What Are Channels of Distribution?

The distribution channel refers to the entire channel connected by various middlemen through which products or services flow from the manufacturer to the consumer (user).

Distribution channel

Kotler believes that the market

Specifically, the functions of distribution channels include:

First, research, that is, gathering the information necessary for planning and exchange;

Second, promotion, that is, designing and disseminating information about goods, and encouraging consumers to buy;

Third, contact, that is to find, identify potential buyers for the manufacturer, and communicate with the buyers;

Fourth, cooperation, that is, adjusting the products supplied according to the buyer's requirements, including grading, sorting and packaging activities;

Fifth, negotiation, that is, participating in negotiations on prices and other trading conditions on behalf of the buyer or seller to facilitate the signing of a final agreement and transfer of product ownership

Sixth, physical distribution, that is, storage and transportation of products;

Seventh, financing, that is, collecting and distributing funds to cover part or all of the costs required for distribution;

Eighth, risk taking, that is, taking on all risks related to engaging in channel work.

Functions of distribution channels

First, classification. Including the classification and grading of products,

As the main products consumed by individual consumers and productive group users in China are different, the consumption purposes and purchasing characteristics are different. Objectively, the sales channels of Chinese enterprises constitute two basic models: the sales channel model of productive groups and users And business to individual consumer sales channel model.

1. Enterprise sales channel model to productive group users. There are the following: Producer-User, Producer-Retailer-User, Producer-Wholesaler-User, Producer-Wholesaler-Retailer-User, Producer-Agent -Wholesaler-Retailer-User

2. Business-to-individual consumer sales channel model. There are the following: Producer-Consumer, Producer-Retailer-Consumer, Producer-Wholesaler-Retailer-Consumer, Producer-Agent-Retailer- Consumer, Producer-Agent-Wholesaler-Retailer-Consumer

According to the presence or absence of middlemen participating in the exchange activity, all the channels in the above two models can be summarized into two types of basic sales channels: direct distribution channels and indirect distribution channels. Indirect channels are divided into short channels and long channels.

(I) Direct distribution channels

Direct distribution channels refer to producers supplying products directly to consumers or users without the involvement of middlemen.

The form of direct distribution channels is: producer-user. Direct channels are the main type of industrial product distribution. For example, large-scale equipment, special tools, and products with complex technology that require special services are all directly distributed. Some consumer products also use direct distribution types, such as live goods. In recent years, especially since 1988, the proportion of self-sale by enterprises has increased significantly. For example, in 1990, China's steel products sold by steel mills accounted for 38% of the country's total steel output; only 20.20% of automobiles were supplied and sold under mandatory plans.

1. Specific ways of direct distribution channels

There are many direct distribution methods for enterprises, but they can be summarized as follows:

(1) Order distribution. It means that the manufacturing enterprise and the user first sign a purchase or sales contract or agreement, supply the goods according to the terms of the contract, and pay the money within the specified time. Generally speaking, most of the active contact parties are the sales producers (such as the manufacturers to send sales staff), and there are some popular products or raw materials, spare parts, etc. that are requested by customers.

(2) From the sales department. It refers to the place where the production company usually sets up the sales department outside the production area, where the users are concentrated, or the business area. There are also some production companies that are close to users or business districts to set up the sales department in front of the factory.

(3) Joint distribution. Such as industrial and commercial enterprises, production enterprises unite for sales.

2. Pros and cons of direct distribution channels

(1) The advantages of direct distribution channels:

It is conducive to the communication between the production and demand parties, and can produce on demand to better meet the needs of target customers. Due to face-to-face sales, users can better understand the performance, characteristics and usage methods of the products; producers can directly understand the characteristics of users' needs, purchases and other trends, as well as their advantages and disadvantages and their marketing environment The changes created conditions for on-demand production.

can reduce the loss of products in the distribution process. Because the intermediate link of commodity circulation is removed, sales losses are reduced, and sometimes the commodity circulation can be accelerated.

It can make the buyers and sellers relatively stable in marketing. Generally speaking, direct sales channels exchange goods and sign contracts. The quantity, time, price, quality, and service are performed in accordance with the contract. The relationship between the purchaser and the seller is fixed in a legal form for a certain period of time, so that both parties can use their energy Strategic planning for other areas.

You can directly promote in the sales process. Direct distribution by enterprises is actually a direct promotion. For example, direct sales by companies not only promotes user orders, but also expands the influence of enterprises and products in the market, and also promotes new users' order.

