The document summarizes channels of distribution for pharmaceutical drugs. It discusses direct selling from manufacturer to consumer as well as various indirect channels involving distributors, wholesalers, and retailers. It outlines the functions and types of wholesalers and retailers. Some advantages of channels of distribution are reducing costs and widely distributing goods. Disadvantages include increased prices from commissions and potential supply issues. The choice of appropriate distribution channels depends on market, product, and company factors.

1. Channels of distribution.
Presented By
Mrs.Ashwini Shelke
(Department of Pharmaceutical Chemistry)
SANDIP INSTITUTE OF PHRMACEUTICAL SCIENCES, NASHIK

2. Channels of distribution.
 Channels of distribution are the various
outlets through which the product moves
from the factory into the hands of its
consumer.
 The term channels of distribution or
trade channel signifies various trade links
connecting the manufacturers or
producers and the ultimate consumers or
users.

3. Channel of distribution of drugs
 Direct selling:
i) Manufacturer - Consumer
 Indirect selling of drugs to consumer includes
following intermediates.
i) Manufacturer – Distributors- wholesaler - Retailer
(pharmacist)- Consumer.
ii) Manufacturer -Wholesaler - Retailer(pharmacist) -
Consumer
iii) Manufacturer -Wholesaler (pharmacist)- Consumer
iv) Manufacturer -Retailer (pharmacist)- Consumer

4. Advantages:
1. The cost of marketing is reduced by channels of
distribution.
2. The goods are easily available at all places.
3. The sale of goods increases due to support of
wholesaler and retailers.
4. The goods are available at similar prices throughout
the area.
5. The financial burden and employment problems are
removed for producer.

5. Disadvantages:
1. Wholesaler, retailer and other agent’s commission
increases the price of goods.
2. Sometime they do not supply goods in time.
3. They may create artificial scarcity by holding goods
supply.

6. Types of middlemen
1. Functional middlemen –
a. Brokers
b. Commission agents
c. Auctioneers
d. Del credere agents

7. 2 Merchant middlemen
a. Wholesalers
b. Retailers

8. Functional middlemen-
 They help in transfer of goods from the
hands of producers to the customers
without having an ownership rights.
 (they do not have title to goods )

9. a) Brokers-
 Their only function is to bring buyer &
seller together.
 If hired by seller then called as selling
agent & if engaged by buyer called as
buying agent.
 They get certain % of commission.

10. b)Commission agent -
 They negotiate the sale of goods , take
possession & make arrangement for
transfer of the goods.
 So he has to arrange for warehousing,
grading, packing, assembling & disposal.

11. c)Auctioneers
 They collect goods display & invite bids
from buyers.
 Bid means the price which the buyer is
willing to pay for the goods being
auctioned.
 The buyer making the highest bid gets the
goods.

12. d) Del credre agent-
 They find the buyer & also guarantee the
payment of price on their behalf.
 The agent has to pay the sum if the buyer
fails to pay.
 Delcredere agents charge higher than
normal commission rates

13. Merchant middlemen
a) Wholesalers
 He is the middleman between the
manufacturer & retailers.
 They buy goods and sell to retailer
b) Retailer
He is the middleman between wholesaler
& consumer

14. Wholesalers
 Wholesaler is the middlemen who
purchase and sell in large quantities.

15. Classification of wholesaler
a) Pure Wholesaler
is a merchant who concentrate entirely on buying and selling
in large lots and does not engage in manufacturing or
retailing
b) Manufacturer wholsaler
person takes manufacture of goods alongwith distribution
to retailers.
c) RetailerWholesaler
He combines with his business of wholesale the functions of
retail trade.

16. Functions of wholesalers
1. Buying & assembling:
2. Storage
3. Transportation
4. Grading & Packaging
5. Financing
6. Risk Taking
7. Promotion

17. The wholesaler performs the
following important functions.
1. Assembling : They collects varieties of
products from different manufacturers
2. Distribution: They distribute goods to
the retailer who are widely scattered.
3. Warehousing: They stores the goods of
manufacturer for supply to retailer.
4. Transportation: Wholesaler moves the
good from the place of production to his
warehouse and from there to the retailer.

