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What Is a Channel of Distribution.

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Helna is a postgraduate in Commerce who now working as a Manager and also love sharing informative information with her readers.

Delivery of Goods

Distributors distribute the goods to the consumers. They are also called intermediaries. They identify the demand and source of goods. They directly negotiated between the producer and consumers.

Distributors distribute the goods to the consumers. They are also called intermediaries. They identify the demand and source of goods. They directly negotiated between the producer and consumers.

What Is a Channel of Distribution?

The channel of distribution is the network of institutions that perform a variety of interrelated and coordinating functions in the movement of goods from produces to consumers.


The distribution system involves many processes. It is the movement of goods from manufacturers to the end consumers. Many parties are involved in the distribution system. Main parties are (1) Manufactures or producers (2) Distributes (3) Facilitating agencies (4) Consumers.


Manufacturers produce goods. It could be manufacturing goods in a factory or other goods which are produced in the farm like grains and fruits.


Distributors distribute the goods to the consumers. They are also called intermediaries. They identify the demand and source of goods. They directly negotiated between the producer and consumers. They also do certain other functions like buying, selling, Packing, Packaging, assembling, grading, risk-bearing, etc.


Facilitating agencies are agencies that facilitate the transfer of goods from producers to consumers. Insurance companies, Banking institutions, Warehousing agencies, Transport companies are some of the examples of facilitating agencies.


Consumers are the end-users of the product. They are the last participants in the distribution system.

Utility of a Channel of Distribution

A Channel of distribution is mainly concerned with the middlemen who assist the producers to distribute the goods to the consumers. Many companies do not deal with end-users. They use middlemen to distribute the goods. These middlemen take the title of the goods and transfer it to the consumer. Some other causes they assist the producer to transfer the title of goods to the consumers. The channel of Distribution is mainly concerned with the transfer of title from the producers to the consumers directly or through a chain of intermediates as most producers do not sell goods directly to the consumers.


Creates Place Utility: Nowadays most companies depend on the channel of distribution to sell their goods to the end-users as these distribution channels create a place, time, and position utilities to the product and effectively do the function of physical distribution. Many products are produced in a manufacturing unit which is used by consumers all over the country. For example, apples are produced in Kashmir and Himachal Pradesh but are used by people all over India. Most of the textile mills are located in Mumbai, Ahmedabad, and Chennai. But the users of the clothes are spread all over India. Nano Cars are produced in a plant in Gujarat. But the end-users of the Nano car spread all over India. So the distribution channel is a vital part of the business all over the world. A distribution channel helps in the movement of goods from producers to the consumer and thus creates place utility to the product.


Creates Time Utility: Some products like Woolen clothes and raincoats are used by the consumer in the winter and rainy season respectively. But these goods are produced throughout the year by the manufacturing companies. Some products like food grains are produced by the farmers in the respective season. But the food grains are used by the consumers throughout the year. Distributors facilitate the function of making the goods available to the consumer at the time of utility. So the Channel of distribution facilitates the time utility. They remove the time barrier i.e. the time of production and the time of consumption.


Creates Convenience Utility: Distribution channels make it possible for the consumer to buy products in a convenient shape, size, style, and package. Distributors buy goods in bulk quantity and sell the same to the consumers as per their need and size and shape. They also pack the goods properly for protection and convenience. Small packets and big packets are available at the distributor. The consumer can buy goods as per his need.


Creates Possession Utility: The distribution channel also makes it possible for the customer to buy goods at a price suitable to him. Quality goods cost more. Goods are available at a cheap rate in low quality. Goods in less quantity cost less money. Likewise, the bulk quantity costs more. Distributors make it possible for consumers to buy goods as per their purchasing power. So the Channel of Distribution facilitates the possession utility.


The channel of distribution is the network of institutions that perform a variety of interrelated and coordinating functions in the movement of goods from produces to consumers.


In short Distribution channel facilitates the movement of goods from producers to the consumers while performing the function of time, place, and utility.

  • Functions of Channels of Distribution
    Functions of Channels of Distribution. Functions performed by Channels of distribution can be categorized in to three main groups. They are: 1. Transactional Functions. 2. Logistical Functions. ...

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2010 Helna

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