(The famer in the picture is actually the producer. It can also be a miner or anyone else that produces goods.)
A distribution channel is the flow of a product or service in one direction (Producer to consumer). On the other hand, the money flows in the other direction (consumer to vendor).
Stages of the distribution channel
There are 6 different distribution channels
1.Producer to Consumer:
-Often seen in farms where products are directly sold to the client.
2.Producer to Retailor to Consumer:
-The clients buy the products from a retail outlet but it did NOT produce the product, the outlet only bought the product from the producer and it is often large to store a large quantity of products.
3.Producer to Wholesaler to Retailer to Consumer:
- The wholesaler buys a big quantity of products then breaks it into smaller bulks (that's why it's called breaking bulks) for the retailers to buy. Many small retailers don't want to buy large quantities of products since some can expire quickly and they don't have enough space to store the goods.
4.Producer to Agent to Wholesaler to Retailer to Consumer:
-The agent sells the product on behalf of the producer. This is often seen when the producer is from a foreign country and isn't familiar with the local market, the agents knows the market therefore knows how to sell the products in the right way.
How to select which channel to use?
You have to look at the following aspects:
-What type of product is it?
-Is it technical? If yes, then it should be sold by someone with technical knowledge.
-Where are the customers located? If most customers are located in the city then the products shouldn't be limited to rural areas.
-How perishable is the product? Food and flowers perish easily so it should be widely available to be sold off quickly.
-How expensive is the product? The image of the product is important as it affects the price so it should only be sold through a number of retailers.
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