18. 5. Financing: He provides credit facility to the retailer.
6. Risk bearing: In pharmaceuticals the wholesaler
bears the risk of theft, fire, fluctuating prices breakage
and expiry.
7. Pricing- The price fixed by the wholesaler on the
basis of which retailers charge from the customer.
8. Grading and Packaging : The goods are graded
and packed by the wholesaler as per the requirement
of the retailer
9. Market Research : The retailer passes the
knowledge regarding the product from the Customer
to the wholesaler and in return the wholesaler passes
this knowledge to the manufacturer.

19. Retailers
 Retailing include all the activities directly
related to the sales of goods or services
to the ultimate consumer.

20. Functions of retailer
 Retailer meet the need of consumer
 They create time utility
 They perform transportation function
 Sometimes they also provide free home
delivery
 Retailers educate customers

21. The Retailer perform the
following important functions
1) Wide choice to consumers: He keeps a
stock of various items according to the need
of the consumers.
2) Ready stock: He keeps ready stock of all
goods so that he is able to meet demand of
customers at all times.
3)Transportation: Retailer makes their own
arrangements for transportation of products
of different kind from wholesaler’s go down.
4) Grading: Retailer does grading of those
goods which have been left ungraded by the
manufacturers and wholesalers.

22. 5) Risk bearing: Retailers bears a risk of loss of goods
by fire, theft or deterioration as long as they are not
sold.
6) Financing: They provide financial help to
consumers by selling them the goods on credit.
7) Market research: The retailer passes the
knowledge regarding the product (likes, dislikes,
tastes) from the Customer to the wholesaler and in
return the wholesaler passes this knowledge to the
manufacturer.
8) Sales promotion: They display the goods in show
windows & the counter for information of customers
thus retailer promotes the sale of goods.

23. Kinds of Retail Distribution
 Retailing institutions may broadly be
classified on the basis of their scale of
operations, into
Small scale retailers
Large scale retailers

24. Small scale retailes
1. Mobile or Itinerant
do not operate from fixed business
premises, but move from place to place
for selling their products.
2. Fixed shops
are located near residential areas.

25. Mobile Retaillers
1. Pedlers
2. Street traders
3. Market traders
Fixed Shops
1. Street stalls
2. General stores
3. Speciality stores
4. Second hand goods shops.

26. Large scale retailes
1. Departmental Stores
2. Multiple shops
3. Mail order house
4. Consumers cooperative stores
5. Super markets
6. Hire Purchase & instalments shops

27. 1. Departmental Stores
 It is retail institution that handles a wide
variety of marcandise grouped into well
defined departments for purposes of
promotion, service, accounting and
control.
 A deparmental stores is large scalle retail
organisation having number of
departments under the same roof.

28. Advantages
 To satisfy customers need at one place
 It is located at central place of city.This
saves time and efforts of customers
 They provide number of services
including free home delivery, credit facility.

29. Disadvantages
 It offers number of services but cost of
which is ultimatly borne by the
customers.
 Expensive window dressing, interior
decoration and advrtising increase
overhead expenses.
 Huge capital is required.

30. 2. Multiple shops or chain stores
 A system of branch shops operating under a
centralised managment and dealing in similar lines of
products.
 Multiple shop or chain stores are the groups of shops
in the same branch of retail trade.
 The main objective is to provide shopping facilities
near the residence of the would be customers.
 Each branch deals in a similar line of goods.
 Each multiple shop system has a head office whose
decisions are passed on to all its branches.
 The price of all the items is fixed by the head office
and the same is charged at every branch.
 The supply of items to various branches is made
direct from head office.

31. Advantages
1. Central head office does the purchasing for
all the branches which results in bulk buying
which reduces the cost of the product.
2. Multiple shops are located in important
localities of the city for the convenience of
the customers which increases sale.
3.The fixed price and standard quality of
goods helps in winning the confidence of the
customers.
4.The shortage of supplies at one branch can
easily be met by transfer from another
branch having a surplus stock.

