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Factors that affect the choice of the distribution channel

Distribution is an activity that involves effecting the flow of goods and services from the point of production to the end users or consumers. It is the means or process by which goods and services move from the point of production to the point of consumption. The main importance of distribution is to help overcome the time frame and the difference in place that separates goods and services from those who need them.

The distribution channel is the means by which goods and services are made available to consumers in the market. It is an organized system of agencies and institutions, which in combination performs all the necessary activities to link producers with consumers in order to achieve the desired marketing task.

TYPES OF DISTRIBUTION CHANNEL

There are two main types of canal systems that are;

1) Conventional marketing system: it is understood by producer, wholesaler and independent retailer. Each is a separate business entity seeking to maximize its own profit. It’s more or less a highly fragmented network in which loosely aligned manufacturers, wholesalers, and retailers have haggled and negotiated terms of sale.

2) Vertical marketing system: this is a type of distribution channel where coordination is achieved because the producer, wholesaler and retailer act as a unified system. Any member owns the others and no member can dominate the system. It is also effective in controlling channel behavior and eliminating conflicts that result when independent channel members pursue their own goals.

DISTRIBUTION CHANNEL FORMS

Any of the types mentioned above can take any of these forms.

There are three forms of distribution channel that are;

I. Direct channel: this is when producers decide to sell directly to consumers. It is most common in the sale of industrial and perishable consumer goods. It is a zero level method. That is, manufacturer – consumer. This form is primarily service based. For example, hairdresser, doctor, etc. There is no intervention of intermediaries in this form of distribution channel.

II. Indirect channel: implies the intervention of intermediaries to effect the movement of goods to final consumers. It is a one level method. That is, manufacturer – retailer – consumer.

III. Multichannel: one or more channel systems are used to reach the market. It is a two-tier method. That is, manufacturer – wholesaler – retailer – consumer.

Factors that affect the choice of the distribution channel

The choice of the channel is based on the analysis of the consumer, the type of company, the characteristics of the product and the consideration of the environment of the company.

1. Market consideration: the following analyzes must be carried out at the market level:

I. Consumer or industrial market

II. Number of potential consumers

III. Geographical concentration of the market

IV. Order size

2. Consideration of the product: a thorough analysis of the characteristics of the product must be carried out, as this affects the choice of the channel. These include:

I. Unit volume

II. Bulk and weights

III. Perish skill

IV. Product line extension

3. Company Consideration: Reputation, resources, experience, and desire to control the company’s channel are important factors that can affect channel choice. For example, companies with adequate financial and non-financial resources will be less obliged to use intermediaries.

4. Consideration of intermediaries: Under this, we consider the type of service provided by intermediaries, the availability of desired intermediaries, and sales volume opportunities.

5. Environmental Consideration: Environmental factors to consider include economics, technology, legal, competition, etc. In most cases, when economic conditions are depressed, producers turn to the shortest and cheapest channel.

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