Channels of Distribution

Channels of Distribution

Are you aware that the study material of Business Studies, which is now in your hands, is prepared

at the headquarters of the National Institute of Open Schooling (NIOS) situated at New Delhi.

How did it come to your hands? Was it available at your study centre or you bought it from the

market? If you got it from your study centre, then just think for a while: how did it reach your

study centre? Actually, after publishing the study material, NIOS sent this material to your study

centre and then you collected it from there. Similarly, the NIOS study material available in the

market is directly purchased by the booksellers from NIOS. Then, the booksellers sell it to you.

Thus, the study material published by NIOS reached you either through your centre or through

booksellers. In a similar way most of the goods and services we use in our daily life also come

from the producers or manufacturers and reach us through some people. In this lesson, let us

learn how the goods and services of our need reach us.

20.1 Objectives

After studying this lesson, you will be able to:

•

explain the meaning of channels of distribution.

•

identify different channels of distribution;

•

describe the functions of wholesalers and retailers;

•

distinguish between wholesalers and retailers; and

•

identify different types of retail trade.

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20.2 Meaning of Channels of Distribution

You know that the main purpose of trade is to supply goods to the consumers living in far off

places. As goods and services move from producer to consumer they may have to pass through

various individuals. Let us take an example. A farmer in Srinagar has an apple orchard. Once the

apples are ripened he sells the apples to an agent of Delhi. The agent collects the apples from

Srinagar, packs them, and sells them to a wholesaler at New Delhi

then distributes them to various retail fruit vendors throughout Delhi by selling smaller quantities.

Finally, we purchase apples from those vendors as per our requirement. Thus, we find that while

coming from the producer at Srinagar, the product reaches the consumers by passing through

several hands like an agent, a wholesaler and a retailer. All these three are called middlemen.

These middlemen are connecting links between producers of goods, on one side and consumers,

on the other. They perform several functions such as buying, selling, storage, etc. These middlemen

constitute the channels of distribution of goods. Thus, a channel of distribution is the route or path

along which goods move from producers to ultimate consumers.

The route taken by goods as they move from producer to consumer is known as

Channel of Distribution.

sabzimandi. The wholesaler

Fig. 20.1 Channels of Distribution

20.3 Types of Channels

Normally goods and services pass through several hands before they come to the hands of the

consumer for use. But in some cases producers sell goods and services directly to the consumers

without involving any middlemen in between them, which can be called as direct channel. So

there are two types of channels, one direct channel and the other, indirect channel.

From the above diagram it can be found that there is just one direct channel i.e. from producer to

the consumer. There are many indirect channels like:

Agent Retailer

Producer

Wholesaler

Consumer

Channels of Distribution

Channels of Distribution