, the manufacturer directly sells the goods or services to the end-consumer. There is no involvement of middlemen and is also called direct to consumer. This is the simplest and shortest mode of distribution.

Amazon Inc. is an apt example of a direct channel of distribution as it uses its own online selling platform to sell Kindle to customers. Methods of the direct channel are door-to-door selling, Internet selling, telemarketing and organisation-owned retail outlets.

Indirect Channel

The manufacturer engages one or more middlemen to distribute goods or services. The main forms of indirect channels are:

• One-level channel: Manufacturer → Retailer → Consumer
  
  This channel has only one intermediary, i.e., retailer who sells the product/ service to the final buyer. It is usually adopted for speciality products/ services. For example, Tata sells its cars through approved retailers. Dell sells its products directly to reputed retailers.
  
  
• Two-level channel: Manufacturer → Wholesaler → Retailer → Consumer
  
  In this channel, wholesaler and retailer act as a link between the manufacturer and consumer. This is a commonly used channel for distributing soap, clothes, grains, cereals, etc. The wine and adult beverage industry also uses this distribution channel.
  
  
• Three-level channel: Manufacturer → Agent → Wholesaler → Retailer → Consumer
  
  This channel consists of three middlemen, i.e., agent, wholesaler and retailer. The manufacturers supply the goods or services to their agents who, in turn, supply them to wholesalers and further to retailers. This level is particularly useful when a manufacturer wants to cover a wide geographical area with limited products.

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Functions of Physical Distribution

Let us understand the functions of physical distribution in discrepancy removal in the process of sales management:

Match Discrepancy

Consumers do not purchase directly from producers. Consumers typically purchase very small portions of product; however, producers produce them in massive portions. Therefore, there’s a discrepancy between deliver and call for.

For example, cement manufacturers like ACC and footwear like Nike produce massive products, however customers want product in small portions. This distinction in amount is synchronised with the aid of using the salesperson who gives the variety of product to the customer.

Storing and Transportation

After things are manufactured, they must be stored until they are sold to clients. This necessitates the establishment of storage and warehousing facilities. One of the most significant roles of intermediaries is to keep items in their facilities to meet changing client demand.

There are channel partners whose major responsibility is product storage. This eliminates the need for the manufacturers to invest in their own storage infrastructure. Goods must eventually make their way to markets where they may be purchased by people. In this movement, transportation and logistics partners come to the rescue of producers.

Information Provision

There are salesperson and shops close to you. The proximity of this area offers purchaser comments and direct facts approximately options and new modifications in product. Brokers also can offer treasured facts approximately the sports in their competition.

In a worldwide advertising scenario, a corporation may also find out about its clients and competition from intermediaries working in its market. Brokers can affect the selections of clients who want a specific logo clearly through offering facts approximately the applicable product or corporation.

Think approximately how shops can effect logo purchases through teaching clients approximately the strengths and weaknesses of the logo below consideration. Uninformed clients rely upon the salesperson on the quilt of the distribution channel to make the proper buy selections.

Assortment of Products

Sales channels help customers purchase product in handy character batches, packs, and exclusive product variations, main to client usability. Goods and product are industrially produced to take gain of economies of scale and minimise ordinary manufacturing costs.

However, those items and offerings are fed on in small quantities, so maximum of them want to be destroyed. This is completed via way of means of the channel broker.

A collection approach is a plan that stores (in-shop and e-commerce) use to decide the first-rate product mixture for his or her each day inventory. It is critical to stores due to the fact clients engage directly with the product and make buy selections primarily based totally on what they see.

Product Width

Product Width refers back to the variety of product traces supplied via way of means of stores. For example, supermarkets might also additionally provide a product line that tiers from meals to cosmetics to over the counter medicines. All of those are client-handy product traces and make up the product variety supplied via way of means of stores.

Product Depth

Product Depth is quite a few product supplied in every product line. For example, if the store in query is a grain forte shop, it can promote loads of grains. The range determines the intensity of the product.

Spatial Discrepancy

• The channel goods facilitate to lessen the “distance” among product producers and customers.
  
  
• Consumers are scattered
  
  
• Need to attain cheaper
  
  
• Enterprises additionally produce product in a single area to satisfy worldwide needs

Temporal Discrepancy

Channel system is quicker than client call for helps to respond. The time of manufacture and the time of intake of the product are exclusive. The wide variety of manufacturing bases is limited; however, there are loads of customers.

Gurgaon’s Maruti Factory-Cars and spare components are to be had while customers want. Temporal mismatch spatial mismatch. A state of affairs that happens while a product is synthetic, however, the client is not geared up to shop for it. The distinction between a producer’s area and a broadly dispersed marketplace area,