Meaning and Objectives of Channels of Distribution and Types of Channels

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Most of the goods and services we use in our daily life also come from the producers or manufacturers and. Product which are manufacture in factory and final product is available in our near area which reach us through some people. This whole process done through distribution channels. Distribution channels include Producer to final consumer.

Meaning of Channels of Distribution

  • The main purpose of trade is to supply goods to the consumers living in far off places. As goods and services move from producer to consumer they may have to pass through various individuals. Channels of Distribution understand with example. A farmer living in Srinagar has an apple orchard. Once the apples are ripened, he sells the apples to an agent of Delhi. The agent collects the apples from Srinagar, packs them, and sells them to a wholesaler of Delhi fruit market. The retailers buy apples from the wholesalers in small quantities to sell them to the consumers.

  • Finally, we purchase apples from the vendors as per our requirement. Thus, while coming from the producer at Srinagar, the product reaches the consumers by passing through several hands like an agent, a wholesaler and a retailer. All these three are called Middlemen.

  • These middlemen are the connecting links between producers of goods, on one side and consumers, on the other. They perform several functions such as buying, selling, storage, etc. These middlemen constitute the channels of distribution of goods. Thus, a channel of distribution is the route or path along which goods move from producers to ultimate consumers.

  • The route taken by goods as they move from producer to consumer is known as Channel of Distribution as shown by the following figure:

Channel of Distribution

Channel of Distribution

Objectives of Channels Distribution

Objectives of Channel Distribution

Objectives of Channel Distribution

Types of Channels

  • Normally goods and services pass through several hands before they reach in the hands of the consumer for use. But in some cases, producers sell goods and services directly to the consumers without involving any middlemen in between them, which can be called as direct channel. So, there are two types of channels, one direct channel and the other, indirect channel.

  • Direct channel includes from Producer to Consumer. While indirect channels are of various types such as:

    • Producer → Agent→ Wholesaler→ Retailer → Consumer

    • Producer → Wholesaler → Retailer → Consumer

    • Producer → Agent → Consumer

    • Producer → Wholesaler → Consumer and

    • Producer → Retailer → Consumer

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