Varieties of Retail Channel of Distribution
What is a retail channel of distribution?
This is the path that a product takes from the producer until it reaches the consumer. This path includes individuals and businesses that serve as intermediaries or middlemen. Intermediaries may be wholesalers, distributors, jobbers, agents, and retailers. A retail distribution channel is also known as a marketing channel.
Functions of a Retail Channel of Distribution
Asides being a link between producer and consumer, channels are important for the following:
- Buying and assembly
- Credit facilities
- Bulk breaking
- Risk bearing
- Grading and Packaging
Varieties of Retail Distribution Channel
Marketing channels can be divided into the direct channel and indirect channels. Indirect channels are further subdivided into the first level, second level, and third-level channels depending on the number of middlemen in-between the producer and final consumer.
- Direct Channel (Zero level channel)
In this channel, the product moves directly from the producer to the consumer. There are no middlemen. This variety of channels is used for perishable goods and luxury goods.
- First Level Channel
This involves the passage of goods from producers to retailers to the consumer. The only intermediary is the retailer.
- Second Level Channel
This variety involves two intermediaries, the wholesaler, and the retailer. The wholesaler buys from the producer and sells to a retailer who eventually supplies the consumer.
- Third Level Channel
This variety of marketing channels involves a distributor or an agent. It is used to distribute goods in high demand over a large area.
- Second level and third-level channels are used for stable and durable products.
- A producer may employ dual distribution channel varieties. For instance, he may sell to retailers (first level channel) and also sell directly to consumers by himself (zero level channel). Also, a producer may employ different channel varieties for different product lines.
- Today, the internet is also used as a distribution channel.
How to Choose a Distribution Channel Variety
These factors determine what channel type will be best for your retail distribution.
- Market Features
You need to consider your customers. Their potential number, location, preferences, behavior, and buying patterns. If your customers are scattered over a large area, it is usually better to use indirect channels. The level of demand by customers also affects what channel is chosen. For high demands, indirect channels are best. However, if demand is not really high, direct channels may be used.
Everyday goods can be distributed through indirect channels.
- Competitor Choice
It is good to observe the type of channel a competitor is usually. Your business may adopt the same style or use an alternative style that will work well for you and give an advantage over the competition.
- Business Finances
It is necessary to consider the financial strength of your business before choosing a variety of market channels. For instance, how rich your business is will determine if you will build your own channel or involve distributors and agents in a longer distribution channel.
- Product Characteristics
Perishable goods should be distributed using direct channels to prevent spoilage. Nonperishable goods can stand longer channels. Likewise, luxury goods and products that require technical support have short distribution channels