32. 5.There is uniformity of window display and shop
decoration in all the branches of multiple shops
which makes an easy identification of them.
6.There is a direct contact between producer and
customer, so the middlemen’s profit are eliminated.
7. In multiple shops sales are made strictly on cash
payment. So there is practically no loss due to bad
debts.
8. Multiple shops are run under the control of head
office which follows uniform policies in regard to all
important matters.
This makes it easy for the head office to exercise
effective control and supervision of its branches.

33. Disadvantage
1. Multiple shops deal in a limited range of products. So
the customers do not have a wide choice.
2.The head office of multiple shops is generally located
at a faraway place, so there is generally no effective
control on the staff working in its branches.
3.The staffs at multiple shops have little freedom to
make its own decisions sometimes it adversely affect
the sales.
4.There is no provision for any facilities to its
customers.
5.The owner of multiple shops cannot make personal
contacts with his customers.
The success of the organisation depends upon the
branch managers.

34. 3. Mail order house
 Mail order houses are retailing
enterprises which carry on business
through mail.
 Is known as selling through post and
shopping by post

35. Main features
 Goods are sold without any personal
contact between the buyer and the seller.
 Goods are identified by brand name
 Goods enjoy popular demand by
customer scattered over wide areas
 Goods do not require demonstration or
special skills in handling and use

36. Advantages
1. The buyer need not to travel for longer
distance
2. Can be located in less expensive locality
3. Goods can be procured after receiving
order from customer

37. Disadvantages
1. There is no personal contact between
seller and the buyer
2. Customers may have to pay for postal
expenses also
3. Other services like credit facility
deprived for customers.
4. It is not suitable for all kind of business

38. 4. Consumers cooperative store
 Is organised under the Cooperative
Societies Act
 The capital of the store is provided by
shareholders
 The membership of store is voluntarily
 Aim of the store is to provide service to
the members and not the maximisation of
profit.

39. Advantages
 It is easier to form a cooperative society.
 It attracts large number of members
becoz value of shares is nominal
 The liability of member is nominal

40. Disadvantages
 It is not been very much successful
because of certain limitations like
 There is lack of in itiative among the
people to form cooperative socities
 They face shortage of funds
 The managment if depend on member
only

41. 5. Hire-Purchase house
 Under hugh purchase system, the buyer
gets the immediate possesion of the
goods without paying the full price for
them.
 He only pays part of the purchase price at
the time of entering into the agreement
with the seller and agrees to pay the
balance in instalments which may be
monthly, quarterly or yearly.

42. Essential features
 The buyer gets only the possession of
goods, but the ownership of the goods
passes to him only after the last
instalment has been paid.
 In other words, the buyer is the only the
hirer until he pays the final instalment
 Instalments paid by him are treated as
mere hire charges

43. Advantages
1. This system provides facility to purchase
costly goods to middle class people on
easy instalments.
2. The Small scale manufacturer can buy their
machinery and tools without making total
payment.
3. This system helps to increase the sale of
costly and non-essential items as it tempts
large number of people to buy the same.
4. Even the people who have sufficient money
will go for this system as they can invest
their money elsewhere to earn more profit

44. Disadvantages:
1. People are tempted to buy things which
they cannot afford.
2. Trader dealing in hire purchase scheme
have to arrange for large capital to
finance their business
3. The goods purchased on hire purchase
scheme are costlier as they have to pay
the interest on unpaid instalment.

45. One-price shop
 One price shops or Fixed Price Chain
Stores are organised on the same lines as
multiple shop retail organisations.
 Their distinguishing feature is one price.
 They are one price shops in the sense
that almost everything sold at these shops
is priced uniformly.
 Besides one price also implies fixed prices
and those stores therefore allow no
scope for haggling.

46. 6. Super Market
 A super market is a large retailing
business unit selling mainly food and every
items on the basis of low margin appeal,
wide variety and self service appeal.
 It is also known as self service store.

