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.