- Channels of distribution are the paths that goods and or services follow from the producers to the final users.
- The persons involved in the distribution of goods from the producer to consumer are called middlemen or intermediaries.
- There are different channels that different products follow. Some of the channels include the following:
- Producer agent wholesaler retailer
- Producer co – operative society marketing board wholesaler retailer
- Producer marketing board wholesaler retailer
- Producer wholesaler retailer
- Producer wholesaler consumer
- Producer retailer consumer
- Producer consumer
Costs incurred middlemen while distributing goods
- Buying costs. They incur this cost paying for them from the producers or other middlemen.
- Transport cost. Some middlemen do transport goods from the producer to other middlemen or to the final users.
- Storage costs. Middlemen do keep the goods until their demand arises. This will therefore require them to hire or construct their own warehouses.
- Advertising or marketing costs. Some middlemen do carry out marketing of goods on behalf of the producers and other middlemen. In the process, they pay for such services.
- Insurance costs. Middlemen do insure the goods they are trading in to ensure compensation in the event of loss.
- Operation costs. Middlemen just like other businesses do incur operating costs such as salaries to employees, electricity, maintenance among others.
- Preparation costs. Some middlemen to prepare goods before they are sold to the consumers. Such activities include packing, assembling and blending. They have to meet such costs on behalf the producer, other middlemen and consumers.
ROLES OF MIDDLEMEN
The following are some the roles performed middlemen in the chain of distribution
- Bulk accumulation (assembling). They similar goods from different producers in small quantities and then offering the large amount gathered to buyers who may want to buy in large volumes.
- Reducing transactions. The interactions between the producers and the consumers will be reduced since the middlemen are the ones who will be communicating to the consumers.
- Bulk breaking. They buy in large quantities and then sell in small quantities as desired the consumers.
- Risk taking. They assume all the risks related with the movement of goods from the producers to the consumers. Such risks include theft, damages, loss due to bad debts.
- Finance provision. Middlemen provide finance to the producers buying goods in large quantities and paying for them in time.
- Provision of information. Middlemen gather market information from the consumers then pass to the producers who in turn produce goods in line with the tastes of consumers.
- Marketing/product promotion. Middlemen are involved in marketing of goods hence stimulating the interest of consumers.
- Provision of transport. Middlemen do transport goods from the producers up to the where the consumers can access them. Both the producers and consumers are hence relieved of transport costs.
- Variety provision
- Availing goods to consumers
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