Question

What is meant by indirect channels of distribution? Explain the types of indirect channels of distribution.

Answer 1

Indirect Channel:

If the producer is producing goods on a large scale, it may not be possible for him to sell goods directly to consumers. As such, he sells goods through middlemen. These middlemen may be wholesalers or retailers. A wholesaler is a person who buys goods in large quantities from producers; whereas a retailer is one who buys goods from wholesalers and producers and sells to ultimate consumers as per their requirement. The involvement of various middlemen in the process of distribution constitutes the indirect channel of distribution. Let us look into some of the important indirect channels of distribution.

This is the common channel for the distribution of goods to ultimate consumers. Selling goods through wholesalers may be suitable in case of food grains, spices, utensils, etc. and most of the items, which are smaller in size.

Under this channel, the producers sell to one or more retailers who in turn sell to the ultimate consumers. This channel is used under the following conditions –

• When the goods cater to a local market, for example, bread, biscuits, patties, etc.
• When the retailers are big and buy in bulk but sell in smaller units, directly to the consumers.