Channel of Distribution, Its Importance & Types

Definition

A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers. It is a distribution network through which a producer puts his products in the hands of actual users. A trade or marketing channel consists of the producer, consumers or users and the various middlemen who intervene between the two. The channel serves as a connecting link between the producer and consumers. By bridging the gap between the point of production and the point of consumption, a channel creates time, place and possession utilities. A channel of distribution represents three types of flows:

a. Goods flow from producer to consumers;

b. Cash flow from consumers to producer as payment for goods; and

c. Marketing information flows in both directions, from producers to consumers in the form of information on new products, new uses of existing products, etc. The flow of information from consumers to producers is the feedback of the wants, suggestions, complaints, etc.

Importance of channel of distribution

The importance of channel of distribution are as follows:

· Cost Savings in Specialization - Members of the distribution channel are specialists in what they do and can often perform tasks better and at lower cost than companies who do not have distribution experience. Marketers attempting to handle too many aspects of distribution may end up exhausting company resources as they learn how to distribute.

· Reduce Exchange Time - Not only are channel members able to reduce distribution costs by being experienced at what they do, they often perform their job more rapidly resulting in faster product delivery.

· Customers Want to Conveniently Shop for Variety - Marketers have to understand what customers want in their shopping experience .Resellers within the channel of distribution serve two very important needs: 1) they give customers the products they want by purchasing from many suppliers (termed accumulating and assortment services), and 2) they make it convenient to purchase by making products available in single location.