2. Points of discussion
Concept of Distribution Channel
Designs of Distribution Channel
Factors affecting distribution Channel
Role of Distribution Channel
3. 1. The path through which goods and services travel from the vendor to the consumer
2. Flow of payments for those products travel from the consumer to the vendor
3. Manufacturers and consumers are two major components of the market.
4. Intermediaries perform the duty of eliminating the distance between the two.
5. Each intermediary receives the item at one pricing point and moves it to the next higher pricing
point until it reaches the final buyer
Example for understanding the concept
Coffee does not reach the consumer before first going through a channel involving
the farmer, exporter, importer, distributor and the retailer.
Also called the channel of distribution
Concept-
Distribution Channel
5. DESIGNOFDISTRIBUTIONCHANNEL
DESIGNOFDISTRIBUTIONCHANNEL
When the manufacturer instead of selling the goods to the
intermediary sells it directly to the consumer then this is known
as Zero Level Channel.
Retail outlets, mail order selling, internet selling and selling
Diagrammatic Representation of Zero Level
6. DESIGNOFDISTRIBUTIONCHANNEL
In this method an intermediary is used. Here a manufacturer sells the
goods directly to the retailer instead of selling it to agents or wholesalers.
This method is used for expensive watches
Diagrammatic Representation of One Level Channel
7. DESIGNOFDISTRIBUTIONCHANNEL
In this method a manufacturer sells the material to a wholesaler, the
wholesaler to the retailer and then the retailer to the consumer.
This medium is mainly used to sell soap, tea, salt, cigarette, sugar, ghee
etc.
Diagrammatic Representation of Two Level Channel
8. DESIGNOFDISTRIBUTIONCHANNEL
An agent facilitates to reduce the distance between the manufacturer and the wholesaler.
Some big companies who cannot directly contact the wholesaler, they take the help of agents
Diagrammatic Representation of Three Level Channel
13. Role of Distribution
channel
• Promotion
Negotiation
Ordering
Physical Possession
Transfer of title
Financing
Risk Taking
Information
14. Role of Intermediaries
• Greater efficiency in
making goods available
to target markets
Contacts Experience Specialization
Match Supply & Demand
15. E-Tailing
• E-Tailing---E-tailing means selling of goods and service through online
process with the use of internet. It’s an advanced version of distribution.
E-tailing basically deals with retailing that takes place on internet Eg;
Dell. It succeeded success fully in on line distribution channel.
Model of E-Tailing:
• Manufacturer Internet Consumer There are many advantages in E- tailing.
An e-tailing does not have to wait for customers because it virtually
operates globally.
• Companies have cost leadership with the elimination of middlemen.
• Products can be ordered all-round the clock.
• Chances of product shortage are minimized.
• In the current scenario where the market is growing and world is shrinking
due to better connectivity, need of e-tailing is highly looked upon. There is
huge potential in the world market as the spending of consumer is
increasing
16. A marketing strategy under which a company sells through as many outlets as possible, so
that the consumers encounter the product virtually everywhere they go: supermarkets, drug
stores, gas stations, and the like. Soft drinks are generally made available through intensive
distribution.
Example: Soft Drinks.
This strategy has the highest visibility
17. Selective distribution
• In selective distribution, the producer relies on a few intermediaries to
carry their product.
• The exact number of outlets in any given market is dependent upon
market potential, density of population, dispersion of sales, and the
distribution policies of competitors.
• This strategy is commonly observed for more specialized goods that are
carried through specialist dealers, such as brands of craft tools or large
appliances .
• It contains some of the strengths and weaknesses of the other two
strategies; however, it is difficult to determine the optimal number of
intermediaries in each market.
• Example---Retailers such as Lowe's are commonly utilized in selective
distribution for large appliances
18. Exclusive Distribution
• In exclusive distribution, the producer selects only very few
intermediaries.
• Exclusive distribution is often characterized by a deal where
the reseller carries only that producer's products to the exclusion of
all others.
• This creates high dealer loyalty and considerable sales support.
Success of the product is dependent upon the ability of a single
intermediary. Therefore, it provides greater control but limits
potential sales volume.
• Example--This strategy is typical of luxury goods retailers such as
Gucci .
Retailers such as Gucci are utilized for exclusive distribution.
20. New Distribution Channel
Project Shakti
• This model creates a symbiotic partnership between HUL and its consumers.
• Started in the late 2000, Project Shakti had enabled Hindustan Lever to access 80,000 of
India's 638,000 villages .
• HUL's partnership with Self Help Groups(SHGs) of rural women, is becoming an extended arm
of the company's operation in rural hinterlands.
• Project Shakti has already been extended to about 12 states‐Andhra Pradesh, Karnataka,
Gujarat, Madhya Pradesh,T amil Nadu, Chattisgarh, Uttar Pradesh, Orissa, Punjab, Rajasthan,
Maharashtra and WestBengal.
• The SHGs have chosen to partner with HUL as a business venture, armed with training from
HUL and support from government agencies concerned and NGOs. Armed with microcredit,
women from SHGs become direct to home distributors in rural markets.
• The model consists of groups of (1520) villagers below the poverty line (Rs.750 per month)
taking microcredit‐ from banks, and using that to buy our products, which they will then
directly sell to consumers. In general, a member from a SHG selected as a Shakti
entrepreneur, commonly referred as 'Shakti Amma' receives stocks from the HUL rural
distributor.
• After being trained by the company, the Shakti entrepreneur then sells those goodsdirectly to
consumers and retailers in the village. Each Shakti entrepreneur usually service 61 villages in
the population strata of 1,000,2,000. The Shakti entrepreneurs are given HUL products on
a `cash and carry basis.'
21. ITC
Who are the Distributors??
• Exclusive based on population
• Needs to stock all FMCG products( Except Stationery)
• Wholesalers
• Retailers
• Paanwalas
22. Analysis of ITC
• ITC has the most popular brands of cigarettes in India. The sale takes place from
the largest of retailers like Big Bazaar, Spencers to the smallest of paanwalas at
every nook and corner in India.
• With an already established distribution channel for cigarettes, ITC is also selling
safety matches, which is complementary to both the cigarettes and agarbattis. The
retailers and paanwalas are also ready to stock ITC’s candies, potato chips and
finger snacks because of the higher margin as compared to Frito lays, which is
its biggest rival in potato chips and finger snacks
• By entering into the branded Indian biscuit industry there was a business synergy.
ITC was already value-adding to wheat with its branded atta presence. By entering
the biscuits segment, it improved its bottom-line further. The company used its
existing network of convenience stores -- the company’s name for the hole-in-the-
wall pan-beady shops-- for Sunfast. The company says the brand is now available in
nearly 1.8 million outlets. Sunfeast captured around 7% in mere 3 years since its
launch in 2000.
