Channel of Distribution and Its Functions

Meaning of 'Channel of Distribution'

By the term channel of distribution' is meant that chain through which, passing from one to the other hand, the product reaches from the producer to the final consumer. The following are some of the main definitions of the channel of distribution:

In the opinion of Richard Buskirk, Channel of distribution is that system of financial organization by which a producer sends his products to the hands of consumers.

Stanton has opined that by channel of distribution is meant that way which the entitled owner adopts in sending the goods or products from the producer to the final consumer 'or the industrial consumer.

In the view of McCarthy, Any order of the institutions from the producer to the consumer in which either one middlemen or any number of them might be there, is known as the channel of distribution.

In the opinion of Cundiff and Still, Channels of distribution are those marketing nets through which the producer flow the products toward the market.

Functions of the Channels of Distribution

The following are the main function of the channel of distribution:

(1)   Extending Suggestions Regarding Price-Determination. The middlemen are in the direct contact of the consumers. Therefore, they possess the knowledge that on what price may the consumer accepts the product. Thus, the channel of distribution extends necessary advice to the producers in the price-determination.

(2)   Regularizing the Decisions. The channel of distribution regularizes the decisions and the transactions, resulting in the lowering of the costs. If the products are sold off to some such store which has many branches in the city, the producer then doesn't need going to various branches frequently or repeatedly. The main cause of the same is that if the product seems suitable for the store, it will itself send the purchase order to the manufacturer and in this way, with only the limited efforts, it will become possible to sell the products in bulk quantities.

(3)   Managing the Finance. We find that the agents generally send some advance money along with the order. Very often the product is supplied to the agents through the bank so that the company gets the documents discounted from the bank. Thus the finance is arranged. Thus it-is also the function of the agents to arrange the finance.

(4)   Performing the Promotion Activities. By the middlemen, particularly by the retailers, the advertisements, individual sales, and the sales promotion activities are performed. Very often the middlemen themselves plan and implement the promotion activities and sometimes the manufacturers too extend their help in such work. Really, the result or the outcome of the sales, by the producer, very much depends upon the promotion activities undertaken by the middlemen.

(5)   Serving the Consumers. Due to the middlemen only, the consumers get their required products. Only in accordance with the needs of the consumers, the retailers arrange to purchase the products from the wholesellers and the manufacturers.

(6)   Minimizing the Total Transactions. If there were no middlemen, the producer would have been required to sell the product directly to the consumers which would have result into more of expenditure and trouble. Really speaking, due to the existence of the middlemen only, the number of total transactions is reduced which also reduces the costs of distribution.