What is meant by distribution of goods?

It is the action of sharing something out among a number of recipients. It is the way in which something is shared out among a group or spread over an area. It is the action or process of supplying goods to stores and other businesses that sell to consumers.

Distribution is the process of moving a product that has been produced from the producer to the final consumer. The process of distribution is then called channel of distribution.

1. The Channels of Distribution

The channels of distribution are as follows:

• The producer/ manufacturer
• The wholesalers
• The retailers
• The consumers

1. The Producer/ Manufacturer: A person, company, or country that makes, grows, or supplies goods or commodities for sale. A producer is someone or company that makes goods available for sale.
2. The Wholesaler: The wholesaler is the trader who buys goods in large quantity, he / she buys in bulk from the producer and sell in small quantities to the retailers. The wholesaler is the middleman between the producer and the consumer. The wholesaler can be a company or an individual. They can be referred to as merchants, distributors or dealers. The wholesalers distribute raw materials for the production of consumer goods. The producers’ deals directly with the wholesalers and the wholesalers deal directly with the retailer
3. The Retailer: The retailer is a trader who buys goods from the wholesalers in small quantity and sells to the consumers. The retailer is the last link in the channel of distribution. The retailer stands between the wholesalers and the consumers.
4. The Consumer: The consumer refers to an individual who buys products or services for personal use and not for manufacture or resale as a Consumer. A Consumeris a person who engages in acquiring and using goods and services to satisfy his needs and wants. The consumer is the one who pays to consume the goods and services produced. As such, consumers play a vital role in the economic system of a nation. In the absence of their effective demand, the producers would lack a key motivation to produce.

Functions of the wholesalers to the Manufacturer

The following are the functions of the wholesalers to the manufacturer

• The wholesalers markets and advertises the products for the manufacturers
• The wholesalers moves finished goods from the manufacturer to the warehouse , thereby creating space for the manufacturer to put new finished goods
• The wholesalers sometimes prepare a product for sale by replacing them.
• They finance the manufacturer by paying for goods in advance
• They help to give advice to the manufacturers
• They give information to the manufacturers about the goods produced.

Functions of the wholesalers to the Retailer

The following are the functions of the wholesalers to the retailer

• The wholesalers sell in small quantity to the retailer
• He helps the retailers to transport their goods to their destination
• They also help to finance the retailers by selling to them on credit
• They also help them in the acquisition of their duties
• They help in grading and packaging of goods
• They bear the loss or risk of any bad products
• They make goods available in small quantities

Functions of Retailer to the Wholesalers

• The retailers gather information from the consumer and sends it to the wholesalers
• The retailers help the wholesalers in advertising their products to the final consumer
• The retailer moves the goods from the wholesaler’s warehouse thereby creating space for the wholesalers to stock more goods.
• They finance the wholesalers by buying from them in cash and paying in advance.

Functions of the Retailer to the Consumer

• The retailers make buying of goods easy to the consumer and brings goods nearer to the consumer
• They are everywhere , so therefore the consumer can get to buy whatever they want to buy anywhere
• The retailer opens his shop for business from morning till night and every day.
• He sells on credit to the customer
• He also assist the consumer in making a good choice
• The retailer discovered the needs of the people in their environment.

Functions of the Consumer to the Retailer

• They relate with the retailer as friends
• They give information to the retailer about the product sold to them
• The consumer finance the retailer by paying for products and paying in advance

Test and Exercise

1. The major an important channel of distribution is (a) the consumer (b) the retailer (c) the wholesaler (d) the producer
2. ———— Finances the producer (a) retailer (b) consumer (c) manufacturer (d) wholesalers
3. ———— buys in large quantity and sell in small quantity to the retailer (a) the consumer (b) the producer (c) the wholesalers (d) the retailer
4. All the following are chains of distribution except (a) manufacturer (b) wholesalers (c) traders (d) consumer
5. All the channels of distribution are important. True/ false
6. The channel of distribution is (a) process of distribution (b) location of distribution (c) the idea of the business (d) all of the above
7. The last link in the channel of distribution is (a) manufacturer (b) wholesaler (c) retailer (d) consumer
8. Those who buys goods to satisfy their wants are referred to as (a) producers (b) retailers (c) consumers (d) wholesalers
9. The action of sharing something out among a number of recipients is (a) combination (b) distribution (c) continuation (d) malnutrition

• ———- and ————- is called the middlemen (a) consumer and producers (b) consumer and retailer (c) wholesalers and retailers (d) producers and retailers

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Related

A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. Distribution channels can include wholesalers, retailers, distributors, and even the internet.

