Factors affecting the choice of distribution channel

Distribution is an activity that involves making the flow of goods and services from the point of production to end users or consumers. It is the means or process by which goods and services move from the point of production to the point of consumption. The main importance of distribution is to help overcome the difference in time and place that separates goods and services from those who need them.

The distribution channel is the means by which goods and services are made available to consumers in the marketplace. It is an organized system of agencies and institutions, which in combination perform all the activities required to link producers with consumers in order to fulfill the desired marketing task.

TYPES OF DISTRIBUTION CHANNEL

There are two main types of canal system which are;

1) Conventional Marketing System – This includes an independent producer, wholesaler and retailer. Each is a separate business entity seeking to maximize its own profits. It’s more or less a highly fragmented network in which loosely aligned manufacturers, wholesalers, and retailers have haggled and negotiated terms of sale.

2) Vertical Marketing System: This is a type of distribution channel where coordination is achieved because the producer, wholesaler, and retailer act as a unified system. Any member owns the others, and no individual member can dominate the system. It is also effective for controlling channel behavior and eliminating conflicts that arise when independent channel members pursue their own goals.

DISTRIBUTION CHANNEL FORMS

Any of the types mentioned above can take any of these forms.

There are three forms of distribution channel which are;

I. Direct Channel – It is when producers decide to sell directly to consumers. It is especially common in the sale of industrial and perishable consumer goods. It is a zero level method. That is, Manufacturer – Consumer. This form is mainly based on services. For example, hairdresser, doctor, etc. There is no intermediary intervention in this form of distribution channel.

II. Indirect channel: involves the intervention of intermediaries to carry out the movement of goods to final consumers. It is a one level method. That is, Manufacturer – Retailer – Consumer.

third Multichannel: uses one or more channel systems to reach the market. It is a two-tier method. That is, Manufacturer – Wholesaler – Retailer – Consumer.

Factors affecting the choice of distribution channel

The choice of the channel is based on the analysis of the consumer, the type of company, the characteristics of the product and the consideration of the environment of the company.

1. Consideration of the market: the following analyzes must be carried out at the market level:

I. Consumer or industrial market

II. Number of potential consumers

third Geographical concentration of the market.

IV. order size

2. Consideration of the product: a thorough analysis of the characteristics of the product must be carried out, since this affects the choice of channel. These include:

I. Unit volume

II. Bulks and weights

3rd Perish skill

IV. Product line extension

3. Company Consideration: The company’s reputation, resources, experience, and desire to control the channel are important factors that can affect channel choice. For example, companies with adequate financial and non-financial resources will be less compelled to use intermediaries.

4. Consideration of intermediaries: Under this, we consider the type of service provided by intermediaries, the availability of desired intermediaries, and sales volume opportunities.

5. Environmental Consideration: Environmental factors to consider include economics, technology, legal, competition, etc. In most cases, when economic conditions are depressed, producers turn to the shortest and cheapest channel.