The complex mechanism of connecting the producer with the consumer is referred to as the channel of distribution. This chapter has looked at the evolution of the channel, as well as theoretical explanations for the distribution channel phenomenon. Five "flows" are suggested that reflect the ties of channel members with other agencies in the distribution of goods and services. A channel performs three important functions: (a) transactional functions, (b) logistical functions, and (c) facilitating functions. Channel strategies are evident for service products as well as for physical products. Options available for organizing the channel structure include: (a) conventional channels, (b) vertical marketing systems, (c) horizontal channel systems, and (d) multiple channel networks. Designing the optimal distribution channel depends on the objectives of the firm and the characteristics of available channel options.
The primary members of distribution channels are manufacturers, wholesalers, and retailers, Retailing is all activities required to market goods and services to the ultimate consumer. This makes retailers who perform such activities an important link in the channel of distribution for many consumer products.
Wholesaling involves all activities required to market goods and services to businesses, institutions, or industrial users who are motivated to buy for resale or to produce and market other products and services. Wholesalers provide a linkage between producers and retails or industrial users.
Physical distribution management involves the movement and storage of materials, parts, and finished inventory from suppliers, between middlemen, and to customers. Physical distribution activities are undertaken to facilitate exchange between marketers and customers. The basic objective of physical distribution is to provide an acceptable level of customer service at the lowest possible cost. This is done using the total cost concept, which requires that all the costs of each alternative distribution system be considered when a firm is attempting to provide a level of customer service.
Channels exhibit behavior, as people do, and this behavior needs to be coordinated and managed in order to reach desired objectives. The four dimensions of behavior examined are role, communication, conflict, and power. Strategies for effective channel management include: (a) analyze the consumer, (b) establish channel objectives, (c) specify the channel tasks, (d) select the appropriate channel from available alternatives and (e) evaluate the results. The chapter concludes with a discussion of the legal factor’s impact on channels.