47. Merits
 It enjoys all the benefits of large scale
buying and selling
 Its operating costs are lower and it can
sell goods at cheaper rates.
 The customers can make all their
purchase under one roof

48. Demerits
 Super market can not handle
commodities that require personal
attention by the salesman
 Some customers handle goods carelasely
and misuse the opportunity of self service
 Establishment and running of super
market requires huge investment and its
turnover should be very high to keep
overhead expenses.

49. Choice of Channels of Distribution
 The choice of the appropriate channels of
distribution is not a simple job.
 While taking a decision in this regard,
management should carefully consider the
following factors:
1. Market considerations
2. Product considerations
3. Company considerations
4. Middlemen considerations

50. 1. Market Considerations:
 The nature of the market is a key factor
influencing the choice of channels of
distribution.
 The following features of the market should
be analysed to determine the channels:
a) Consumer or industrial market
b) Number of potential customers
c) Size of order
d) Customer buying habits and expectations

51. a) Consumer or industrial market
 If the product is intended for industrial
market or industrial users, the channel of
distribution will be a short one.
 Since industrial users purchase in large
quantities, they can purchase directly from
producer

52. b) Number of potential customers:
 If the number of customers is relatively
small, the manufacturer may be able to
sell directly by using his own salesforce.

53. c) Size of order:
 Direct selling is convinient and
economical where customers place order
in big lots as in case of industrial goods.

54. d) Customer buying habits and
expectations:
 Like time he is willing to spend, the desire
for credit, the preference of personal
attention and the preference for one stop
shopping significantly affect the choice of
channels of distribution.

55. 2. Product Considerations:
 The type and nature of the product influence the
number and type of middlemen to be chosen for
distributing the product.
 The important factors regard to the product are
as follows:
a) Unit value
b) Product line
c) Standardised product
d) Technical nature
e) Bulk and weight
f) Perishability

56. a) Unit value
 Usually if the unit value of product is
lower and turnover if higher the channels
of distribution will be longer.

57. b) Product line
 A mfg manufacturing several products in
same line will sell directly or through
retailers since it is economical
 But a mfg manufacturing only one item
may have to appoint the wholesalers and
retailers to sell his product.

58. c) Standardised Product
 Standardised product can be sell through
longer channels because their brand
names are very popular.

59. d) Technical nature
 An industrial product which is very
technical is often distributed directly to
the industrial users.
 Mfg appoint sales engineer

60. e) Bulk & Weight
 Bulky and heavy goods distributed directly
to the users in order to minimise the
physical handling of the product because
transportation of these product involves
huge cost.

61. 3. Company consideration
 The nature and size of the business firm
have an important impact on the selection of
channels of distribution.
 Following factors are important in this
regard:
a) Volume of production
b) Financial resources
c) Services provided by sellers
d) Desire for control of channel

62. a)Volume production
 A big manufacturer may find it profitable
to sell directly to customers through his
saleforce.
 But small manufacturer with only small
number of item cannot afford to sell
directly because of his small scale
operations.

63. b)Financial resources
 A financially strong company can
distribute its products itself employing its
own sales-force & opening retail outlets.

64. c) Services provided by seller
 A manufacturer can find good retail;ers
only if he undertakes sufficient advertising

65. Desire for control of channel
 A mfg who wants to control the
distribution of his product will select a
short channel of distribution.

66. 4. Middlemen consideration
 Certain factors related to middlemen
which influence the channel section are as
follows:
a) Availability of desired middlemen
b) Financial ability
c) Attitude of middlmen
d) Sale potential
e) Cost

67. a) Availability of desired middlemen
 A mfg will rely on middlemen if they
operate according to his desire.
 He may not like to entrust his peoduct to
a middlemen who is handling competetive
products.

68. b) Financial ability
 A large mfg generally select those
middlemen who are financially strong and
can provide credit facilities to the
customers.

69. c) Attitude of middlemen
 Sometimes middlemen are not prepared
to carry a mfg’s products because of the
non-acceptability of his marketing policies.

70. d) Sale potential
 A mfg will generally select a channel
offering the greatest potential sales
volume over the long run.

71. e) Cost
 The mfg also consider the cost of selling
through alternative channels.

72. Thank you