Types of Distribution Channels
It is essential to make the product or service available to the customer at the right place and at the right time, then only the customer would be able to purchase the product or service. Place is an element of marketing and is a process of transferring goods from the place of production to the place of consumption. Therefore, Place Mix is an important decision and is related to the physical distribution of the goods and services to the customers. The decisions under place mix include deciding the market for distribution, the channel of distribution, etc. Hence, the place mix consists of Channels of Distribution and Physical Movement of Goods. The two different channels of distribution are direct channel and indirect channel. And the components of physical distribution include order processing, transportation, warehousing, and inventory.
Channels of Distribution
A set of middlemen or intermediaries who help an organisation in the flow of goods and services from the manufacturers to the consumers are known as Channels of Distribution. The intermediaries along with the help in the physical movement of goods, also help in the movement or title or transfer of ownership. The two types of channels of distribution or distribution level are Direct Channel and Indirect Channel.
Types of Distribution Channels/Level
1. Direct Channel (Zero Level)
As the name suggests, a direct channel or zero level is a distribution level through which an organisation directly sells its products to the customers with the involvement of any intermediary. For example, jewellers use direct channels, Apple sells its products directly to the customers through its stores, Amazon sells directly to the consumers, etc. Some of the most common types of direct channels of distribution are Direct sales by appointing salesmen, through Internet, teleshopping, mail order house, etc.
2. Indirect Channels
When a middleman or intermediary is involved in the distribution process, it means the organisation is using Indirect Channels of Distribution. The indirect channels of distribution can be classified into three categories; viz., One Level Channel, Two Level Channel, and Three Level Channel.
i) One-Level Channel
One level channel means that there is only one intermediary involved between the manufacturer and the customer to sell the goods. This intermediary is known as a retailer. In simple terms, under one level channel, the organisations supply their products to the retailers who sell them to the customers directly. For example, goods like clothes, shoes, accessories, etc., are sold by companies with the help of a retailer.
ii) Two-Level Channel
A most commonly used channel of distribution that involves two intermediaries for the sale of products is known as Two Level Channel. The intermediaries involved are wholesalers and retailers. The producer sells their products to wholesalers in bulk quantity, who sells them to small retailers, who ultimately supply the products to the customers. This channel is generally used to sell convenient goods like soaps, milk, milk products, soft drinks, etc. For example, Hindustan Unilever Limited sells its goods like detergent, tea leaves, etc., through wholesalers and retailers.
iii) Three-Level Channel
Three level channel means that there are three intermediaries involved between the manufacturer and the customer for the sale of products. The three intermediaries involved are Agent Distribution, Wholesalers, and Retailers. It is usually used when the goods are distributed across the country and for that different distributors are appointed for different areas. For example, wholesalers purchase goods from different distributors, like North India Distributors and then pass the goods to the retailers, who ultimately sell the goods to customers.
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