Retailers sell products/ goods to final consumers for consumption or use. Retailers buy the products from different sources like manufacturers, wholesalers, traders, etc. basis the need and want in the market. They are considered the final link with the consumer in the marketing/ distribution channel. Most of the retailing in retail stores is through new concept of retailing called non-store retailing. This type of retailing is becoming popular. It is direct selling to customers via infomercials, telecalling, internet selling, ecommerce, direct mail, personal selling, etc.

Retailers can be broadly classifies as small scale retailers and large scale retailers.
i) Small scale retailers –
a) Unit stores – these are general stores or single line stores like clothes, gift shops, grocery stores, utensils, book shops, bakery, etc.

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Wholesalers are the organisations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc.

Below are the major functions of Wholesalers-
1. Buying and assembling – The wholesalers buy products from various manufacturers and assemble them for supply to retailers. They store these products in their warehouses, and ensure supply of product as per demand in particular region.

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1) Wholesalers –
These are the organisations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc.

There are different kinds of wholesalers and they can be broadly put into the below categories-

a) Full function wholesaler – they buy products/goods from manufacturers and sell them to other resellers like retailers, traders, etc. below the marketing or distribution channel. They buy in bulk from different manufacturers, break down the bulk, store, sell the smaller lots for cash or credit, and also helps with information (advice, education, etc.) to whom he sells. As they take title to the products, they are also responsible for the risk factor involved.

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The organisations invest heavily in making a product of customer’s choice. If the organisation don’t make arrangements to  deliver or make it available to prospective buyers at the right time and the right place, it is sure to fail in the market. Imagine a customer has to contact the manufacturer for the products like shampoo, soaps, etc. and arrange his own transport. It will be a big hassle for the customer who would rather prefer something that is easily accessible.

Making the products available effectively and efficiently to the end consumers is taken care under the place concept of the marketing mix also known as marketing channel or distribution channel. Decisions concerning distribution channels are of utmost importance to manufacturers. It is concerned with how the product gets through the producer to the consumer. Most of the manufacturers do not sell the products to the end users. They use a set of intermediaries which perform different roles in the channel network. Each member in this chain or channel serves as a link in the distribution network linking the manufacturer to the end user.

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Marketing channels from the soul of the marketing function. Consider a product of customer’s choice made by a manufacturer at the right price. Now when a customer wants to buy the product, he will have to locate a manufacturer who may be in a different region. Just making enquiries about the product, getting it, etc. will take immense effort from the customer. It has been noted that most of the products in the market fail if they are not made available to the target customer at the right time and at the right place. The roles, functions and benefits of marketing channels are listed below-

1) When the product information is available (promotion), the customer is bound to make enquires with different retailers, ecommerce sites, wholesalers, etc. It becomes important for the manufacturers to ensure the product is easily available to the customers. Else a competitor will take advantage of this opportunity and introduce the product with different intermediaries for the customer.

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The producer and the end consumer are the starting and end point of the marketing channel. The presence of number of intermediaries depends on the marketing objectives of the organisation. Selecting the right channel is a critical task as it can be the reason for failure or success of the product. We will look at the Levels of marketing as shown in the figure above.

Manufacturer – Consumer channel, there is absence of intermediaries. Here the manufacturer opts to sell directly to the customer. Hence, this level is also known as Direct-marketing channel. The internet, television (cable networks) give great opportunity to manufacturers to reach their prospective customers. Manufacturers understand the power of retailers as the final link to the customers. To reduce this influence of retailers, organisations follow this channel. This channel structure is also economically viable as the manufacturer doesn’t needs to give sales or profit margins to intermediaries. Some examples of this channel are: mail order, door-to-door selling, internet selling, Television commercials (infomercials), telemarketing, and manufacturer store outlets.

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Intermediaries, also known as middlemen and re-sellers, are organisations that perform the different functions in the marketing channel to connect the manufacturer to the buyer. These can be organisations as well as individual business men.

There are two types of middlemen, one those who take title to the products (merchant middlemen), and others who just facilitate the sale and purchase of product without taking title of them (agent middlemen). The first category are known as merchant middlemen which are known as wholesalers and retailers. The agent middlemen are the agents and brokers who negotiate purchase or sales, or both and do not take ownership of the product. Example of agent middlemen are agents, brokers, commission agent, forwarding and clearing agents.

I. Merchant Middlemen –
1) Wholesalers –

These are the organisations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc.

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Types of channels-
In Conventional marketing channel, members work independently with each other under agreement and no member has control over other member. It comprises on autonomous/ independent manufacturer, wholesaler and retailer. Each member is concerned about increasing the profits of its business and not the profit of the entire channel. For example, the manufacturer will perform the function of Product development, branding, pricing, promoting and selling. The wholesaler performs its function of buying, stocking, promoting, displaying, selling, delivering, finance, etc. The decision making resides in each firm and there is lack of proper planning to achieve the objectives of the entire channel.

Vertical marketing channel has the manufacturer, wholesaler and retailer working as one system. They formally agree to cooperate with each other. The responsibility of functioning of each channel member in owned by one member. This arrangement is done through contractual agreement. The member which has authority over all the member can be the manufacturer, wholesaler or the retailer. They work in cohesion, and conflicts between channel members don’t exist. This type of channel came into existence to avoid disagreements and conflicts among channel member. As independent members try to force their influence to meet their objectives, there is always a possibility of conflict and powerful channel member influencing the other. Once the channel operates as a one system and managed by one member, there is much clarity and coordination among channel members to achieve the channel objectives.

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A careful and systematic study needs to be done for selecting a marketing/ distribution channel. It not only affects the marketing strategy and organisational goals but also the strategies of the intermediaries in the channel. Place factor of the marketing mix that involves the distribution system requires effort and time of the management and involves costs for making changes to it. Therefore it becomes essential that a right channel if chosen to avoid any later changes. Below are the factors that influence the choice of the channel –

Product – The first factor to be considered is the product category. A FMCG product will require different distribution than an automobile. Similarly the channel of distribution for making an industrial product like a “Rotary Encoder” will be shorter as compared to a consumer product like Shampoo. Some consumer goods need immediate availability for the risk of shorter life like perishable goods from a bakery, etc. Similarly a fragile product will need careful handling by the intermediaries and hence, a shorter channel is selected. A technical product will need selling from knowledgeable sellers providing demos, etc. Complexity of product and level of sales service also decide the selection of the intermediary.

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A marketing channel not designed effectively fails to make an excellent product successful. The firms usually follow the below steps for designing a marketing channel-

Analysis –
A channel design starts with analysing the market requirements. Basis the customer, product category, and marketing environment, the organisation has to follow the matching channel strategy – Exclusive distribution, Intensive distribution and Selective distribution. The availability of the intermediary also influences the selection of the channel member. The intermediary that the organisation wishes to sell through should be available in the target market. In their absence, the organisation will have to opt for an intermediary that is available to them. Or the organisation will have to invest to open their own stores, opt for direct selling, etc. Sometimes the intermediary is unwilling to distribute the organisations products. In such cases the firm should be ready to involve channel alternatives.

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