Distribution Channel Analysis

Distribution Channel Decisions

The marketers have to make their products reach the consumers for which they have to either take up the responsibility upon themselves or engage in the services of some middlemen. So the activity of managing physical movement of the goods from their point of production to the point of consumption is called distribution.

There are two aspects of distribution:

1. Operational Aspect: It deals with the physical activities like transportation etc. and is called physical distribution.

2. Institutional Aspect: It deals with the nature of the organizations through which the products reach the customers.

Channel Distribution:

The word channel has its origin from the French word 'canal' which means a pathway or route.

• Also, sometimes these shops also offer short-term credit facilities.

• Also another important advantage of such shops is that these shops are just around and they know the requirements of the local people very well.

Disadvantages:

• As the retail stores are small in size, so they cannot buy the products in bulk. So, the cost of the products dealt in by them becomes higher.

• However, in the Western Countries, developments are taking place in two directions as: o Small shops are forming associations for the economy of bulk buying etc. o With the help of franchise arrangements, a small shop is now able to operate under the name and guidance of a nationally known company. iii) Departmental Stores: They deal in a wide variety of shopping and specialty goods and generally they have many departments and each department deals with particular product variety. It serves the richer segment of the society. E.g. Big Bazzar etc.

Characteristics of Departmental stores:

• These stores deal in a wide variety of shopping and specialty goods.

• It consists of many departments and each department deals with a particular product

Their locations are generally at the busy centers of the city.

• Higher cost of distribution and administrative overheads (rental etc.) lead to higher prices.

• If some department is not able to do good business, the resources may not be always fully utilized.

• The departmental stores have not been a great success story in India. It seems that the Indian customers, even the richer ones, prefer the warm personal atmosphere of the retail shop and the opportunity for bargaining that is possible there.

• Besides, in our country, there are many alternatives opportunities, which are highly profitable. the opportunity cost calculation of the investment required for running a Departmental store often leads to the selection of some other alternatives. iv) Supermarket: A supermarket is a large store, dealing mainly in food and grocery items on the basis of display appeal, self-service, cash and lower margin. Unlike Departmental Store, it seeks to serve the middle and lower income segments. E.g. Reliance Fresh etc.

Advantages of Supermarkets:

• Its operating expenses are kept reasonably