Distribution is the counterpart of production and has no meaning unless the goods produced are distributed. Distribution means an arrangement- a system that is responsible for the percolation of goods and services from the producers to the consumers with reference to time, place, price and ownership dimensions. Distribution does not mean merely packing the goods and dispatching them. It is the actual placing of goods in the hands of final user or the commercial user at right place, time and price.
Factors Governing the Selection of a good Distribution Method
The choice between direct and indirect methods of distributor and a particular form in each case is the outcome of certain factors. The factors that govern the choice a good distribution method are as follows:
1. The nature of the product
It is the nature of the product manufactured and sold that exerts influence on the choice. Perishable products, specially products, high price products are more suited for direct sales methods than indirect one. Even the products that need personnel demonstration are more suited for direct distribution.
2. The extent of market
It is the extent of market, both actual and potential that determines the choice. If the number of customers is limited and concentrated at points, it is better to go in for direct selling. It is the case with industrial products or even consumers durables. On the contrary, if the market is extensive and widely scattered, the only alternative is to sell through wholesalers and retailers.
3. The financial strength
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The financial capacity of the manufacturer decides the method. A manufacturer capable of investing huge finance in selling paraphernalia like that of production can goods ahead daringly with direct distribution. Normally, a financially strong manufacturer has a well built production line and, hence, can think of bold and ambitious programme of selling too, unlike a small manufacturer with meager resources.
4. The selling costs
It is human tendency and rationality that one goes in for that alternative which costs less and gives better results. Surely, a shrewd manufacturer is going to select that method may be direct or indirect that costs least and is more result oriented. Generally, indirect method costs more than the direct one. However, sometimes, opposite might be true.
5. The customs and tradition
In each line of product there prevails certain customs and traditions departmental-rooted which are to be accepted and respected the violation which does more than good. Thus, a manufacture finds it difficult and uneconomical to change suddenly from indirect method to direct say in case of textiles. It would be again, wrong to move from direct to indirect method. Thus, a baker finds it something unusual if he sells his products through retailers through his market remains the same in all the dimensions.
In conclusion, it can be said that the final selection is the result of the six factors taken in aggregate than individually taken. With all that, the final selection or decision is that of the manufacturer based on his individual and unique business situation that he faces.