subject: Distribution An Essential Element Of Marketing [print this page] 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, 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 to deliver a companys 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 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 manufacturers agent serving as an intermediary between the wholesalers and the manufacturer. This structure consists of the manufacturer, agent, wholesaler, retailer, and the end user.
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 these channels.
