Types of Distribution Channels Class 12
Two main types of distribution channels are:
A. Direct Channel
B. Indirect Channel
A. Direct Channel (Zero level):
Manufacturers --> Consumers
This is the simplest and shortest mode of distribution. There’s a close connection between the manufacturer and the consumer.
The manufacturer sells directly to the consumer without intermediaries. It can be Direct Selling i.e. providing products through the company's own retail outlets and sales staff, like McDonald's or by direct delivery to the customer, either in person or via mail.
Mail order selling involves getting orders from customers who respond to ads or direct mail, and then shipping the product to them.
B. Indirect Channel
In an indirect channel, manufacturers use intermediaries like wholesalers and retailers to sell products to consumers. Each intermediary adds to the cost by taking a share of the profits.
This method is useful for large producers needing to reach many small retailers, making large-scale distribution more efficient.
Indirect Channels can be:
- One level channel:
Manufacturer --> Retailer --> Consumer
In One level channel, only one intermediary is involved. The manufacturer supplies goods directly to retailers, who then sell to end consumers.
The producer regularly checks retailers' needs and supplies goods accordingly. Retailers can also pick up goods from the producer's warehouse if needed e.g. Maruti Udyog sells its cars through approved retailers.
- Two levels channel:
Manufacturer --> Wholesaler --> Retailer --> Consumer
In two level channel the manufacturer supplies products in bulk to wholesalers. Retailers then buy from wholesalers and sell to local consumers. This setup, involving both wholesalers and retailers, is FMCG being sold through big retailers like BIG BAZAAR.
This is the most common channel adopted for consumer goods
- Three levels channel:
Manufacturer --> Agents --> Wholesaler --> Retailer --> Consumer
Three-Level Channel involves three intermediaries: mercantile agents, wholesalers, and retailers. The manufacturer sells to mercantile agents, who sell to wholesalers, who then sell to retailers, and finally to consumers.
It is useful for manufacturers with limited product lines needing to cover a wide market.
Marketing Intermediaries are middlemen, that facilitate the flow of goods from manufacturer to consumer.
Types of Marketing Intermediaries:
a) Agents: Represent producers, earn commissions, but don't own products (e.g., travel agents).
b) Wholesalers: Buy in bulk, own products, and sell to retailers for profit.
c) Distributors: Similar to wholesalers but carry complementary products and maintain close relationships with suppliers and customers.
d) Retailers: Sell directly to end users, can be small independent stores or large chains.
Intermediaries are crucial for efficient product distribution and can vary depending on the product type.
Types of Distribution Channels Class 12