Explain the various levels of channels of distribution.
Manufacturer and consumer are two major components of market. Intermediaries perform the duty to eliminate the distance between the two. There is no standardized level which proves that the distance between the two is eliminated. Based on necessity help of one or more intermediaries could be taken and even this is possible that there is no intermediary. Their description is as follows:
(i) Direct Channel or Zero Level Channel: When manufacturer instead of selling the goods to the intermediary sells it directly to the consumer then this is known as Zero Level Channel. Retail outlets, mail order selling, internet selling and selling through own sales force are the examples of this channel. Some companies which sell goods through this medium are as follows:
— BATA SHOE CO, — EUREKA FORBES, — ASIAN SKY SHOP.
Zero Level Channel can be explained with the help of the followinq diagram:
(ii) Indirect Channels: When a manufacturer gets help of one or were middlemen to move goods from production place to the consumption place , the distribution channel is called indirect channel. Following are the main types of it:
(a) One Level Channel: In this method an intermediary is used. Here manufacturer sells the goods directly to the retailer instead of selling it to agents or wholesaler. This method is used for expensive watches and other like products. This method is also useful for selling FMCG (Fast Moving Consumer Goods). This channel is clarified in the following diagram:
(b) Two Level Channel: In this method/ medium manufacturer sells the material to the wholesaler, wholesaler to the retailer and then retailer to the consumer. Here wholesaler after purchasing material in large quantity from the manufacturer sells in small quantity to the retailer. Then retailers make the products available to consumers. This medium is mainly used to sell-soap, tea, salt, cigarette, sugar, ghee etc. This channel is more clarified in the following diagram:
(c) Three Level Channel: Under this one more level is added to Two Level Channel in the form of agent. Agent facilitates to reduce the distance between manufacturer and wholesaler. Some big companies who cannot directly contact wholesaler, they take the help of agents. Such companies appoint their agents in every region and sells the material to them. Then agents sell the material to wholesalers, wholesaler to retailer and in the end retailer sells the material to consumers. This channel is more clarified in the following diagram:
