Distribution Channels

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Distribution Channels
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Definition In general , goods are
seldom transferred from producers to consumers
directly . They normally pass through one or more
middlemen before reaching the consumers .
According to different market conditions ,
different goods need different middlemen as a
channel to adjust the flowing process . These
different modes of channel are the distribution
channels . In other words , the channels of how
goods are transferred from producers to consumers
are called distribution channels . For examples ,
producers sell goods to wholesalers in large
quantities . The wholesalers then re-sell the
goods to retailers before they reach the
consumers . Distribution channels mean the
channels of transferring the title of ownership
form producers to consumers . It is different
from Physical distribution because the latter
does not necessarily involve any transfer of
ownership . For example , the transportation of
goods from a production plant to a warehouse is
only a kind of physical distribution . It does
not involve any change of ownership .
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Structure Of Different Distribution Channels
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Different Types of distribution channel
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1 ) Producer -----to----- Consumer This
kind of distribution channel has both advantages
and disadvantages . The advantages are no
middleman is required . Consumers have direct
service from producers . Since middlemans profit
is eliminated , price is generally cheaper .
Also Time is saved as goods can be passed to
consumers almost instantly . Producers can be
directly in contact with consumers . They can
receive comments and response directly from
consumers and make improvement . Besides
advantages , also there are disadvantages . The
disadvantages are consumers do not have many
choices as most goods are produced under mass
production , and time-consuming for consumers .
It is difficult for them to get various types of
goods at the same time and at the same place .
Examples are Maxim and St. Honor . These
are bakeries that have their own retail shop to
sell their bread and cakes .
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2 ) Producer----to---Retailer----to----Consumer
The advantages of this type of distribution
channel is that retailers serving as the
middlemen can bring in different type of goods
from different producers , providing more choices
to consumers . It can also save the consumer
shopping time . Disadvantages are the prices of
goods through the retailer will normally be more
expensive than those directly purchase from
producers . Also producers and retailers need to
share the works of wholesale , such as storage of
goods , breaking bulk and packaging .
 
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3) Produce----Wholesaler-----Consumer The
advantages are wholesalers can absorb large
quantities of goods from producers. Producers can
concentrate more on production. And even among
similar types of products, there are many
different brands, styles, and qualities for
consumers to select. Examples are wholesaler
set up their own retail shops. Goods are sold to
consumers in large quantities. They are GrandMart
and the flower wholesalers in Fa Hui.  
The disadvantages are the follow. Firstly
,although the prices of goods from wholesales
are a bit cheaper, they are more expensive than
direct purchase from producers. Then , the
wholesalers need to take up the retail works and
normally do not provide after-sale service. Last,
some wholesalers will offer a minimum order
quantity which may exceed the quantity required
by customers.
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4 ) Producer----Wholesaler----Retailer---Consumer
The disadvantage is middlemen include
wholesalers and retailers. They need to make
profit after providing their services. This will
increase the cost of the goods and finally
increase the selling price. Examples are
newspaper and magazines selling and clothing
manufacturing industry .
The advantages are wholesalers can absorb
products in large quantities from producers.
Producers can concentrate on production. And
wholesalers and retailers specialize in their
works. For example, wholesalers can store and
divide the goods while retailers provide selling
service to customers. This enables them to enjoy
the benefits of division of labour. Last, most
wholesalers provide credit sale to retailers.
Retailers need not to pay in a certain credit
period until goods are sold.
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5) Producer-----Exporter-----Importer----Wholesale
r----Retailer----

Consumer
The advantages are though exporters, local
goods can be distributed to overseas markets. And
the importers, foreigner products can be
imported, offering more choices to local
consumers. The disadvantages are the
follow. The products need to pass through a
number of middlemen after production, which take
a long time before reaching the consumers. And
the imported goods are normally more expensive
than local products because of transportation
charge and middlemens profits. Examples are
goods import in other countries and sell in Hong
Kong , just like Levis .