Distribution – An Essential Element of Marketing

In commerce, distribution can be defined as “the transfer of goods and services from the production source to the final consumer, user, or final customer through a distribution channel, and also the transfer of payment in the opposite direction, straight to the actual producer or supplier.” In simple words, product distribution is one of the essential elements of marketing. Besides, distribution is also an essential component of Logistics & supply-chain management.

In supply-chain management, distribution is described as distribution of a product from one business to other, be it producer to supplier, a supplier to retailer, or retailer to the end user. It can also be expressed as a chain of intermediaries, each one moving the product to the organization at next step in the chain, before it reaches the final consumer. This process is referred as the ‘distribution chain’ or ‘distribution channel’, each having its own particular needs, which must be considered by the producer, in addition to those of the all-important final consumer.

These distribution channels might not be constrained to physical products from producer to end user in certain areas as both direct as well as indirect channels might be used. For instance, hotels can sell their services through tour operators, travel agents, tourist boards, airlines, centralized reservation systems, etc. ways of transferring the goods or services from producer to the final consumer.

Distribution, in short, explains all the logistics drawn in order to deliver a company’s goods and services to the correct place at the right time and at lowest possible costs. These channels of distribution opted for by the producer perform a vital role in the distribution process. The right choice of channels contributes to a significant competitive advantage, whereas wrong selections of the same might get a better product to failure.

These channel structures vary from two to five levels. The choice of these channels depends on the nature of goods and services. The two-level structure, being the simplest one, involves the transfer of goods and services directly from the producer to the end user. A three-level structure, on the other hand, involves the retailers serve as mediators between the end users and the producers by ordering products directly from the manufacturers and selling them off to the end user. The fourth level of distribution channels is incorporated in the manufacturer selling his goods and services to a wholesaler rather than the retailer. In this distribution structure, the retailers buy goods from wholesalers instead of manufactures. Finally, a five channel distribution structure involves the manufacturer’s agent serving as an intermediary between the wholesalers and the manufacturer. This structure consists of the manufacturer, agent, wholesaler, retailer, and the end user.

There are two types of distribution for marketing purposes:

Direct Approach for Distribution:

In this approach, the product is distributed directly from manufacturer to consumer. Examples of direct approach are factory outlet or direct sale points. This kind of distribution is beneficial for consumer as they are able to enjoy discounted prices. The quantity of products distributed with this method is quite small, and it is effective as the company earns a direct profit.

Indirect Distribution:

In this type of distribution, the products are provided to retailers by manufacturers, and then retailers sell those products to their customers. For example, in some business the product is provided to a wholesaler by manufacturer and wholesaler sell products to retailer and then retailer sell products to consumers. In this approach, the cost of product is higher with respect to direct approach.

For good marketing, the most suitable approach of distribution should be followed. The distribution channels might be as simple and as complex as possible. It is, however, the individual choice of the manufacturers, retailers, and the consumers to opt for the perfect channel.

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