24-09-2012, 01:51 PM
Channels of Distribution
Channels of Distribution.pdf (Size: 113.05 KB / Downloads: 1,047)
Are you aware that the study material of Business Studies, which is now in your hands, is prepared
at the headquarters of the National Institute of Open Schooling (NIOS) situated at New Delhi.
How did it come to your hands? Was it available at your study centre or you bought it from the
market? If you got it from your study centre, then just think for a while: how did it reach your
study centre? Actually, after publishing the study material, NIOS sent this material to your study
centre and then you collected it from there. Similarly, the NIOS study material available in the
market is directly purchased by the booksellers from NIOS. Then, the booksellers sell it to you.
Thus, the study material published by NIOS reached you either through your centre or through
booksellers. In a similar way most of the goods and services we use in our daily life also come
from the producers or manufacturers and reach us through some people. In this lesson, let us
learn how the goods and services of our need reach us.
Meaning of Channels of Distribution
You know that 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. Let us take an example. A farmer 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 at New Delhi sabzimandi. The wholesaler
then distributes them to various retail fruit vendors throughout Delhi by selling smaller quantities.
Finally, we purchase apples from those vendors as per our requirement. Thus, we find that 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 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.
(i) Direct Channel
In this channel, producers sell their goods and services directly to the consumers. There is no
middleman present between the producers and consumers. The producers may sell directly to
consumers through door-to-door salesmen and through their own retail stores. For example,
Bata India Ltd, HPCL, Liberty Shoes Limited has their own retail shops to sell their products to
consumers. For certain service organizations consumers avail the service directly. Banks,
consultancy firms, telephone companies, passenger and freight transport services, etc. are examples
of direct channel of distribution of service.
(ii) Indirect Channel
If the producer is producing goods on a large scale, it may not be possible for him to sell goods
directly to consumers. As such, he sells goods through middlemen. These middlemen may be
wholesalers or retailers. A wholesaler is a person who buys goods in large quantities from
producers; where as a retailer is one who buys goods from wholesalers and producers and sells
to ultimate consumers as per their requirement. the involvement of various middlemen in the
process of distribution constitute the indirect channel of distribution. Let us look into some of the
important indirect channels of distribution.