Types of Distribution Channels

Conventional Distribution Channel

A channel consisting of one or more independent producers, wholesalers and retailers, each a separate business seeking tit maximize its men profits even at the expense of profit for the system an a whole.

Direct Channel

• The producer can sell directly to his customers without the help of middlemen, such as wholesalers of retailers
• By opening retails shop.
• Through travelling salesmen.
• Through mail order business.

Indirect Channel

• Producer-Retailer-Consumer (via large department ‘ stores).
• Producer—Wholesaler—Consumer (most industrial products).
• Producer-Wholesaler-Retailer-Consumer (most consumer goods).
• Producer-Sole Agent -Wholesaler-Retailer-Consumer (usually for a prescribed geographical area).

Vertical Marketing Systems

A distribution channel structure in which producers, “wholesalers and retailers act as a unified system. One channel member owns the others, has contracts which them, or has so much power that they all co-operate.

Corporate VMS

A vertical marketing system that combines successive stations, production and distribution under single ownership – channel leadership is established through common ownership. Petrol distribution through chains of petrol stations owned by the oil company is an example of delivery and control achieved by such a system.

Contractual VMS

A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economic* or sales impact than they could achieve

Franchise VMS

Contractual association between a franchisor – a manufacturer, wholesaler or service organization – and an independent channel member (the franchisee), which buys the right to sell the franchisor’s branded product or service.

Administered VMS

A vertical marketing system that co-ordinates successive stages of production and distribution, not through common ownership or contractual tics, but through the size and power of one of the parties.

Horizontal Marketing System

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Nestle and Coca-Cola formed a joint venture to market ready-to-drink coffee and tea worldwide. Coke provided worldwide experience in marketing and distributing beverages, and Nestle contributed two established brand names – Nescafe and Nestea.