(2) Disadvantages of direct distribution channels:

In terms of products and target customers: For most daily necessities, their purchases are miniaturized, diversified and repetitive. If producers use their own strength to set up sales outlets, they are often unable to do so, or even go against their wishes. It is difficult to make products widely distributed in a short period of time, and it is difficult to quickly occupy or consolidate the market. The needs of corporate target customers are not met in a timely manner and are bound to be transferred. Buy products from other manufacturers, which means that the company loses its target customers and market share.

In terms of business collaboration partners: Commercial companies are more experienced in sales than production companies. These middlemen know the customers' needs and purchasing habits the most, and play an indispensable bridge in business circulation. However, the self-selling products of the production enterprises have dismantled this bridge, and they will inevitably conduct market surveys by themselves, so as to capture the costs of personnel, property, and materials borne by the middlemen. In this way, the workload of the producer is increased and the energy of the producer is dispersed. More importantly, producers will lose the cooperation of middlemen in sales. The realization of product value adds new difficulties, and it is difficult to meet the needs of target customers in a timely manner.

Between producers: When producers only sell goods through direct distribution channels, so that the needs of target customers are not met in a timely manner, peer producers may take advantage of the situation to enter the target market and take away target customers and goods Collaboration partners. In the productive group market, the target customers of an enterprise are often productive users who purchase the products of the enterprise, and they are often partners of the enterprise's specialized collaboration. Therefore, the loss of target customers also means the loss of collaboration partners. When the exchange of scientific technology and management experience between producers is hindered, it will make the company's journey of professional collaboration more difficult, which will affect the company's products to achieve market share and business collaboration, resulting in a Kind of bad cycle.

(II) Indirect distribution channels

Indirect distribution channels refer to producers using middlemen to supply goods to consumers or users, and middlemen are involved in exchange activities.

The typical form of indirect distribution channels is: producerswholesalersretailersindividual consumers (a few are group users)? At this stage, China s total consumer goods demand and market potential are large, and the market for most commodities is Gradually transform from seller's market to buyer's market. At the same time, for the sales of daily necessities, the proportion of market regulation has increased significantly, and the collaboration between industrial and commercial enterprises has become wider and closer. Therefore, how to use indirect channels to make their products widely distributed has become one of the important topics studied by modern enterprises in marketing.

1. Specific ways of indirect distribution channels

With the opening of the market and the revitalization of the circulation field, the proportion of China's indirect distribution of commodities has increased. There are many ways for enterprises to sell through middlemen in the market, such as factory-store linkage, special dealerships, retailers or wholesalers buying directly from the factory, middlemen holding various trade fairs for the factory, etc., which are not listed and explained here one by one. .

2. Pros and cons of indirect distribution channels

(1) The advantages of indirect distribution channels:

It helps to distribute products widely. The middleman is connected to the producer at the beginning of the circulation of goods, and to the consumer at the end, which is conducive to regulating the contradiction between production and consumption in terms of variety, quantity, time and space. It is not only beneficial to meet the needs of the target customers of the manufacturers, but also to realize the value of the products of the manufacturing enterprises. It can also make the products widely distributed, consolidate the existing target markets, and expand new markets.

Alleviate the shortage of human, financial and material power of producers. The middleman purchases the producer's product and delivers the payment, so that the producer realizes the value of the product in advance, and starts a new capital cycle and production process. In addition, the middlemen also bear the costs of warehousing and transportation during the sales process, as well as other human and material resources, which makes up for the lack of power in producer marketing.

Indirect sales. Consumers often buy products after comparing several goods, and a middleman usually distributes similar products of many manufacturers. The different introductions and publicity of similar products by middlemen have a great impact on product sales. In addition, strong intermediaries can also pay a certain amount of publicity and advertising costs, and have certain after-sales service capabilities. Therefore, if producers can get good cooperation with middlemen, they can promote product sales and obtain market information from middlemen in a timely manner.

Conducive to professional collaboration between enterprises. The increasing socialization of modern machine manufacturing and the rapid advancement of science and technology have made the division of specialization increasingly sophisticated. Only through extensive professional cooperation can companies better meet the challenges of new technologies and materials, and be able to withstand the severe market Tests can be carried out in large quantities and efficiently. Intermediaries are the product of specialized collaborative development. The integration of production and sales by producers makes it difficult to effectively organize the circulation of goods and disperses production energy. With the cooperation of middlemen, producers can be relieved from the tedious sales business, concentrate their efforts on production, concentrate on technical research and technological innovation, and promote professional cooperation between production enterprises to improve the efficiency of production and operation.

