Business Definition for: channel of distribution
channel of distribution
means used to transfer merchandise from the manufacturer to the end user. Intermediaries in the channel are called middlemen. Those who actually take title to the merchandise and resell the goods are merchant middlemen. Those who act as
brokers
but do not take title are agent middlemen. Merchant middlemen include wholesalers and retailers. Agent middlemen include
manufacturer's representative
,
broker
, and sales agents.
channel of distribution
means used to transfer merchandise from the manufacturer to the end user. An intermediary in the channel is called a
middleman
. Channels normally range from two-level channels without intermediaries to five-level channels with three intermediaries. For example, a caterer who prepares food and sells it directly to the customer is in a two-level channel. A food manufacturer who sells to a restaurant supplier, who sells to individual restaurants, who then serve the customer, is in a four-level channel. Intermediaries in the channel of distribution are used to facilitate the delivery of the merchandise as well as to transfer title, payments, and information about the merchandise. For example, a manufacturer may rely upon the workforce employed by a distributor to sell the product, make deliveries, and collect payments. The channels used by a marketer are an integral part of the marketing plan and play a role in all strategic marketing decisions.
See also
distribution
,
channel competition
,
channel management
Related Terms:
Corporate finance: allocation of income and expenses to the appropriate subsidiary accounts.
Economics: (1) movement of goods from manufacturers; (2) way in which wealth is shared in any particular economic system.
Estate law: parceling out of assets to the beneficiaries named in a will, as carried out by the executor under the guidance of a court.
Mutual funds and closed-end investment companies:payout of realized capital gains on securities in the portfolio of the fund or closed-end
investment company.
Securities: sale of a large block of stock in such manner that the price is not adversely affected. Technical analysts look on a pattern of distribution as a tipoff that the stock will soon fall in price. The opposite of distribution, known as accumulation, may signal a rise in price.
efforts by the marketers within a channel of distribution, or by channels as a whole, to establish dominance over the others. For example, the restaurants in a downtown district compete with each other for customers as well as for the best locations and suppliers. The same restaurants also compete as a group against home/office meal delivery services. A restaurant can gain an advantage by differentiating itself from the rest of the competitors in the channel. For example, it might offer a formal lunch club open to members only or guaranteed 15-minute service for informal lunches. It can be difficult for a marketer to determine when a company that used to be part of a different distribution channel becomes a competitor within the same channel, such as in the case of Sears versus Wal-Mart or Continental versus Southwest Airlines.
process by which a marketer ensures the effectiveness of its middlemen in terms of product knowledge, sales volume, and profitability. Marketers must provide their middlemen with the tools they need to promote and sell the product effectively as well as adequate incentives to do so. The middleman is not an employee of the marketer and will not share the same objectives unless given some incentive to do so.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright c 2000, 1994, 1987 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
