28 March 2014

Distribution Channel

The organization must carefully consider all the channels of distribution and eventually fix and adopt those channels which would bring the best results. This would considerably depend on the nature of the article as well as the money which can be spent by the organization concerned. In selecting the form of distribution, the manufacturer should also bear in mind the costs involved as, however, attractive or suitable any form of distribution may seem, it must of necessity fall within a definite cost range depending on the available funds. However, a method of distribution which is cheap need not necessarily be correct. Channelizing through wholesalers may be cheaper in represen­tation cost than selling to the retailers as there are fewer wholesalers than retailers. Again, selling to the retailers would be cheaper than going to the customer direct because there are fewer retailers than there are members of the public. The wholesaler does not pay the same price as the retailer, but, then, he buys in larger quantities, his credit is safer and there is a considerable reduction in capital outlay as the cost accounting, delivery and general overheads is less.
These considerations would also apply when considering selling to the retailer rather than direct to the consumer. The selection of the channels of distribution would also depend to a large extent on the nature of the product. For this purpose goods may generally be divided into “staple” and “specialty” goods. The staple commodity is an article which is in constant demand with some claim to being a necessity as opposed to utility or luxury articles.
Sugar, tea, coffee, rice and foodstuff as well as buttons, ink, gum, etc., are examples of staple commodities. Staple commodities are generally easier to sell than specialty goods for obvious reasons.
Vacuum cleaners, adding machines, refrigerators, Dictaphones, internal telephone systems, office printing machines duplicators, etc., arc examples of specialty goods. Specialty goods require a higher and more efficient form of salesmanship than staple goods.
In both these cases the degree of effort involved in selling would vary according to whether the goods are new to the market or whether they are goods for which the demand is already created. It will thus be seen that success or failure of the sales effort would materially depend on the care and skill with which the method of distribution has selected and exploited. Generally it would be safer to adopt methods which have been proved by competitors to be sound and suitable. In recent years there is a general tendency to shorten the route through which the article passes before reaching the consumer.
In many cases the manufac­turer has himself undertaken the functions of the jobber or wholesaler, and the retailer.
The reverse procedure has also taken place in certain cases and large retail organizations have entered into the field of manufacturing as well as wholesaling their goods.
In the selecting of the form distribution, the primary consideration should naturally be the cost of distribution in relation to the product. In case of staple goods which are new products to the market, the task of creating a demand is more difficult than in regard to others but the demand once created is easier to maintain.
The manufacturer of such goods very often adopts a direct-to-retailer policy to commence with and once the demand is created he then approaches wholesalers.