Question

What are the different channels of distribution ?

Hint:

The "level" of a channel refers to the number of intermediaries. A zero-level channel has zero intermediaries, a one-level channel has one, and so on.

Answer 1

Channels of distribution are the paths or routes through which goods and services travel to get from the producer to the final consumer. The channels can be direct or indirect. The main types are:

Direct Channel (Zero-level Channel): In this channel, the producer sells goods or services directly to the consumer without any intermediaries.
Example: Manufacturer \(\rightarrow\) Consumer. This is common for online sales, company-owned retail stores, or services like banking.

Indirect Channels: These channels involve one or more intermediaries to move products from the producer to the consumer.

One-level Channel: This channel includes one intermediary, typically a retailer. The manufacturer sells to the retailer, who then sells to the final consumer.
Example: Manufacturer \(\rightarrow\) Retailer \(\rightarrow\) Consumer. This is common for perishable goods or large-scale retailers.

Two-level Channel: This is a common channel for consumer goods and involves two intermediaries: a wholesaler and a retailer. The manufacturer sells in bulk to wholesalers, who then sell in smaller quantities to retailers, who finally sell to consumers.
Example: Manufacturer \(\rightarrow\) Wholesaler \(\rightarrow\) Retailer \(\rightarrow\) Consumer.

Three-level Channel: This channel includes an agent or broker in addition to the wholesaler and retailer. The agent facilitates the sale between the manufacturer and the wholesaler, especially when manufacturers want to enter new geographic markets.
Example: Manufacturer \(\rightarrow\) Agent \(\rightarrow\) Wholesaler \(\rightarrow\) Retailer \(\rightarrow\) Consumer.