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Principles of Marketing (MGT301) Fall, 2014
Graded Discussion Board No. 2
Due Date: February 16, 2015
Total Marks: 05
Topic: Number of Channel Levels
NOTE: There is no grace period in case of GDB
The case will enable the students to understand and apply strategies so that they could manage the difficulties that a business startup and distribution phenomena faces.
There was a time when women were operating businesses as a way of supplementing income or in many cases they were simply trying to avoid poverty and making up for the loss of a spouse. But; with the advent of new progressions in the business world, trend is getting changed and women are now doing businesses as a profession.
A group of five women living in the rural area of Pakistan had started with a small set up of making embroidery suits three years ago, they had been making suits for a reseller who is living in the urban area; he bought suits from these women at lesser price and sold them in the urban market at a very high profit margin. It’s been more than three years now and these women are earning very less amount of their hard work; to get rid of this situation they started to analyze the way through which they could maximize their profit margin as in return of their extremely hard and devoted work. Finally they came to a conclusion that they should take the initiative of selling their distinguished work to the urban market themselves so that they could earn maximum profit and make more money as in return of their enthusiastic work.
Point of discussion:
Considering this scenario; which level(s) of distribution channel these women should opt so that their dependency on that reseller could be eliminated and they could competently sell their product in the urban regions? (05 Marks)
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which level(s) of distribution channel is used in this scenario plz post here
Aslam o Alaikum!
Channel 1, called a direct marketing channel, has no intermediary levels. It consists of a company
selling directly to consumers. The remaining channels in Figure A are indirect marketing channels.
Channel 2 contains one intermediary level. In consumer markets, this level is typically a retailer.
For example, the makers of televisions, cameras, tires, furniture, major appliances, and many other
products sell their goods directly to large retailers which then sell the goods to final consumers.
Channel 3 contains two intermediary levels, a wholesaler and a retailer. This channel is often used
by small manufacturers of food, drugs, hardware, and other products. Channel 4 contains three
intermediary levels. In the meatpacking industry, for example, jobbers buy from wholesalers and
sell to smaller retailers who generally are not served by larger wholesalers.
aur koi channal ni ha wo bi define karo na ...
Channel-1 .Producer_________________________________________ Consumer
Channel-2. Producer ________________Retailer __________________Consumer
Channel-3. Producer ______ Wholesaler ______ Retailer ___________ Consumer
Channel-4. Producer ___ Agent Broker ___Wholesaler ___ Retailer ___ Consumer
Friends, read lesson #28 of handout for better understanding.
CHANNELS OF DESTRIBUTION
A channel of distribution refers to the arrangement through which goods move from the producer to the final user/consumer. Every entrepreneur requires a channel that he/she can use to distribute his/her products/services to the right customers at the right time and cost. It consists of all middlemen who participate in the distribution of products and serve as a link between the manufacturer and the consumer.
Types of distribution channels
There are different ways through which an entrepreneur can distribute his/her products:
(a) Direct Distribution
This refers to a method whereby an entrepreneur makes and sells his/her products to customers who consume or use the product. It is also known as short channel distribution.
(b) Retail distribution
Retail distribution channel involves the entrepreneur selling his/her products to retailers and other entrepreneurs who also sell to customers as final users or consumers of the product.
(c) Wholesale distribution
Wholesale distribution channel involves an entrepreneur selling the products in large quantities to wholesalers who also sell them in smaller quantities to retailers who finally sell them to customers who are the final users of the product.
(d) Marketing and selling agents
These are agents who sell products on behalf of entrepreneurs and are paid a commission based on the value of the amount sold.
