No business can survive on its own. It needs a proper and robust network to carry on its business smoothly and ensure regular transportation of goods from the site of production to various market outlets. A business should carefully choose its channel of distribution so that its manufactured products reach the customers on time. This also ensure that the investment in the stocks and products is repaid quickly by materialising sales. 4 Top HR Trends & Priorities for 2021.
A distribution channel a network or chain of middle men or intermediaries through which manufactured products passe until they reaches the final buyer or the end consumer. Distribution channels can include wholesalers, retailers, distributors, and even the Internet. It is part of a firm's marketing strategy. There are two forms of distribution channels -direct and indirect. Direct channels does not involve any middlemen and the product reaches to the customers directly from manufacturing site. In an indirect channel, product passes through various intermediaries to reach the final consumers. 8 Types of Working Capital & Everything you should know about them!
Here are factors that need to be considered while choosing a distribution channel -
Nature of the product
The first and the foremost aspect while deciding the channel of distribution is the type and nature of the product. If the product is perishable in nature, which get spoiled easily and quickly, should mostly use direct channel of distribution so that the goods reach the customers fresh and well in time. However for durable and semi-durable products longer and indirect channels of distribution can be used.
Cost of Distribution Channel
Another important aspect to be considered for determining the channel of distribution is the cost involved. Mostly the direct channels are less expensive than the indirect ones and involves less time . Firm should examine various options available and choose the one which is most cost effective. Every middlemen involved leads to an additional increase in the overall price of the product.
Channel of Distributions Used by Competitors-
Firms should also look at the channels of distributions being used by its various competitors. It gives firm a sense of expenditure related to distribution channels to the firm. The business could also take the first mover advantage. By regularly analysing the market scenarios, businesses can quickly change the channels to have an advantage over its competitors.
Firms should be careful while choosing a channel of production and it is the only source through which its products reach the customers and sales materlise. Any distribution channel should be flexible enough to accommodate for opportunities and threats of the dynamic business environment.