Chain/channels of distribution

Business studies study module

Introduction

  • 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 to agent to wholesaler to retailer to consumer.
  • Producer to co – operative society to marketing board to wholesaler to retailer to consumer.
  • Producer to marketing board to wholesaler to retailer to consumer.
  • Producer to wholesaler to retailer to consumer.
  • Producer to wholesaler to consumer
  • Producer to retailer to consumer
  • Producer to consumer

Costs incurred middlemen while distributing goods

  1. Buying costs. They incur this cost paying for them from the producers or other middlemen.
  2. Transport cost. Some middlemen do transport goods from the producer to other middlemen or to the final users.
  3. Storage costs. Middlemen do keep the goods until their demand arises. This will therefore require them to hire or construct their own warehouses.
  4. 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.
  5. Insurance costs. Middlemen do insure the goods they are trading in to ensure compensation in the event of loss.
  6. Operation costs. Middlemen just like other businesses do incur operating costs such as salaries to employees, electricity, maintenance among others.
  7. 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.



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