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«PHYSICAL DISTRIBUTION Last stage of production is consumption and consumers are called customers; Hence, Products are produced to provide it to the ...»

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Chapter-V

PHYSICAL DISTRIBUTION

Last stage of production is consumption and consumers are

called customers; Hence, Products are produced to provide it to the

consumers. But, middlemen‟s are involved to fulfill the gap between

the producers to the consumers. Producers produce the product

and sell it to the agent for wholesaler sells it to the retailer and

consumers purchase it from the retailer to use it. Some products

involve less number of middlemen‟s. The product which involves large number of middlemen‟s profit or say commission are included in the products selling price, which increase the product price. And the products which doesn‟t involves middlemen‟s its selling price is of less difference with cost of production because only producers includes their profit in the production cost. The medium used for transferring the products from the producers to the final consumers or a industrial seller is called distribution medium1. Distribution channels are systems of economic institutions through which a producer of goods delivers them into the hands of their users2.

Producer and final consumer both are included in distribution media. Hence, under this channel those middlemen come who work as coordinator between the producer and consumer. The institutions who doesn‟t transfer the ownership of product but provides only services then they are not included in distribution medium. Like Bank, Transport institutions, warehousing etc. “Any sequence of institutions from the producer to the consumer, including one or any number of middlemen, is called a channel of distribution3. Every producer seeks to link together the set of marketing intermediaries that best fulfill the firm‟s objective. This set of marketing intermediaries is called marketing channel (also trade channels and channel of distribution)4. What middlemen offer is distribution, produced product is available on right time, at the right place and in the right time, at the right place and in the right quantity. “It is a path traced in the direct or indirect transfer of title to a product as it moves from a producer to ultimate consumer or industrial users.”5

Distribution System:

The structure of a marketing channel describes the arrangement and linkage of its members6. Three distribution systems are used to transfer the goods from production place to

final consumers. These are:

(1) Direct Distribution System, (2) Indirect Distribution System, (3) Double Distribution System,

Direct Distribution system:

The producer can sell directly to the customers without the help of intermediaries. Some of the important examples where direct distribution channel is used through opening retail shops, through mail order business, through traveling salesmen.

Manufacturer itself works as the middlemen to transfer the goods to the consumer. These mediums of manufacturers are its own shops, Depo, Branches, Representatives Etc.

Mainly these are divided into 5 parts:

(a) Mail Order House:

The seller contacts the buyer through some form of advertising. The seller advertises his goods through the press and by sending leaflets, cards and catalogues giving all necessary particulars about the goods. Orders are received from customers by pot and the goods are dispatched usually by V.P.P. (Value Payable Post) or Registered Post. Delivery is made by the postal peon on payment of the amount due which is sent by the post office to the seller. Sometimes, goods may by sent by railway parcel and the railway receipt may be forwarded by the seller to the customer by post, usually by V.P.P. In any case post office plays a pivotal role in mail order business.

In case of the mail order business the selling function is performed without the intervention of personal salesmen. Therefore, it is obvious that not all types of goods can be suitable articles for retail selling by mail. Goods of well-known brands are the most suitable articles for mail order business. Usually chemicals, patent medicines, footwear, jewellery, leather goods, watches, ready-made clothes, fountain pens, toilet goods and book etc. are sold by mail.

Thus leading general mail order houses like Sears Roebuck and Co., Montgomery Ward & Co., and others (in the U.S.A.) were started after 18707.

(b) Automatic Vending Machine Selling:

Automatic vending makes use of machines. Coin-operated, self-service machines make a wide assortment of products available, such as cigarettes, hosiery, insurance policies, hot food and beverages, such machines as supply candy, chewing gun, soft drinks, and coffee are purchased in areas of heavy traffic, where such machines are installed as near offices, service stations hotels and shopping areas. Now in India such machines are being installed at important railway stations for issuing tickets.

The owners have to develop special packs to suit the machines. The machines must present attractive appearance and must be reliable in its operation. The machines are frequently used to supply a certain service to the employees and to get right time business by the retails store. They eliminate the use of sales personnel‟s and small space is needed for their installation. But they need frequent servicing and repair to keep vending machines functioning8.





(c) Door-to-Door Selling:

It means that either the producers or retailers sell directly to the consumers by visiting their homes. Such selling requires travel and personal contact and substantial costs are involved in recruiting, maintaining and managing sales staff large enough to transact profitable business. Rugs, draperies, milk and dairy products, cosmetics, bakery products, household cleaning materials, housewares etc., are sold through these retailers. The door-to-door selling attracts the consumers because it offers ease and convenience of buying at home and to get the personalized services of the retailers.

