They are given the duty to handle the product distribution of a specified area or district in return for a certain percentage of commission. These agents come in handy when goods need to move quickly into the market soon after the order is placed. Three-level channel of distribution involves an agent besides the wholesaler and retailer who assists in selling goods. Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to Customer) Goods that are durable, standardised and somewhat inexpensive and whose target audience isn’t limited to a confined area use two-level channel of distribution. Wholesalers buy the bulk from the manufacturers, break it down into small packages and sell them to retailers who eventually sell them to the end customers. Two-Level Channel (Manufacturer to Wholesaler to Retailer to Customer) One level channel of distribution works best for manufacturers dealing in shopping goods like clothes, shoes, furniture, toys, etc. Retailers buy the product from the manufacturer and then sell it to the customers. Indirect channels can be classified into three types: One-level Channel (Manufacturer to Retailer to Customer) When a manufacturer involves a middleman/intermediary to sell its product to the end customer, it is said to be using an indirect channel. Indirect Channels (Selling Through Intermediaries) They are in direct contact with the end customers and help the manufacturers in propagating the brand message and product benefits and other benefits to the customers. Marketing: Distribution channels are also called marketing channels because they are among the core touchpoints where many marketing strategies are executed. Sharing Risks: Since most of the channels buy the products beforehand, they also share the risk with the manufacturers and do everything possible to sell it.They also offer different types of products in a single place which is a huge benefit to customers as they don’t have to visit different retailers for different products. Wholesalers and retailers purchase large quantities of goods from manufacturers but break the bulk by selling a few at a time to many other channels or customers. Creating Efficiencies: This is done in two ways: bulk breaking and creating assortments.Facilitation: Channels of distribution even provide pre-sale and post-purchase services like financing, maintenance, information dissemination and channel coordination.Logistics and Physical Distribution: Distribution channels are responsible for the assembly, storage, sorting, and transportation of goods from manufacturers to customers. But other than these transactional functions, distribution channels are also responsible to carry out the following functions: They make the product available when, where, and in which quantities the customer wants. In order to understand the importance of distribution channels, businesses need to understand that it doesn’t just bridge the gap between the producer of a product and its user.ĭistribution channels provide time, place, and ownership utility.
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