Sales Distribution Channels and Marketing– The Use of Digital Media and Communication Systems.
The Scope of online technologies Amid and After CoViD 19 Pandemic (The era of SAARS CoV 2)
What do you mean by Sales Distribution Channels?
Distribution channels for sales, is a systematic network through which the product take its journey from a manufacturer to the end customer, where each personnel is meant to be a direct influencer and direct or indirect beneficiary of the process. The total system comprises the flow of product from a manufacturer – marketer – distributor – wholesaler – retailer – customer. Depending on the product and the company’s roadmap to reach the customer the chain may be as short with zero intermediates to broader with added intermediates and process.
What are the types of sales distribution channels? / What are routes of sales through Distribution Channels?
- Broadly depending on the number of intermediates between the manufacturer and end customer, distribution channels may be direct distribution channels or indirect distribution channels. Depending on the number of intermediates indirect distribution channels are categorized as one level distribution channel, two level distribution channel, and three level distribution channels.
Direct Distribution Channels or Zero level distribution channel
Manufacturer to customer
- Direct distribution channels or zero level distribution channels include direct selling of a product or service by a brand or manufacturer to the end customer.
- There will be no intermediates in between the manufacturer and the end customer.
- Choosers include bakers, jewellers, clinical laboratories, hospitals, etc.
- Direct distribution channels can optimise the business operation for the real market only when the company is about to sell a limited edition product or a luxurious product or when the business aims only a region specific market.
- Direct distribution mechanism, however cannot assure volume sales but it can benefit the volume sales you are proposed to.
One level distribution channel
Manufacturer to Retailer to Customer
- The channel where many retailers purchase the product from a manufacturer with a commission percentage deducted price and resell it to the end customer under MRP.
- Customer may be offered/given slight deduction in MRP as a part of publicity or customer management or lead nurturing.
- Channel used by branded product showrooms, deduction retailers (off price retailers), etc. Textile, footwear, automobiles, etc. are simple examples.
Two level distribution channel
Manufacturer to Wholesaler to Retailer to Customer
- Many wholesalers purchase bulk products from the manufacturer. Depending on the benefit of large stock clearance enables the manufacturer to avail added deduction in the price per unit.
- Wholesalers sells the bulk as small packages to many retailers, availing a percentage deduction from their profit amount at the price per pack level. This deduction mainly depends upon the stock purchase and clearance capacity (Retail capacity) of the retailer along with that of the wholesaler (a silent factor).
- All retailers resell the products to the end customers with or without deduction as said above.
Three level distribution channel
Manufacturer to Agent to Wholesaler to Retailer to Customer
- Agents are people or organisation, capable of taking or carry/forward stocks at very large scale, undertaking the duty for a large area like district or state.
- Agents may be super stockists or just stock forwarding agents. Super stockists purchase very large quantity of goods and store it on behalf of the company, sell it to many wholesalers and many retailers; a system that works on profit from trade. Stock forwarding agents provide their warehouse and shipment expertise for order processing and last mile deliveries, i.e., works to just forward the stock; a system that works on commission basis.
- Agents are utilised for moving out the stock very quickly.
- Three level distribution channels are used for quickly moving out stocks, and when the customer base is very large - across a nation or during high demand for the product.
What is Dual Distribution Channels?
When a manufacturer uses multiple channels (more than one) for the product to reach end customers, such a path adoption is referred to as dual distribution channel. Proper implementation of different distribution channels, simultaneously in a view of very quick stock clearance is the point of success in trade.
For a simple example to say, if you are a smartphone manufacturer, you should have your own outlets, e commerce facilities, etc. (direct distribution channel) as a first line of safe stock clearance as well as publicity, whereby you reach the large market through multi branded stores and other means (indirect distribution channels). Similarly for the trade of food and raw materials you should have sufficient stocks to forward quickly without any shortage, to avoid the B2B as well as B2C customers; in business delay means time for competitor to replace you, so you should have to manage the stock in remote agent’s warehouses also.
This is the importance of distribution channels, well nurtured relations with them, and timely negotiations.
Credit Stock Purchase
Credit stocks and its purchase is a privilege given to the intermediates of a distribution channel, based on certain factors
- History of transaction
- Sales capacity (Stock purchase – clearance turnover)
- Demand of the situation
Maximum Retail Price:
Maximum Retail Price (MRP) is a margin price set by the manufacturer to a product, for the end customer to purchase it. After counting the collective commissions in the trade line, operation and production costs, advertisement cost, taxes and all other expenses it is adjusted to achieve a profit and simplified in a per product level price, so that a uniform price will be set for a product throughout the nation. This final standard price per unit of a product which should be the maximum amount taken from the end customer is called the Maximum Retail Price (MRP).
What type of business require a sales distribution channel?
In a first start-ups are often misled or they misunderstand that indirect Distribution channels are required only wherever the end customers do not directly purchase from the manufacturer or the service provider. Fearing the high expense of advertising and sales they may reach a conclusion of direct distribution methods and end up with failed expectation of inbound sales or a limited outbound sales.
