For owning a successful business in-depth knowledge is very important, for that you have to learn the basics of the subject. So let us start with,
Who is Who!
Wholesalers are the intermediates who buy products in bulk at lower prices. And cater to the needs of the retailers. They sell in small packages at higher prices that helps them to gain profit.
Distributors are a type of wholesalers. They are independent agents who work as intermediates between the manufacturer and the customer in the supply chain. The distributor can be a retailer, a value-added re-seller. He or she signs an agreement with the manufacturer that they will sell the product but cannot use manufacturer’s name in his or her business. First, they store the product and then sell it through a distribution channel.
For example, a manufacturer produced shoes. Then these shoes are sold in the retail market. The distributor helps to sell the product in the retail market.
Retailers are the businesses that sell products directly to the customers via various channels to gain profits.
Brokers and Agents handle customer relationship management for manufacturers. They represent the manufacturer in the sales process. And also assist the manufacturers and sellers to contact and negotiate with the wholesalers.
Everything about Distribution Channels
A distribution channel is a route through which goods and services reach the customers. Role of the distribution channel is to:-
- help sellers and buyers connect with each other.
- help in transaction functions
- control the pricing strategies
Business-to-customer (B2C) distribution – The products are directly sold to the final customer. For example, buying jewelry.
Business-to-business (B2B) distribution – In this, the goods and services of one business are sold to another business. For example, graphic designing services. Also, the level of complexity is more than B2C.
Distribution Marketing Channels
Products are distributed through two types of distribution channels:-
- Direct Distribution
It is also known as Level Zero:- Product → Customer
In this system, the goods reach the customer directly from the producer, without the involvement of middlemen such as a retailer, wholesaler, reseller, or any kind of intermediate.
- Indirect Distribution
In this system middlemen are involved. As the number of intermediaries increases the final price the end customer has to pay also increases.
Level One:- Producer→ Retailer→ Customer
This is used for selling fast moving goods like clothes, toys.
Level Two:- Producer → Wholesaler → Retailer → Customer
In this, the wholesaler buys in large quantities from the producer and sells a small
amount to the retailer. After that, the retailers make it available to the final customers.
For example soap, sugar, ghee.
Level Three:- Producer → Agent or Broker→ Wholesaler→ Retailer → Customer
Agents and broker add the extra level in this. This happens when the products are
perishable. In some cases, the agents directly contact the retailers with the goods.
Distributions Business Models
- Intensive distribution
This kind of marketing strategy targets to cover all the available outlets in the market. It is good for selling food items, magazines. The profit margin is increased as it helps to reach out to more and more customers.
- Selective distribution
In this limited number of outlets are covered in a particular area, it is usually meant for special kinds of products. To sell designer goods this kind of strategy is very good. It helps to control marketing and target the best-performing outlets. Also, it helps to save extra expenses.
Exclusive distribution- This is the extreme kind of selective distribution in which only a single distributor is targeted in a particular area. Exclusive distributors and luxurious brands follow this strategy.
Some things to keep in mind
How to select the channel?
- Consumers liking’s and habits should be the first thing to keep in mind while choosing the channel. If your consumers prefer a particular shop the most, then target that shop for your products.
- Cost of the channels– Many channels are less expensive than others. According to the price of goods, channels should be selected like cheaper goods should be sold at cheaper outlets.
- Brand name– The kind of brand you do business with is the one you are associated with. If you sell a certain brand then users will equate the two brands together. Earn a good name by selling a good brand.
How to select a profitable niche?
- Instead of selling too many products if you focus on a single product line and strive to provide the best services then your business will turn out to be more profitable.
- To provide the best possible services select products you have good knowledge about. For example, everyone sells normal sports shoes. If you choose sports shoes specially meant for running you need to have good knowledge as to how it will be beneficial for runners.
- It doesn’t really matter what you sell, but how you sell is very important. You have to convince your customers that your services and the products are the best for their needs.
- The amount of time you spend on your business, customers choice, your knowledge base all this helps to decide. It is on you what niche you select, a variety of goods or a particular product line.
So this was all the knowledge you need to gain about distribution. We hope this helps you run a successful business.