Producers can use different channels of distribution in the process of supplying their products to the final consumers. There are different alternatives for them to select type and number of channel.The legal right and ownership of goods goes on transferring from one to another channel member before reaching the hands of final consumers.
The levels and numbers of distribution channels should be selected and used carefully considering the nature of products, market situation, firm's capacity etc. Each intermediary involved in distribution channel is counted as one level of the channel. If a producer sell his products directly to consumers, then it is 'zero level channel'. If he sells products to retailers and retailers sell to consumers, this is 'first level channel'.
The levels and numbers of distribution channels should be selected and used carefully considering the nature of products, market situation, firm's capacity etc. Each intermediary involved in distribution channel is counted as one level of the channel. If a producer sell his products directly to consumers, then it is 'zero level channel'. If he sells products to retailers and retailers sell to consumers, this is 'first level channel'.
The goods that the consumers buy for the purpose of consumption or use are called consumer goods. On the basis of buying behavior, consumer goods can be divided into three classes as convenience goods, shopping goods and specialty goods.
According to the nature of the goods, they can be classified into two types as perishable goods and durable goods, necessities and luxury goods. Only one type or same distribution channel may not be suitable for distribution of all types of consumer goods. Any one or more distribution channel can be used; they may be various levels of distribution channels used for supplying consumer goods. Among them the main levels can be presented as follows:
1. Zero-level Channel: (Producer......Consumers)
This channel is also called direct channel. In this, the producers sell their goods or services directly to the consumers. There is absence of intermediary or middlemen between the producers and consumers. This channel of distribution is called zero-level. This is the most common, easy and short channel for sales or distribution of goods. Mostly, if the goods are costly or the consumers' number is low, the producers themselves sell their products directly to the consumers. The small producers of perishable products also sell their products directly to the local consumers. Big firms, which want to minimize distribution cost and eliminate middlemen, use direct level distribution channel to sell their products.
2. One Level Channel: (Producer...Retailer...Consumers)
In one level channel of distribution, only retailers remain as middlemen between producers and consumers. In this channel producers sell their products to retailers and the retailers sell them to final consumers. The producers do not seek help of wholesalers or agents to sell their products. Nowadays, this channel has become very popular. The producers themselves supply their products to the final consumers through retailers. Big retailing shops such as departmental stores, super markets, discount houses etc. have begun to appear in markets. They have made easy to sell any goods or services without the presence of wholesalers in the distribution channel. This channel is suitable to sell perishable goods and other goods that need prompt sale.
3. Two-level Channel: (Producer....Wholesaler...Retailer....Consumers)
In this channel of distribution, the producers sell their products to final consumers through wholesalers and retailers. In other words, the producers sell their products to wholesalers, then wholesalers sell them to retailers and the retailers sell to final consumers. This is also called 'Traditional channel of distribution'. The producers sell their products to wholesalers in large quantity. Then wholesalers sell them to retailers in small quantity. then the retailers sell them to final consumers.
This channel is long in distribution system. This channel is used to sell or distribute foodstuffs, medicines, including many other consumer goods. This channel is suitable for the products, which need to be supplied to scattered markets and consumers.
Also Read:
4. Third-Level Channel: (Producer...Agent...Wholesalers...Retailers...Consumers)
This is the longest channel of distribution of consumers goods. In this channel three middlemen are used to supply goods to the final consumers. In other words, the producers sell their products to final consumers through agents, then agents sell them to wholesalers and wholesalers sell them to retailers and finally the retailers sell the goods to consumers. Generally, this channel is needed for selling agro-products, clothes, industrial materials etc. The producers can take help of agents to sell their goods.
This channel is useful to those producers who cannot contact many wholesalers, cannot pay attention to international markets and want to avoid several distribution problems. Mostly, this channel is not used for distribution of most of the goods since it is costly, takes long time and invites several problems.