Business is a vision rather than a mission; it should grow, feed and improve the feed in an hourly basis. Then only it can provide any good to the society and owner’s signature.
- Let it be any type of trade, the manufacturer or the marketer should keep in mind that in the end of the day it is only sales that credits in your bank account. Your happiness while closing the daily balance sheet depends on the profit after covering the debts and debits.
- Direct distribution channels with sufficient advertisements can act as a product introduction and safety line but the vastness of customer base and sales networks to reach them with your product (large volume sales) determines the BEP (break-even point). Please scroll up to the above subheadings to get into distribution channels and its types. The idea of a direct distribution channel can therefore said to achieve the best only when it can deliver the maximum benefit, else you have to grab a maximum retail price per product and deliver an amazing customer experience for a profit, where still the fact is you may not enter a stable BEP sale.
- You should have proper stockings for each customer clusters. It should meet the needs of your customers, as well as catch the needs and convert the competitor’s customer. Any delay will allow competitors to catch yours.
- Entrepreneurs should identify the importance of networks, the influence of each personnel in their market and make them feel good to you. You should identify them as your representatives in front of the end customers.
It’s all volume sales and product’s reach among new customers that establishes your business.
Successful trade = Customer base + Good sales network + Customer base
How COVID 19 affected trade and distribution networks?
- The economic think tanks and of course the reality sees the pandemic as a hit to the economy rather than a health problem. Nations had to move into lockdown to manage with the impact.
- Today we are experiencing socio economic problems as a part of the pandemic and it has affected the business a lot as the “supply was to create and feed the demands”. The routines have changed much, so the demands.
- Disease with no medicine urged us into self-restrictions of social distancing, masking, washing, avoid unnecessary travels and purchases, etc.
- Totality seems to be blocks, temporary dead ends, and sudden deviations in the routine roadmap of business under the #stayhome and #staysafe. (Click here to read how to protect COVID 19 entering your home, bedroom, and living area.)
- Till the date we have experienced blockages in the trade routes, many of the villages experienced shortage in supply of goods, the large share of customers are staying home, less wandering in the super stores and textiles.
How the COVID 19 pandemic affected the sales distribution network in India?
Lockdowns and restrictions in movements:
The month-long complete lockdown and the following cluster level lock down seriously affected the transport system. As a whole, in the case of India, the distribution system has the permission to transport the materials to avoid shortage of food. But there was restrictions in free commuting at the border level checkpoints. Many had to seek backstage routes for the trade, mainly for vegetables and other farm produce.
Stores were not allowed to open as usual, there were restrictions for the customers to travel, supermarkets, factories and businesses were advised to reduce the number of employees. So these all slowed down the sales process, which is the final destination of the production-distribution system.
Hike in fuel price is also badly affecting the industry with no way to increase the pricings to maintain the market of consumer goods.
Fear of contracting the infection:
Fear of infection impacted the customer’s purchase behaviour and purchase pattern. Customers reduced the frequency of outing and shopping. They reduced the unnecessary wandering through supermarkets, and streets. Reduced food from restaurants and hotels. A large share pointed the bakery products as unsafe. These are all the end customer’s habit being for past months and the trade sector is yet studying what will be the long term impact of COVID 19, will the situation be restored after the pandemic, etc.
For the production distribution system, the workers both at office and field are also facing a fear of contracting an infection as a worker as well as customer. They are concerned about the well-being of family too. So the stress level has also increased for the entire system that finally affected the whole business.
Fear of financial crisis:
COVID 19 is an era of unemployment. A large number of expats have also been reached homeland losing the jobs. The situation therefore witness a fear of possible and happened financial crisis. People are concerned in over expenditures. Many are turning their purchase power to create an income generation. The scenario therefore added with the slow clearance of stock from the end retailers.
Click here to learn the upcoming trends in trade and market.
Reduced ability to utilise the business capacities:
The net effect of the pandemic is a drastic reduction of purchase capacity of the customers and thereby sales capacity of retailers, stock clearance from wholesalers and stockists. And the final loss from the distribution channel to the manufacturer.
- The positive is that in India the pandemic didn’t forced a hiked demand for necessary goods as it showed in western countries. Here the stocks never vanished as the Government handled the situation not to make fear among the public.
In India, the situation hasn’t yet entered the worst as it was in the European nations and USA. The test positivity results are hiking day by day. Considering the large population and the density, we have to wish for the good and be prepared for the worst.
Business is always one that sees a positive factor in crisis. The COVID world is thinking of how to cope up with the pandemic with least operation cost and cent percent safety. And the post COVID world plans to continue the system, so that everything will be much comfortable.
Internet, IoTs, Digital marketing, and networking assures a better sales system under the #stayhome #staysafe scenario. And the system is now expected to continue under a #becomfortable #beathome tagline.
How can you use internet, online sales, online marketing to increase business during COVID?
Article Being Added. Stay Tuned
You may also read: Click on the subject to get entire article
How will COVID affect Industries and Economy?
Protecting your home from COVID 19