Question No. 23: Define Channels of Distribution? What are the major types?

Answer: CHANNELS OF DISTRIBUTION: INTRODUCTION: The channel of Distribution means the Path or Rout, which products follow from the point of production to the point of consumption. It includes wholesalers, retailers, agents and distributors. Actually channel is divided into two categories. DEFINITIONS: According to DOUGLAS FOSTER: A channel of distribution is the path, which products take from the producer to ultimate consumer or industrial user. According to E.J.MECCARTHY: Channel of distribution is any series of firm or individuals from producer to final user or consumer. TYPES OF CHANNEL OF DISTRIBUTION: DIRECT CHANNEL: If producer sells the goods directly to consumer, it is called direct channel. INDIRECT CHANNEL: If producer sells the goods to consumer Kinds through middlemen, it is called indirect channel.

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of goods: main kinds of goods: Goods

(A) Consumer

(B) Industrial Goods

Convenience goods: Shopping goods: Specially goods:

B- INDUSTRIAL GOODS: Industrial goods mean those goods, which are purchased for producing the other goods. These goods satisfy consumer wants indirectly. These goods are: Raw material: Semi manufactured goods: Capital goods:

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A- CONSUMER GOODS: Consumer goods mean that form of goods, which are wanted by the consumers i.e. Food, Manufactured goods. The purchasing power of the consumer further divided into three kinds.

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There are two

COMMON POINTS OF CONSUMER AND INDUSTRIAL GOODS: Producer to Consumer / User: Some producers adopt the direct channel of distribution and they supply the goods directly to the consumers without any middlemen. The nature of these types of goods small-scale production

CONSUMER

RETAILER

WHOLESELLER

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Producer to Retailer to Consumer/ User: Some times a producer adopts this channel and supplies the goods directly to the retailer. And retailer supplies goods directly to the consumer. In this way the profit of the wholesaler is saved.

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PRODUCER

Producer to Wholesaler to Retailer to Consumer/ User: In this type of channel there are two middlemen involved such as wholesaler and retailer this strategy is adopted is in the large-scale business. The Wholesaler sells the goods to retailer.

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Producer to Agents to Wholesaler to Retailer to Consumer/ User: According to this channel, producer hires some agents to sell the product through them and paid some amount of

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Producer to Agents to Retailer to Consumer/ User: Many producers prefer to agents instead of whole sellers they give the commission to the agent who reach them to the large-scale retailers and from retailers to consumer.

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commission. The agents sell to whole sell from wholesaler to retailer and from retailer to final consumer.

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CONCLUSION: In short, channels are the blood for the business because without these channels the life of business would be stopped. In different kinds of business there are different kinds of channels which play their role in the promotion of business.

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NOTE: For Industrial Goods: If we consider the industrial goods instead of consumer then we will be User.

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