Distributor Definition

The movement of goods and services from the source through a distribution channel, right up to the
final customer, consumer, or user, and the movement of payment in the opposite direction, right up
to the original producer or supplier.

Types of Distributors
There are 3 main types of distributors which are intensive distributors, selective distributors and
exclusive distributors. The types of distributor can also be classified as direct distributors and indirect
distributors.

Intensive Distributors
This type of distributor is normally used when the manufacturer / vendor wants to sell their products
as quickly as possible through the widest possible channel. Intensive distributors will work with
many vendors and usually sell high volumes of goods at lower prices and earn lower margins.
For mass market products, this type of intensive distributor can be a very effective route to market
enabling goods to be distributed through the channel to the end consumer quickly. While profit
margins are generally lower, manufacturers / vendors can benefit from improved cash flow.

Examples: Telecommunication ZONG, U-fone, Mobilink,

Selective Distributors
This type of distribution is where manufacturers / vendors select specialized distributors who are
experienced at distributing their products. Manufacturers / vendors may restrict the number of
retailers that a distributor can supply to in order to effectively reach the target market, maintain a
high level of service and retain high retail pricing maximizing profit margins for the whole distribution
channel.
Examples: Burque Corp/IBL (loreal) AGC (Loreal), Burque-Shangrilla

Exclusive Distributors
This type of distributor is used when the manufacturer / vendor has a niche market and product with
targeted consumers. There will usually be only one exclusive distributor for each territory.
This type of distributor is used where channel control is important to maintain brand integrity, brand
image and often higher pricing points. Exclusive distributors are usually more common than
exclusive retailers. This allows exclusive distributors to sell to all their suitable retailers.
Example: GBL for Coty cosmetics, Abu Dawood PnG, Burque for Shan, Premiere for Shield
Direct Distributors
With this type of distributor the manufacturer / vendor to sells and delivers products directly to the
consumer. Direct distributors usually choose this route in order to reduce costs by negating the need
for a middle man as they would require a share of the profit margin in return for distributing the
products. However, direct distributors face several drawbacks. Firstly they are limited to their own
physical storage capacity dictated solely by their sales volumes. Secondly they are likely to have
much less marketing exposure and significantly higher marketing costs which may in actual fact
offset any saving made by not using other types of distributors.

Example: Dawn Bread, Bake Parlour

Indirect Distributors
This type of distributor uses a network of wholesalers, retailers and resellers to distribute their
products to consumers, and is the most common type of distributor. Indirect distribution enables
manufacturers / vendors to concentrate on production while the distributors focus on generating
sales. The distributors sell to their existing customer base of resellers / retailers with whom they
have good relationships enabling speedy sales and distribution of products. With this type of
distribution there may also be more than one distributor per territory.
Example: Imported item, chocolates, Cheese etc

The type of distribution channel selected will largely depend on product type, size of business
and volume of sales. To find distributors to supply your business, or to find new products to distribute
yourself simply Browse Merchants and search our global network of manufactures, vendors and
distributors.

Channels of Distribution of Goods: Zero, One and Two Level Channels!

Production is for consumption. Having produced the products, these need to
be made available to the final users of the products, i.e., the consumers
scattered in large geographical areas. Since, many a times it becomes
extremely difficult, if not impossible, to reach the customers on its own, the
firm needs the help of marketing intermediaries, like wholesalers and retailers,
to make their products reach to the ultimate consumers.
These intermediaries serve as channels to make the product reach to the
consumers. The way products reach to the ultimate consumers is called
‘distribution channels’ or ‘marketing channels.’ Let us consider a few
definitions on distribution channels.

According to the Committee on Definitions of the American Marketing

Associations (1960):
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“A channel of distribution or marketing channel is the structure of intra-

company organization units and extra-company agents and dealers,
wholesalers and retailers, through which a commodity, product or service is
marketed.”

In fact, channels of distribution are like pipelines that take the right quantities
of the right product to the right location where the target consumer want them
at the right time. In view of this, physical distribution, i.e. to move the product
from the place of production to the place of ultimate consumers assumes
significance in making marketing meaningful and successful.

In this article, therefore, deals with the process how products go through this
channel from the producer to the final user. These distribution channels, in a
way, refer to the methods of marketing also. In view of the number of
intermediaries involved in distribution channels, these can be classified into
three broad categories.

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These are:
1. Zero-Level Channel:
When the distribution of the product is direct from the producer to the
consumer or the user. This is also called direct selling.

2. One-Level Channel:
When the product is not sent directly from the producer to the consumer but
the producer sells the product to the retailer who, in turn, sells to the
consumer. This channel is also known as distribution through retailers.

3. Two-Level Channel:
When there are two levels of different kinds of intermediaries between the
producer and the consumer. In other words, under this channel, the
manufacturer sells the product to the retailer and who finally sells to the
consumer. This is also called as distribution through wholesalers and retailers.

Let us discus these in some more details.

1. Direct Selling:
This method is also referred to as producer to consumer channel. Under this
channel, the producer of goods attempts to make a direct contact with the
ultimate user of goods by several methods of selling including door-to-door
sales-persons. This method is most common in industrial marketing
particularly in respect of capital goods like industrial chemicals, heavy
equipment’s, etc.

Direct selling offers the following advantages to the producers:

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(i) Close relationship to the consumers makes the producer constantly aware
of changes and other consumer’s needs.

(ii) Profit does not go to the middle-man.

(iii) Goods get to the consumer more quickly because they do not have to
travel through the intermediaries or middlemen.

This is due to the following reasons:

(a) The producer has to spend a handsome amount in the training,
maintaining and supervising large number of sales staff.

(b) It involves cumbersome difficulties in providing and maintaining inventories

of goods at many locations to assure prompt delivery to the customers.

2. Producer to Retailer to Customer Channel:

This is a kind of indirect selling. This channel avoids wholesalers. It is suitable
when products are perishable and speed in distributions is extremely
essential. The goods that are frequently sold in this channel are fashion
merchandise, products requiring installation, high value goods, etc.
3. Producer to Wholesaler to Retailer to Consumer Channel:
This channel is also known as the traditional channel. This is also the most
common method of distribution under which the producer sells to the
wholesaler who, in turn, sells to the retailer, who finally sells to the consumer.
In this system, the wholesaler is granted a certain portion of the total profit, in
turn for which he or she buys stores, sells, delivers and extends credits. This
channel is invariably used in respect of groceries, drugs, drug goods, etc.

This channel option is particularly suitable to the following types of

producers:
1. Who lack in financial resources;

2. Whose product line is narrow; and

3. Whose products are not subject to fashion changes and physical

deterioration but are durable.

Despite these features, this channel suffers from certain limitations also
but not confined to the following only:
(i) An over-dependence on wholesalers causes him/her i.e., the producer to
lose contact with the dealers:

(ii) The wholesalers may have different products of different producers to sell.
In such case, the wholesaler might be quiet unable to push up the sales of
one specific product produced by a producer.

After going through the above description, an inevitable question arises in the
mind is which one channel of distribution is the most suitable channel for
distributing the products of a small enterprise.