Businesses spend heavily on making product and services that cater to their consumer choices or needs of the distribution channel. Making the items accessible viably and productively to the end consumers is considered under the spot idea of the advertising otherwise known as a distribution channel (Rushton, Croucher, and Baker, 2014). Choices concerning distribution channels are of most extreme significance to manufacturers. Businesses utilize numerous mediators which perform various jobs in the distribution channel. Every part in this chain fills in as a connection in the distribution system connecting the maker to the end client. Logistics is, therefore, an assorted and dynamic function that remains ﬂexible and needs to change as required. Businesses, therefore, use various forms of channels to leverage their operations and business processes.
A physical distribution channel is considered as the term used to portray the strategy and means by which an item or a gathering of items are physically moved, or dispersed, from their place of creation to the time when they are made accessible to the final client (Farahani et. al., 2011). It incorporates a few basic activities like transportation, warehousing, inventory control, order processing, and material handling. It has two main objectives:
- consumer satisfaction and,
- profit maximisation.
A business can satisfy retailers by making them accessible to the right merchandise at the right spot and time, at minimal expenses. Instant and reliable distribution improves consumer satisfaction. this is possible using physical distribution (Xing et. al., 2010). It helps in creating time and place utility. This remains done through transportation and warehousing. It helps in reducing distribution cost and due to proper transportation and warehousing leads to cost economies. It also helps in maintaining stable prices and improving customer services. 90% of all types of businesses use physical distribution channels.
Marketing distribution channels
A marketing channel is the people, associations, and activities that are important to move the responsibility from the point of generation to the point of utilization (Rushton et. al., 2014). It is the manner in which items get to the end-consumer. This channel is less conventional in the structure such that it enables the producer or distributor to procure buyers by utilizing more than one distribution channel. Businesses achieve their buyer through an immediate market strategy.
For example, a site or pitch to another organization or retailer to achieve the buyer through another channel, i.e., a store or a franchise.
There are four types of marketing distribution channels;
- Producer => Customer (zero- level channel)
- Producer => Retailer => consumer (one-level channel)
- Producer => wholesaler => retailer => customer (two level channel)
- Producer => wholesaler => retailer => customer (three-level channel)
The main problem associated with marketing channels is consumer needs and expectations that are varied. The aim of the marketing channel is to match the segments of demand and supply (Rushton et. al., 2014). Other problems with marketing channels are the choice of marketing channels and distribution channels.
Assembling channel members
The most important factor is to find a strong channel member so that they efficiently perform the distribution tasks necessary to implement the channel strategy (Bowersox, Mentzer and Speh, 2008). Collaborating and coordinating product flows are the two main strategies in assembling channel members. Co-ordination and collaborating among channel members is through the bargaining process. Channel members share a common goal, maximizing the efficiency and effectiveness of the logistics system. The relationships among channel members are influenced by the structure of the marketing channels that remain used for product or service availability and consumption.
Channel associations comprise of two classifications:
- re-sellers and,
- speciality service firms.
Resellers in certain ventures comprise of members as middlemen, merchants or vendors with the goal of pitching to prospective buyers (Rushton et. al., 2014). The subcategories are retailers, wholesalers and industrial distributors.
Speciality service firms are associations that furnish extra administrations to help with the trading of items but don’t take responsibility for the product or service (Rushton et. al., 2014). These include agents and brokers, and distributive services firms.
For example, while attracting qualified marketing intermediaries, Toyota first introduced its Lexus line in the US. It had no trouble attracting new dealers. In fact, it had to turn down many would-be resellers. When Polaroid started, it could not get photography stores to carry its new cameras, and it had to go to mass-merchandising outlets.
Components of different distribution channels
The distribution channels change on the basis of the type of business structure (Dent, 2011). In the case of direct channels, producers or manufacturers sell their goods directly to the consumers. While indirect channels include a trading company. An indirect marketing channel can be both short and long. Only one trading company is included in the short channel (Dent, 2011). In the long channel, there are two or more intermediaries like wholesale and retail companies.
In vertical marketing type of businesses, systems are formed by joining the functions of separate participants in a distribution channel (Bowersox et. al., 2008). They are the result of competitive and concentration flows, so that some business systems expand by taking over the functions of other channel members. This is the expansion of activities within certain corporations, i.e. groups, as well as the development of cooperation types.
In horizontal marketing systems, two or more vertically unrelated firms join their resources or programs for pursuing new opportunities in the market.
For example, retailers in a trade centre, retailers in the supply co-operative, banks with their retail banking services in supermarkets (Dent, 2011).
If a product is being sold to customers who do not have the same status, or to customers in different markets, it is possible to establish multi-channel systems.
Hybrid marketing channels show that the use of a single channel is not sufficient (Dent, 2011). Multichannel architecture optimises channel coverage, adjustability and control. While at the same time minimises cost and conflict. Therefore, distribution channels vary for different customers and businesses.
- Bowersox, D.J., Mentzer, J.T. and Speh, T.W., 2008. Logistics leverage. Journal of Business Strategies, 25(2), p.85.
- Dent, J., 2011. Distribution channels: Understanding and managing channels to market. Kogan Page Publishers.
- Farahani, R., Rezapour, S. and Kardar, L. eds., 2011. Logistics operations and management: concepts and models. Elsevier.
- Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
- Xing, Y., Grant, D.B., McKinnon, A.C. and Fernie, J., 2010. Physical distribution service quality in online retailing. International Journal of Physical Distribution & Logistics Management, 40(5), pp.415-432.