Q.Explain the factors determining the choice of channel of distribution.
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Start your 14-day free trial to unlock the full solution →The choice of a distribution channel depends on a blend of product-related, company-related, market-related, and environmental factors — no single factor decides it; the marketer must weigh them together.
When a business decides how to move its goods from the factory to the final consumer, it faces a critical question: should it sell directly, or should it use intermediaries like wholesalers and retailers? This decision is not made in a vacuum. The channel of distribution — the path a product takes — is shaped by several interconnected factors. Understanding these factors helps a marketer choose a channel that is both efficient and profitable.
Let us begin with the product itself. If the product is perishable, like milk, bread, or fresh flowers, a shorter channel is almost always necessary. A long chain of intermediaries would delay delivery and cause spoilage. Similarly, bulky or heavy items — think furniture, cement, or industrial machinery — are expensive to store and transport. Here, a direct channel or a very short channel (manufacturer to retailer) reduces handling costs. On the other hand, non-perishable, standardized, low-value items like soap, toothpaste, or packaged snacks can travel through longer channels involving wholesalers and retailers because they can be stored and moved in large quantities without risk.
Products requiring after-sales service -- such as air conditioners, cars, or computers -- often benefit from a direct channel or one with a limited number of authorised dealers, so the manufacturer can control service quality.
Next come company-related factors. A company with strong financial resources can afford to set up its own sales force, warehouses, and retail outlets — that is, a direct channel. But a smaller firm with limited capital may have no choice but to rely on intermediaries who already have the infrastructure. The company’s desire for control also matters. If a manufacturer wants to control pricing, display, and customer experience (as luxury brands do), it will prefer a shorter channel. If it is willing to share control in exchange for wider reach, a longer channel works. Past experience and the company’s existing distribution network also guide the choice — a firm already working with wholesalers may continue that pattern for new products. …
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