(2) Disadvantages of indirect distribution channels:

A "lag in demand" may be formed. The purchase of a product by an intermediary does not mean that the product is sold from the intermediary, and sales may be blocked. For a certain producer, once the sales of most of its middlemen are blocked, a demand lag is formed, that is, demand lags behind supply in time or space. However, the production scale is fixed, and personnel, machinery, and funds are operating as usual, and production is difficult to decrease sharply. When demand continues to decrease, it will cause the supply of products to exceed demand. If a similar situation occurs for most commodities, it will lead to so-called market weakness.

It may increase the burden on consumers and cause resistance. The circulation link increases the loss of goods in storage or transportation. If it is passed on to the price, it will increase the burden on consumers. In addition, the poor service of intermediaries may lead to customer resistance to the goods and even transfer of purchases.

It is not easy to communicate information directly. If the cooperation with middlemen is not good, it will be difficult for production companies to understand and grasp consumer opinions on products, the situation of competitors' products, the advantages and disadvantages of enterprises and competitors, and the changing trend of target market conditions. . In today's changing market and information explosion market, corporate information is not good, production and management will inevitably get lost, and it will be difficult to maintain high marketing effectiveness.

(3) Long and short channels

The length of distribution channels is generally divided according to the number of circulation links, including the following four layers: 1.

1. Determine the channel model.

The design of an enterprise's distribution channel is first to decide what type of distribution channel to adopt, whether it is to send salesmen to sell at home or sell it in other ways, or to distribute through an intermediary. If you decide on the distribution of middlemen, you must further decide what type and size of middlemen to choose.

2.Determine the number of middlemen

It determines the width of the channel. This mainly depends on the characteristics of the product itself, the size of the market capacity and the width of demand. There are usually three forms to choose from.

(1)

Market factors, including the scope of the target market-a broad market range, applicable to long,

One,

After the channel design of the enterprise management personnel, they must also select, motivate, evaluate and adjust the individual middlemen.

The essence of the distribution channel assessment is to choose the plan that seems to be reasonable but mutually exclusive, which can best meet the long-term goals of the enterprise. Therefore, companies must evaluate various possible channel options. There are three evaluation criteria, namely economy, control and adaptability.

(A) economic standards

The function of the distribution channel is that it is a bridge and a link between producers and consumers or users. Businesses use distribution channels because

1. Leverage brand and platform advantages

From the offline perspective, many well-known brands such as McDonald's and Starbucks have attracted users from all over the world with their strong brand influence and good reputation, and franchisees are also rushing. In the same way, if you want to obtain a large number of distributors and franchisees on the Internet, you also need to take advantage of the brand. The Handu clothing houses and the excellent sharks in the United States mentioned above have been sought after by others because they already have a certain popularity and reputation on the Internet. Therefore, we must first take advantage of the platform of the brand and online distribution system to form a good reputation, so that many distributors can be trusted, can they be a solid backing, and they can follow you faithfully.

2. Promotion of brand and platform

After the foundation of the brand and platform is set up, the most important thing is promotion. Only after the promotion is done can there be a lot of traffic and user sources. The premise of promotion is that the SME e-commerce website has already optimized its SEO, and the rest is to vigorously promote it.

As far as network promotion methods are concerned, there are two methods: free promotion and paid promotion. Free promotion methods are: Weibo, SNS community, forums, soft articles, Q & A platforms, emails, QQ groups, etc. The effects are also different from person to person, and the final results obtained by different methods in different industries are different; paid promotion methods are: Bidding ranking, hard broadcasting, freelance, part-time recruitment, etc. Of course, many smart businesses are also looking for cooperation models. Many people have great strength. Cooperation such as alliances can save promotion costs and save time and effort. The idea of interdependence and common progress of e-commerce is worth learning from.

3. Get rid of the shackles of traditional management

Many traditional companies and offline brands have very good performance and business acumen. It is also wise to enter e-commerce at a critical moment, and developing network distribution channels is also a way to expand. Online distribution, franchising, and agency, comprehensively carry out network layout, can expand sales channels in a short time, increase sales scale, and can also get rid of the constraints of traditional operations, whether it is capital, manpower, inventory or management, can be unique through the network The integration and utilization of advantages has saved a lot of energy and reduced a lot of pressure and difficulties. Especially for many small and medium-sized traditional enterprises, online distribution is a big move for them to get rid of the shackles of traditional operations.

4.The strong potential of online distribution

In 2012, the number of Chinese Internet users was close to 600 million, and the huge market and potential of the Internet and e-commerce have made us breathtaking. Therefore, if we want to gain a place in the future, we must vigorously develop e-commerce and develop online distribution. Take full advantage of offline advantages, combine network and offline resources, and systematically integrate all channel dealers, agents, distributors and brands, products, channels, supply chains and other aspects, and then do network-wide marketing and network-wide channels . ^[3]