Distribution channels are part of the downstream process, answering the question "How do we get our product to the consumer?" This is in contrast to the upstream process, also known as the supply chain, which answers the question "Who are our suppliers?"

• A distribution channel represents a chain of businesses or intermediaries through which the final buyer purchases a good or service.
• Distribution channels include wholesalers, retailers, distributors, and the Internet.
• In a direct distribution channel, the manufacturer sells directly to the consumer. Indirect channels involve multiple intermediaries before the product ends up in the hands of the consumer.

A distribution channel is a path by which all goods and services must travel to arrive at the intended consumer. Conversely, it also describes the pathway payments make from the end consumer to the original vendor. Distribution channels can be short or long, and depend on the number of intermediaries required to deliver a product or service.

Goods and services sometimes make their way to consumers through multiple channels—a combination of short and long. Increasing the number of ways a consumer is able to find a good can increase sales. But it can also create a complex system that sometimes makes distribution management difficult. Longer distribution channels can also mean less profit each intermediary charges a manufacturer for its service.

Channels are broken into two different forms—direct and indirect. A direct channel allows the consumer to make purchases from the manufacturer while an indirect channel allows the consumer to buy the goods from a wholesaler or retailer. Indirect channels are typical for goods that are sold in traditional brick-and-mortar stores.

Generally, if there are more intermediaries involved in the distribution channel, the price for a good may increase. Conversely, a direct or short channel may mean lower costs for consumers because they are buying directly from the manufacturer.

While a distribution channel may seem endless at times, there are three main types of channels, all of which include the combination of a producer, wholesaler, retailer, and end consumer.

The first channel is the longest because it includes all four: producer, wholesaler, retailer, and consumer. The wine and adult beverage industry is a perfect example of this long distribution channel. In this industry—thanks to laws born out of prohibition—a winery cannot sell directly to a retailer. It operates in the three-tier system, meaning the law requires the winery to first sell its product to a wholesaler who then sells to a retailer. The retailer then sells the product to the end consumer.

The second channel cuts out the wholesaler—where the producer sells directly to a retailer who sells the product to the end consumer. This means the second channel contains only one intermediary. Dell, for example, is large enough to sell its products directly to reputable retailers such as Best Buy.

The third and final channel is a direct-to-consumer model where the producer sells its product directly to the end consumer. Amazon, which uses its own platform to sell Kindles to its customers, is an example of a direct model. This is the shortest distribution channel possible, cutting out both the wholesaler and the retailer.

A distribution channel, also known as placement, is part of a company's marketing strategy, which also includes the product, promotion, and price.

Not all distribution channels work for all products, so it's important for companies to choose the right one. The channel should align with the firm's overall mission and strategic vision including its sales goals.

The method of distribution should add value to the consumer. Do consumers want to speak to a salesperson? Will they want to handle the product before they make a purchase? Or do they want to purchase it online with no hassles? Answering these questions can help companies determine which channel they choose.

Secondly, the company should consider how quickly it wants its product(s) to reach the buyer. Certain products are best served by a direct distribution channel such as meat or produce, while others may benefit from an indirect channel.

If a company chooses multiple distribution channels, such as selling products online and through a retailer, the channels should not conflict with one another. Companies should strategize so one channel doesn't overpower the other.

The term “distribution channel” refers to the methods used by a company to deliver its products or services to the end consumer. It often involves a network of intermediary businesses such as manufacturers, wholesalers, and retailers. Selecting and monitoring distribution channels is a key component of managing supply chains.

Direct distribution channels are those that allow the manufacturer or service provider to deal directly with its end customer. For example, a company that manufactures clothes and sells them directly to its customers using an e-commerce platform would be utilizing a direct distribution channel. By contrast, if that same company were to rely on a network of wholesalers and retailers to sell its products, then it would be using an indirect distribution channel.

The three types of distribution channels are wholesalers, retailers, and direct-to-consumer sales. Wholesalers are intermediary businesses that purchase bulk quantities of product from a manufacturer and then resell them to either retailers or—on some occasions—to the end consumers themselves. Retailers are generally the customers of the wholesalers and offer high-touch customer service to the end customers. Lastly, direct-to-consumer sales occur when the manufacturer sells directly to the end customer, such as when the sale is made directly through an e-commerce platform.