Channels of Distribution

From the Manufacturer to the Customer

Channels of DistributionThe path a product takes from producer or

manufacturer to the final user.

Channel of Distribution

• How will you get your products to sell?• How will you get the products to the

customer’s hands?

Channels of Distribution are the routes products or services take from the time they are produced to the time they are consumed.

Channel Members are called intermediaries

• Intermediaries provide value to producers because they often have expertise in certain areas that producers do not have.

• Intermediaries are experts in displaying, merchandising, and providing convenient shopping locations and hours for customers.

Channel Members are called intermediaries

• Wholesalers – buy large quantities of goods from manufacturers, store the goods, then resell them to other businesses– Rack jobbers – manage inventory and

merchandising for retailers by counting stock, filling it in when needed, and maintaining store displays.

– Drop shippers –own the goods they sell but do not physically handle the actual products.

Retailers – sell goods to the final consumer for personal use

– Brick and mortar retailers

– Automatic retailing – vending service

– Direct mail and catalogs

– TV home shopping

– E-tailing – online retailing

Agents – do not own the goods they sell. They bring buyers and sellers together

Direct and Indirect Channels

• Direct distribution occurs when the goods or services are sold from the producer directly to the customer – no intermediaries are involved.–Example: – A farmer sells corn at a street market.– Services businesses are additional

examples of direct channel* If you take your financial plans to an accounting firm and they audit your books for you. No one else is involved.

Direct and Indirect Channels

• Indirect distribution occurs when the goods or services are sold from the producer through an intermediary to the customer – These can include:

* Wholesalers – in turn sell to retailers

* Retailers – sell to customers

* Agents – arrange for sales

Channel of Distribution

• Every time you can remove a person from the distribution chain, you may be able to reduce cost.

• Before opening your business, you must determine where you will get your product and how you will get it to the customer.

Channels in the consumer markets

Channels in industrial markets