Product Distribution20th June 2020
Distribution means to spread the product throughout the marketplace such that a large number of people can buy it.
Distribution can make or break a company. A good distribution system quite simply means the company has greater chance of selling its products more than its competitors. The company that spreads its products wider and faster into the market place at lower costs than its competitors will make greater margins absorb raw material price rise better and last longer in tough market conditions. Distribution is critical for any type of industry or service. The best price product, promotion and people come to nothing if the product is not available for sale at the points at which consumers can buy.
In the FMCG industry in India, specially, companies distribute their low-value, high volume products to over 1 million retail outlets, or points of sale. The most successful FMCG companies have the biggest networks, made of factories, stock points, distributors or C&F (Carrying and forwarding agents), wholesalers, retailers and consumers. Nowadays, even direct marketing is considered a feasible distribution channel.
Distribution involves doing the following things:
- A good transport system to take the goods into different geographical areas.
- A good tracking system so that the right goods reach at the right time in the right quantity.
- A good packaging, which takes the wear and tear of transport.
- Tracking the places where the product can be placed such that there is a maximum opportunity to buy it.
- It also involves a system to take back goods from the trade.
Importance of Distribution
Distribution is one of the important mix among marketing mixes. Delivery of satisfaction, standard of living, value addition, communication, employment, efficiency and finance are the major role and importance of distribution.
The role and importance of distribution in marketing and in the whole economy can be discussed as follows:-
Delivery of satisfaction
Marketing concept emphasizes on earning profit through satisfaction of the customers. Besides market research for the development and sales of goods according to need and wants of consumers, the participants of distribution channel also help producers in production of new goods.
Standard of living
Distribution function helps to improve living standard of the consumers in the society. Proper distribution of necessary goods and services to the consumers easily at right time does not only satisfy them but also brings change in their living standard. Distribution brings improvement in living standard of consumers through generation of employment, increase in income and transfer of ownership. Hence, it brings positive effect in the society.
The functions of distribution such as transportation, warehousing, inventory management etc. increase the importance of products by creating place utility, time utility and quantity utility. Distribution mix plays an important role to increase the value of the products through delivery of goods in right quantity, at right place and right time.
Distribution serves as link between producers and consumers. Producers can make flow of information and messages to consumers about their products, price, promotion etc. through channel members. Similarly, they receive information about customers, competitors and environmental changes from channel members.
The function of distribution creates employment opportunities in society. Market intermediaries work as direct and indirect sources of employment. Different producers need to supply their innumerable products to consumers. Thousands of distributors, agents, wholesalers, retailers, brokers etc. involve in supplying the products to the consumers. Similarly, many persons of the society can get job in the transport and warehouses sectors, etc.
Producers produce limited types of goods in mass quantity. but the consumers demand different types of goods in small quantity. When goods are produced in a mass quantity, they can be obtained at lower price. Distribution helps to satisfy the needs of consumers by supplying assortment of different products of different producers. From this, efficiency can be achieved in both production and distribution.
Intermediaries themselves make arrangement to keep reserve and stock of goods. The producers need not make arrangement and management of distribution centers and warehouse. The producers need not do anything except remaining busy in production, the timely payment by intermediaries and financial helps become more important for smooth operation of production. Similarly, the role of finance is also decisive in mobilizing other means of production.
Different types of channel of distribution are as follows:
Manufacturers and consumers are two major components of the market. Intermediaries perform the duty of eliminating the distance between the two. There is no standardised level which proves that the distance between the two is eliminated.
Based on necessity the help of one or more intermediaries could be taken and even this is possible that there happens to be no intermediary. Their description is as follows:
(A) Direct Channel or Zero Level Channels
When the manufacturer instead of selling the goods to the intermediary sells it directly to the consumer then this is known as Zero Level Channel. Retail outlets, mail order selling, internet selling and selling
(B) Indirect Channels
When a manufacturer gets the help of one or more middlemen to move goods from the production place to the place of consumption, the distribution channel is called indirect channel. Following are the main types of it:
- One Level Channel
In this method an intermediary is used. Here a manufacturer sells the goods directly to the retailer instead of selling it to agents or wholesalers. This method is used for expensive watches and other like products. This method is also useful for selling FMCG (Fast Moving Consumer Goods).
- Two Level Channel
In this method a manufacturer sells the material to a wholesaler, the wholesaler to the retailer and then the retailer to the consumer. Here, the wholesaler after purchasing the material in large quantity from the manufacturer sells it in small quantity to the retailer.
Then the retailers make the products available to the consumers. This medium is mainly used to sell soap, tea, salt, cigarette, sugar, ghee etc.
- Three Level Channel
Under this one more level is added to Two Level Channel in the form of agent. An agent facilitates to reduce the distance between the manufacturer and the wholesaler. Some big companies who cannot directly contact the wholesaler, they take the help of agents. Such companies appoint their agents in every region and sell the material to them.
Then the agents sell the material to the wholesalers, the wholesaler to the retailer and in the end the retailer sells the material to the consumers.