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Channels of Distribution
MANUFACTURER
Factoryshop or Chainshop: is a shop that belongs to the manufacturer. He sells his product at his own
shops directly to the customer.

Agent or Salesman: is a person who works for one or more manufacturers. He himself doesn't buy the
products but he makes the
contracts with the customers. For his work he gets a commission, e.g. 10%
on his sales.

The
Wholesaler buys the products in bulk at the manufacturer and sells it in small lots to retailers or to the
consumer.

The Retailer: always sells to the consumer but he can buy from the manufacturer or from the wholesaler. If
the retailer only has one shop he normally buys from the wholesaler.
Now the market situation is changing.
There is keen competition and there are big retailers who have shops in lots of cities, for example,
Wal-Mart. They will buy directly at the manufacturer so they can earn the money that normally the wholesaler
earns or they can set low prices because they don't have to pay the wholesaler.

The choice of distribution channel depends on the
product and the target market.

If the manufacturer decides to set up his own distribution organization he has a lot of costs but he can
control the channel very well. It's useful for large & expensive products, in particular if the customer needs a
special customised product. If the manufacturer sells
necessities he has to use retailers because the
consumers wants to buy necessities near their homes. Another question is which
kind of retailer a
company wants to use. Foe example, a company produces shoes, it can sell the shoes in special shops
with high prices in the city or in a shopping mall or in a shoe shop or in the corner of a supermarket. It
depends on the kind of shoes the manufacturer produces and the customers to whom the company wants
to sell.

Transport

Transportation means the physical distribution of goods, the physical movement of goods from the
producer to the consumer, The kind of physical distribution a company chooses depends on the consumer.
The kind of physical distribution a company chooses depend on the
kind of goods, the Distance and the
cost
of the transport.
The product a company has produced must be transferred efficiently to the user or customer. The company
can do this with its own distribution organization or it can use other persons or other companies.

  1. Direct Channels: Distributed by the manufacturer itself.
  2. Non-direct Channels: Distributed by independent sales organizations.
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