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Channels to Distribute Product Defined and Explained:
There is a path that is travelled by goods and services when they move from a vendor to the end consumer and it is referred to as a channel of distribution for the product. It is also that path in which payments travel from the consumer back to the vendor.
Distribution channels can be very short in a direct transaction that is from a vendor right to the consumer or it can be more convoluted. Longer channels to distribute product can include several intermediaries that are interconnected throughout the chain.
Who are the Intermediaries in channels to distribute product?
Intermediaries are inextricably connected to one another. These include wholesalers, retailers, distributors and agents. An intermediary receives an item at a specific price point and then continues to move the item through the distribution channels by moving it to a higher pricing point until the item ultimately reaches a final buyer.
Intermediaries such as wholesalers tend to make money from distributing a product, simply by importing it and then incorporating their mark up before they turn around and sell it to the next intermediary in the chain.
What is a great example of channels to distribute product?
Food that reaches the grocery store and the end customer must start at a farmer, then be dealt with by the exporter who will get it to the country, the importer who will aid in getting the product into the country and then the distributor who will get the product to a retailer or a grocery store. Consumers then purchase the food from the grocery store at the end of the chain of distribution.
What are some considerations for channels to distribute product?
It is important for any retailer or other intermediary to consider both the nature of a product and the length of time that the product will take to reach its final destination. If a product is perishable, it is important that it reach the end of the distribution chain in a timely fashion. Failure to accomplish this will ensure that the product will spoil and any possible profit will not be achieved in the end.
Most intermediaries plan the chain of distribution in advance to ensure that a product reaches the consumer by the time that it needs to so that a profit can ultimately be made. There are no winners at the end of a distribution chain if a perishable product does not reach its goal market before the product spoils, the only winners are those at the beginning of the chain.