Channels of Distribution

The concept of a channel of distribution Who channel members are What you’ll learn The concept of a channel of distribution Who channel members are The different non-store retailing methods How channels of distribution differ for consumer and business-to-business products

Channel of Distribution The path or routes, that goods and services take from the producer to the ultimate consumer or industrial user.

Producer (Manufacturer) Makes or provides goods and services.

Ultimate Consumer Is anyone who personally uses a good or service to satisfy her/his own wants or needs.

Industrial User Is a business that buys materials, services, or goods that will be used to make other goods or used in the operation of the company.

Channel Members are called intermediaries Operate between producer and consumer or user to help in the movement of goods and services.

Types of Intermediaries-Retailers Retailers: Businesses that buy consumer goods and sell them to the ultimate consumers.

Types of Intermediaries-Wholesalers Wholesalers: Businesses that buy goods from producers or agents and sell them to retailers. Wholesalers buy a variety of goods from many producers and sell groups of related products to retailers.

Types of Intermediaries-Agents Agents: Businesses or individuals that assist in the sale and/or promotion of goods and services but do not buy them from the producer.

Importance of intermediaries Through the use of intermediaries, producers are able to match their production to the wants and needs of consumers or industrial users. Intermediaries will have products and services at the right place, at the right times and at the least costs.

Direct and Indirect Channels Direct distribution occurs when the goods or services are sold from the producer directly to the customer – no intermediaries are involved. Example: A farmer sells corn at a street market. Indirect distribution involves one or more intermediaries.

Channels in the consumer markets

Channels in industrial markets