Distribution Channels - Meaning and Their Significance

Various marketing intermediaries are used in transferring the products from the hands of producers to the final consumers or industrial users. These marketing intermediaries carry alternate names such as wholesalers, distributors, retailers, franchised dealers, jobbers, authorised dealers and agents. Such marketing intermediaries compromise the distribution channel. These distribution channels minimize the gap between point of production and point of consumption, and thereby create place, time and possession utilities.

Role and Significance/Importance of Distribution Channels

Dristribution Channels perform a crucial role in the successful distribution and marketing of all products. They have various contacts, expertise and wider knowledge of the products. The rapidly growing markets and increasing complexities of distribution have increased the demand and requirement of the distribution channels.

The role of distribution channels can be summarised as follows:

1. Distribution channels offer salesmanship: The distribution channels offer pivotal role of a sales agent. They help in creating new products in market. They specialize in word of mouth selling and promotion of products. They assure pre-sale and post-sale service to the consumers. Since these channels are in direct and regular contact with the consumers, they do salesmanship very well and at the same time provide true and valuable feedback to the producers.

2. Distribution channels increase distributional efficiency: The intermediary channels ease the sales process as they are in direct contact with the customers. They narrow down the gap between producers and consumers both ecoomically and efficiently. These intermediaries reduce the number of transactions involved in making products available from producers to consumers.

   For instance, there are four producers who are targeting to sell their products to four customers. If there is no distribution channel involved, then there will be sixteen transactions involved. But if the producers use distribution channels, then the number of transactions involved will be reduced to eight( four from producer to intermediary and four from intermediary to customer), and thereby the transportation costs and efforts will also be reduced.

3. The channels offer products in required assortments: Just like the producers have expertise in manufacturing products, similarly the intermediaries have their own expertise. The wholesalers specialize in moving and transferring products from various producers to greater number of retailers. Similarly, the retailers have expertise in selling a wide assortment of goods in less quantity to a greater number of final customers.

   Due to the presence of distribution channels(wholesalers and retailers), it is possible for a consumer to buy the required products at right time from a store conveniently located(geographically closer) rather than ordering from a far located factory. Thus, these intermediaries break the bulk and meet the less quantity demand of the customers.

4. They assist in product merchandising: It is actually the merchandising by intermediaries which fastens the product movement from the retail shop desk to the customer’s basket.

   When a customer goes to a retail shop, he/she may be fascinated by the attractive display of some new product, may get curious about that new product, and may switch over to that new product leaving his/her regular product. Thus merchandising activities of the intermediaries serve as a quiet seller at a retail store.

5. The channels assist in executing the price mechanism between the firm and the final customers: The intermediaries help in reaching a price level which is acceptable both to the producers as well to the consumers.

6. Distribution channels assist in stock holding: The intermediaries perform various other functions like financing the products, storing the products, bearing of risks and providing required warehouse space.

Thus, the distribution channels are a vital constituent of a firm’s comprehensive marketing strategy. They assist in expanding product reach and availability, as well in increasing revenue.

Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.