Channels of Distribution You know that the main purpose of trade is to supply goods to the consumers living in far off places. As goods and services move from producer to consumer they may have to pass through various individuals. Let us take an example. A farmer in Srinagar has an apple orchard. Once the apples are ripened he sells the apples to an agent of Delhi. The agent collects the apples from Srinagar, packs them, and sells them to a wholesaler at New Delhi sabzimandi. The wholesaler then distributes them to various retail fruit vendors throughout Delhi by selling smaller quantities. Finally, we purchase apples from those vendors as per our requirement. Thus, we find that while coming from the producer at Srinagar, the product reaches the consumers by passing through several hands like an agent, a wholesaler and a retailer. All these three are called middlemen. These middlemen are connecting links between producers of goods, on one side and consumers, on the other. They perform several functions such as buying, selling, storage, etc. These middlemen constitute the channels of distribution of goods. Thus, a channel of distribution is the route or path along which goods move from producers to ultimate consumers. The route taken by goods as they move from producer to consumer is known as Channel of Distribution.
Normally goods and services pass through several hands before they come to the hands of the consumer for use. But in some cases producers sell goods and services directly to the consumers without involving any middlemen in between them, which can be called as direct channel. So there are two types of channels, one direct channel and the other, indirect channel. From the above diagram it can be found that there is just one direct channel i.e. from producer to the consumer.
There are many indirect channels like:
Agent Retailer Producer Wholesaler Consumer Channels of Distribution 71 (i) Producer Agent
Wholesaler Retailer Consumer, (ii) Producer Wholesaler Retailer Consumer (iii) Producer Agent Consumer (iv) Producer Wholesaler Consumer and (v) Producer Retailer Consumer Let us discuss about some of the common channels
a. Small-scale retail trade; and
b. Large-scale retail trade.
Small-scale retail trade is one where a limited variety and also limited quantity of goods are sold within a local area. It requires less capital and provides goods to a limited number of customers. On the other hand, large-scale retail trade is one where capital investment is more and it deals with large volume of goods. It caters to the needs of a large number of customers. Super bazars, Departmental stores and Multiple shops are examples of large scale retail trade organization.
Retail Trade Small-scale Retail
Trade Large-scale Retail Trade
Itinerants Fixed Shop
Small-scale Retail Trade
There are verities of retailers engaged in small scale retail trading.
They can be classified as:
(i) Itinerant Retailing
(ii) Fixed Shop Retailing Channels of Distribution
(i) Itinerant Retailing Itinerant retailing is a type of small-scale retail trade in which retailers move around and sell a variety of items directly to the consumers. They do not have a fixed shop where they can sell. You must have seen them distributing newspapers early in the morning; selling peanuts, bangles, toys etc. in buses and trains; selling fruits and vegetables in your locality using a cart, selling icecream, namkeens etc. on a cycle, selling rice, earthen pots or even carpets by using a cart, etc. You can also see them on pavements in your locality. In towns and cities we come across different type of itinerant retailers. There are traders who sell their articles on fixed days at different market places. In villages these market places are called “Haat” and in towns or cities they are called “weekly bazars”. The itinerant retailing also includes persons selling articles from door to door. In most cases, the price of items is not fixed and mostly settled through bargaining. Moreover, in most cases the items sold are not branded products.
(ii) Fixed Shop Retailing Here the retailers sell goods and services from a fixed place known as ‘shop’. These shops are usually located at market places or commercial areas or near residential localities. These shops normally deal with a limited variety of goods. The goods are stored as well as displayed in the shops.
On the basis of the type of goods which the fixed shops deal in , we can classify this form of retailing as under.
a. General store or variety store
b. Single line store
c. Specialty store
Let us know the details about these stores.
a. General store or Variety store These stores, as the name suggest, deal with a variety of items of general use. They sell products mostly required by people for their daily use. For example, in a variety store you can find different items on toiletry, hosiery, biscuits and snacks items, grocery, cosmetic, gift items and stationery, etc. Normally these retailers make direct sale by cash only. However, for their regular customers, these retailers may give discount, provide credit facility and also deliver purchased goods at the customer’s house free of charge.
b. Single line store These stores deal with a specific line of goods. You must have seen medicine shops, bookshops, toy shops, ready-made garment shops, etc. These are all single line stores. They sell goods of different size, brands, designs, styles and quality of the same product line.
c. Specialty store These stores deal with products of specific brand or company. All varieties of any particular brand or manufacturers are made available in these stores. You must have seen stores, likeBusiness Studies 78 woodland shoe shops where products starting from shoe to apparel produced by woodland company are made available to the customers.