Distribution channels are a set of interdependent organizations (intermediaries) involved in the process of making a product or service available for consumption.

The path through which goods travel from the vendor to the consumer or payments for those products travel from the consumer to the vendor.

Role and Functions of Distribution Channels

  1. Information flow
    • Collect information about market demand, competition etc. and pass on to producers.
    • Information to consumers about new products, changes in designs etc.
  2. Promotion
    • Attract customers and persuade them to buy goods and services.
    • Undertake sales promotion activities through various media and personal contacts.
  3. Contact
  4. Matching
  5. Price fixing
  6. Negotiation
    • Negotiate prices and other terms and conditions between buyer and seller.
  7. Physical distribution and storage
    • Take possession of goods from producers and pass on to consumers.
      Transfer ownership of products from producers to consumers.
  8. Financing
    • Financial assistance at different levels.
    • Buy goods in cash/credit from producers and sell them to customers on credit/cash.
  9. Risk taking
    • Intermediaries assume most of the risk.
    • Relieve producers from risk enabling them to concentrate on production.
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