Further, it provides an opportunity for the most aggressive forms of retailing selling, besides the chances of demonstrating the product in the consumer‟s home9.

(d) By Telephone System:

Direct system sells through telephone. This system is used specially in America. Under this method customers gives order by telephone to the producers sends the order at the house of customers and customers pays for transport expenses also. Under this method consumers get the product in less time and pays extra charge of transport10.

(e) Sale by Opening Retail Shops:

Sometimes manufacturers establish their own retail stores to sell their products direct to the consumers. Manufacturers of perishable goods such as ice-cream and bakery products sell their products through their own retail shops because such goods must reach the consumers quickly. Manufacturers may sell directly to the consumers by establishing their own retail shops when they want to keep in touch with consumers demands and fashion trends, such as clothing‟s, or when their products needs specialty selling as in care of sewing machines.

(f) Sale at the Manufacturer’s Plant:

Under this method it is the consumer who comes to the manufacturer. Consumers call at the factory to buy goods required by them, for example, consumers go to the bakery to purchase bread, biscuits and other backery products11.

Indirect Distribution System:

Indirect distribution system means distribution of goods through middlemen or intermediaries. The whole process of indirect

channel of distribution:

–  –  –

In this figure several flow functions take place through distribution channels which symbolizes the path for movement of title, possession, promotion and payment for goods and services.

Pension, title and promotion flow forward right from the producer to the ultimate consumer through intermediaries. But, the agent is, infact, a warehousing middleman who represents the manufacturers or the regular wholesaler in seeking a market for the manufacturer‟s output. Payment flows move backward from the consumers to producer.

Figure (1): Producer Retailer Consumer Channel is preferred where the purchasers of goods are big retailers like departments stores, chain stores, super markets, shopping centers (In sub-urban areas), consumer co-operative stores etc. some of the Indian Companies like D.C.M. and Bata shoe Company use this channel by establishing their own retail stores.

This channel is also suitable in the case of perishable products.

Department Stores:

It has been defined as the type of retail organization which deals in a wide variety of merchandise grouped into well defined departments under central control.12 A Departments store is a huge retail shop situated at a central place in the city, divided into a number of small shops or departments each dealing with one or two lines of goods and specializing in those lines. All such departments or specialty shop‟s are under one roof and under one management and control. Such a kind of huge retail organization, many a time looking like a miniature township, is usually owned by a big company as it requires huge capital. Thus, a unit of sales organization assumes a very bit size under a department store. The department store is, therefore, a mere collection of shops all under the same palatial building, each shop dealing in a particular line of retains trade. This kind of shopping is often offered to as one- stop „shopping instead of increasing sales by opening branches to ell the same goods (multiple pre shops), a business can as well sell different kinds of goods in the same building13.

Chain have been interpreted as a group of two or more reasonable similar stores in the same kind or field of business, under one ownership and management, merchandised wholly or largely from central merchandising head quarters, and supplied from one or more distributing warehouses or directly from the manufacturer or orders placed by the central buyers16.

Multiple shops:

A multiple shop system is a network of a number of branches situated at different localities in the city or in different parts of the country. In India such organizations are not so common as Europe and America. The multiple shops mean the opening or shops at different places by a trading unit whether it is a company, a partnership, or a sole trader. To make it more clear, multiple shops re the retail units with a different variety of goods of an individual manufacturer, for example Bata Shoes and Usha Machines. The only aim of such organization is to specialize in the trading of particular merchandise. Multiple shops are opened in different cities in competition to departmental stores17.

Super Markets:

These are large, self-service stores that carry a broad and complete line of food and non-food products. They have central check out facilities. A departmentalized-retail establishment having four basic departments, viz., self service grocery, meat produce and dairy plus other household departments and doing maximum business. It may be entirely owner operated or have some of the departments leased on a concession basis18. A super market is a novel form of retail organization specializing in necessaries and convenience goods. Usually it concentrates on all food articles, groceries, meat, fruits, vegetable and tinned products. Non-food items sold by these stores should satisfy a few conditions. Firstly, it must be widely used and must appeal to general consumers.

Secondly, non-food articles most be a branded product, i.e., presold to customers through intensive advertising. Thirdly, it should be a low-priced article. In India Super Markets have been started in all the big cities like Delhi, Bombay, Calcutta, Madras and Other state capitals „Efforts are being made to start such markets in other big towns. Its characteristic are: the large volume of sales. The open display of goods, selection of goods by customers themselves and the absence of credit facilities and services like free home delivery.

Packaging is of great importance in case of goods sold in supermarkets. As salesmen are not used for effecting sales.

Packaging must be attractive, must indicate the price and weight of the goods contained in the packages and make (brand) and grades of the products19.

Discount House:



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