A channel of distribution serves as the connecting link between the producer and consumers. It creates time and place utilities by bridging the gap between the time and place of production and those of consumption.
Channels of distribution increase the efficiency of marketing because the middlemen are specialised agencies of distribution. They help to reduce the cost of transactions and smoothen the flow of goods and services.
Distribution agents facilitate search for buyers and sellers by keeping in touch with both. They are in direct touch with consumers and understand the needs and preferences of consumers. In the absence of middlemen producers may be required to keep larger stock of goods.
Marketing intermediaries play a vital role in the distribution of goods and services. These intermediates have wide contacts, expert knowledge and trade experience.
Therefore, they can achieve more efficient distribution than producers. Many producers do not have the financial resources and expertise required for direct distribution. Manufactures generally produce a large quantity of a limited variety of goods.
On the other hand, consumers generally desire only a limited quantity of a wide variety of goods. Marketing intermediaries bridge the discrepancy between the assortment of goods and services generated by the producer and assortment demanded by the consumers.
They smoothen the flow of goods and services. The role of intermediaries has become important due to increasingly wider markets and growing complexities of distribution.
A channel of distribution performs the work of moving goods and services from producers to consumers. It overcomes the place, time and possession gaps that separate producers from consumers. Marketing intermediaries perform following important functions.
Marketing intermediaries attract customers and persuade them to buy goods and services. These intermediaries undertake sales promotion activities through media and personal contacts.
Intermediaries or middlemen negotiate prices and other terms and conditions between buyer and seller. No sale can take place without an agreement on prices and other terms and conditions.
Middlemen collect information about demand, competition, etc., from consumers and pass on to manufacturers. They also provide information to consumers about new products, changes in design, style, prices, etc., of existing products.
Intermediaries collect small orders from consumers and on that basis place large orders with manufacturers.
v. Physical possession:
Middlemen take possession of goods from producers and pass on possession to consumers.
vi. Transfer of title:
Middlemen transfer ownership of goods from producers to consumers.
Intermediaries provide financial, assistances at different stages of the marketing channel. They buy goods in cash from producers and sell them to consumers on credit.
viii. Risk taking:
Intermediaries assume most of the risks involved in the distribution of goods. They relieve producers from these risks and enable them to concentrate on production.