Suitability of selling through direct channels

 Costly industrial goods such as computer, aircraft, heavy machinery etc.

 Perishable gods like fruits, vegetables, eggs, butter, milk etc.
 Household appliances.
 If customers purchase large quantities.
 In case the number of suppliers is small.

Selling through indirect channel

According to this method of indirect selling, product is passed on to the customers through
intermediaries, known as wholesalers, retailers and agents. These channels may be as under:

Producers -> Wholesalers -> Retailers -> Customer Two level Channel: It is commonly used
channel of distribution. It is also known as traditional or normal channel of distribution. This
channel is useful for small producers for small means. The channel is used for consumer goods. The
common practice is that the manufacturer sells goods in large quantity to wholesalers, who sell
goods to retailers in small quantity. Finally goods are sold to customers in pieces.

Producer -> Agent -> Retailer -> Consumer or Two level Channel: The common practice in this
two level channel is that the goods are sold to the agent in bulk. The agent sells goods to retailer,
who sells goods to customers in pieces. This channel is suitable where the retailers are few and
geographically centered. This channel is commonly used in textile, machinery, equipment and
agricultural products.

Producer -> Agent -> Wholesaler -> Retailer -> Customer or Three level Channel: The
common practice in this three level channel is that goods are sold by the producer to the agent, who
sells it to the wholesaler, who sells to the retailers who finally sells goods to customers. This is the
longest channel of distribution. This practice is useful, when the producer wants to the relieved of
the problem of distribution. This channel is popularly used in textile.

Producer -> Retailer -> Customer or one level Channel: Under this channel the producer sells
goods to retailers, who sell the goods to customers. This channel is popular with the departmental

1
stores, chain stores and supermarkets etc., because these are large scale retailers. Generally
readymade garments, shoes home appliances and automobiles are sold through this channel.

Advantages of a Distribution Channel

When a customer is considering buying a product he tries to access its value by looking at various
factors which surround it. Factors like its delivery, availability etc which are directly influenced by
channel members. Similarly, a marketer too while choosing his distribution members must access
what value is this member adding to the product. He must compare the benefits received to the
amount paid for using the services of this intermediary. These benefits can be the following:

 Cost Saving

The members of distribution channel are specialized in what they do and perform at much
lower costs than companies trying to run the entire distribution channel all by itself.

 Time Saving

Along with costs, time of delivery is also reduced due to efficiency and experience of the
channel members. For example if a grocery store were to receive direct delivery of goods
from every manufacturer the result would have been a chaos. Everyday hundreds of trucks
would line up outside the store to deliver products. The store may not have enough space for
storing all their products and this would add to the chaos. If a grocery wholesaler is included
in the distribution chain then the problem is almost solved. This wholesaler will have a
warehouse where he can store bulk shipments. The grocery store now receives deliveries
from the wholesaler in amounts required and at a suitable time and often in a single truck. In
this way cost as well as time is saved.

 Customer Convenience

Including members in the distribution chain provides customer with a lot of convenience in
their shopping. If every manufacturer owned its own grocery store then customers would

2
 have to visit multiple grocery stores to complete their shopping list. This would be
extremely time-consuming as well as taxing for the customer. Thus channel distribution
provides accumulating and assorting services, which means they purchase from many
suppliers the various goods that a customer may demand. Secondly, channel distribution is
time saving as the customers can find all that they need in one retail store and the retailer

 Customers can buy in small quantities

Retailers buy in bulk quantities from the manufacturer or wholesaler. This is more cost
effective than buying in small quantities. However they resell in smaller quantities to their
customers. This phenomenon of breaking bulk quantities and selling them in smaller
quantities is known as bulk breaking. The customers therefore have the benefit of buying in
smaller quantities and they also get a share of the profit the retailer makes when he buys in
bulk from the supplier.

 Resellers help in boosting sales

Resellers often use persuasive techniques to persuade customers into buying a product
thereby increasing sales for that product. They often make use of various promotional offers
and special product displays to entice customers into buying certain products.

 Customers receive financial support

Resellers offer financial programs to their customers which makes payment easier for the
customer. Customers can buy on credit; buy using a payment plan etc.

 Resellers provide valuable information

Manufacturers who include resellers for selling their products rely on them to provide
information which will help in improving the product or in increasing its sale. High-level
channel members often provide sales data. On all other occasions the manufacturer can
Always rely on the reseller to provide him with customer feedback.

3
Disadvantages of including intermediaries in the distribution channel

 Revenue loss

The manufacturer sells his product to the intermediaries at costs lower than the price at
which these middlemen sell to the final customers. Therefore the manufacturer goes for a
loss in revenue. The intermediaries would never offer their services to the manufacturer
unless they made a profit out of selling his products. They are either made a direct payment
by the manufacturer, for instance shipping costs or as in the case of retailers by selling the
product at costs higher than the price at which the product was bought from the
manufacturer (also known as markup). The manufacturer could have sold at this final price
and made a greater profit if he had been managing the distribution all by himself.

 Loss of Communication Control

Along with loss over the revenue the manufacturer also loses control over what message is
being conveyed to the final customers. The reseller may engage in personal selling in order
to increase the product sale and communicate about the product to his customers. He might
exaggerate about the benefits of the product this may lead to miscommunication problems
with end users. The marketer may provide training to the salespersons of retail outlets but on
the whole he has no control on the final message conveyed.

 Loss of Product Importance

The importance given to a manufacturer’s product by the members of the distribution

channel is not under the manufacturer’s control. In various cases like transportation delays
the product loses its importance in the channel and the sales suffer. Similarly a competitor’s
product may enjoy greater importance as the channel members might be getting a higher
promotional incentive.
Online Solution Advantages, Disadvantages of Distribution Help:

If you are stuck with a Solution Advantages, Disadvantages of Distribution Homework problem and
need help, we have excellent tutors who can provide you with Homework Help. Our tutors who
provide Solution Advantages, Disadvantages of Distribution help are highly qualified. Our tutors
have many years of industry experience and have had years of experience providing Solution

4
Advantages, Disadvantages of Distribution Homework Help. Please do send us the Solution
Advantages, Disadvantages of Distribution problems on which you need Help and we will forward
then to our tutors for review.

Online Tutor Functions Advantages, Disadvantages of Distribution Channel :

We have the best tutors in math in the industry. Our tutors can break down a complex Functions
Advantages, Disadvantages of Distribution Channel problem into its sub parts and explain to you in
detail how each step is performed. This approach of breaking down a problem has been appreciated
by majority of our students for learning Functions Advantages, Disadvantages of Distribution
Channel concepts. You will get one-to-one personalized attention through our online tutoring which
will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please
do send us a request for Functions Advantages, Disadvantages of Distribution Channel tutoring and
experience the quality yourself.

5
6