Channels of distribution

Products (goods and services) from both primary and secondary producers are made available to consumers through any of the following six channels of distribution:

Channel 1 From Producer to Wholesaler to Retailer to Consumer

• It is the traditional route of distribution.
• Wholesalers buy goods in bulk from producers.
• Wholesalers break bulk for retailers.
• Wholesalers provide transport and a variety of goods and services.
• Retailers sell in single units to consumers.
• It is most suited for non-perishable products.

Channel 2 From Producer to Wholesaler to Consumer

• Wholesalers buy in bulk from producers and sell directly to consumers.
• Cash and carry wholesalers sell in case lots to consumers.
• Wholesalers provide variety.
• Goods and services are usually sell on cash and carry basis.

Channel 3 Producers to Large scale retailers to Consumer

• Large scale retailers like OK and TM buy from producers in bulk and sell to consumers directly in single units or in small quantities.
• Examples of large scale retailers are supermarkets and hypermarkets.
• Ideal for the sale of furniture, electrical gadgets and household goods.

Channel 4 Producer to Mail Order forms to Consumer

• Usually done through agents.
• Mail order firms advertise the products.
• Goods are ordered and sold through the post office.
• Cash on Delivery (COD) method of payment is used.
• Sell a wide range of goods.
• Packaging, advertising, postage and printing costs are high.

Channel 5 Producer to Manufacturer’s own retailers to Consumer

• Producers’s own retail outlets which get goods from their producers and sell direct to consumers e.g Bata.
• It is used where producers want to push their own products.
• Other products through this route perishable such as vegetables, fruits and bread.

Channel 6 Producers to Marketing Boards to Wholesalers to Retailers to Consumers.

• Marketing Boards, are state organisations that buy produce from primary produce e.g. Grain Marketing Board.
• Goods sold through this route are usually the country’s essential primary produce e.g. grain.
• Marketing Boards sell to both wholesalers and retailers.
• Retailers then sell to consumers.

To access more topics go to the Commerce Notes page.