HomeIndustriesLogisticDistribution | Definition, Types, Stages, and Examples

Distribution | Definition, Types, Stages, and Examples

To meet the necessities of life, the community must engage in one of the three economic activities, that is distribution. Distribution activities, in a nutshell, are processes that aim to distribute and deliver goods produced by sellers to buyers.

Distribution activities will always be inextricably linked to trading activities because they play an important role in ensuring that the production process reaches consumers in good condition. For example, you may come across vegetable traders who sell and act as intermediaries between farmers and buyers in everyday life.

On this occasion, we will go over the purpose, types, stages, and examples of distribution activities in greater detail. Would you mind continuing to read this article?

Also read:  5 Most Desired Features of Accounting Apps.

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What is Distribution?

Distribution is the process of sending goods from one party to another. The goods are distributed between producers and consumers.

This field is crucial for businesses, particularly as a marketing tool. This is since it will aid in the process of transferring products from producers to consumers. After all, this procedure connects production and consumption.

Because distribution is inextricably linked to marketing activities, businesses, particularly distribution businesses, must produce a product or service that can be widely distributed to target markets that require it.

Distribution entrepreneurs, also known as distributors, act as intermediaries between producers and consumers. The goal is to purchase goods from producers and resell them. However, due to digital technology, distribution channels are becoming shorter in today’s modern economic era.

Marketing products from outside the island was not as simple in the past as it is now, thanks to the advent of digital technology, which has simplified all processes. For example, you can order your needs through the online marketplace, so buyers don’t have to travel far to visit the store.

As a distributor, you need to fulfill all demands with optimal inventory levels, monitor stock transfers, forecast inventory requirements, and optimize stock management across multiple locations with the best inventory management software in Singapore. Click here.

Also read: Scaling Your B2B Business: A Complete Guide.

Destination of Distribution Activities What is?

1. Ensuring the continuity of production

A good distribution activity will maintain the linkages between a production process so that no products accumulate in the warehouse for an extended period.

Large and medium-sized producers are subject to the same conditions. Small producers, on the other hand, can make direct sales to shorten their distribution channels.

2. Sending goods and services to consumers

Because not all consumers have direct access to producers, the purpose of distribution or the distribution process can make it easier for consumers to buy goods or services.

For example, the distributor can link consumers and producers for products manufactured by a large factory, allowing the product or service to be more targeted.

Maintaining economic and business systems

Not all producers can offer their goods and services. This is where distributors come into play in keeping a business economy running. Producers will suffer losses if already available goods and services are not distributed and stored in warehouses.

Meanwhile, consumers will suffer losses if necessary goods and services are unavailable. As a result, this activity will continue to exist as a link between economic activities that have become a part of human life.

Also read Importance of DuPont Analysis for Corporate Financial Management.

Five Types of Distribution

Direct distribution

This first system comprises directly performing merchandise distribution activities. However, you may also suggest that producers serve as distributors to market and distribute their items to buyers.

This distribution procedure typically demands a reassessment of the company’s investment size. As a result, each organization will invest differently to put this system in place.

Indirect distribution

A third-party-involved indirect distribution system is the second type. Typically, producers of goods and services will outsource their sales to intermediaries, either individuals or affiliates.

In practice, there are various qualities among intermediates in the sphere of exporting commodities. Every business demands a dependable delivery service. It is also dependent on the capabilities and capital of the manufacturing organization.

Intensive distribution

Producers to shops of this type practically carry it out. The manufacturer or corporation will transport its products to numerous retail outlets. However, not all items can benefit from this sort of intensive distribution because, in general, some organizations will only utilize intensive distribution for simple-to-sell commodities or services.

Food and beverage items, for example, do not necessitate various distribution channels.

Exclusive distribution

This distribution method occurs when the manufacturer and the merchant agree that they will sell the product through a specified window. The arrangement established between Apple and AT&T to distribute their products in the United States is an example of this form of distribution. This method is excellent for high-demand unique product categories, such as Apple items.

Selective

The final distribution type is selective distribution, which is a combination of exclusive and intensive distribution. This type of business operates by distributing things to a vast number of places.

For example, a big shoe and clothing labels, such as Nike, were carefully selected. As a result, in addition to its store, Nike products can be obtained in various sporting goods stores. Thus, it connects commercial activities that have become a part of everyday life.

Also read:  5 Benefits of Credit Note for Your Business.

Several Stages of Distribution Channels

The distribution process must go through several steps, which are as follows:

Producers

Because this is the stage at which product owners sell their items to distributors, they are also in charge of product availability. The producers must also reach an agreement with the distributor for the product distribution process to go smoothly.

Distributor

Furthermore, the distributor purchases items directly from the maker/producer and then sells them to retailers or wholesalers. As a result, wholesalers will have a single producer, and sell their products at a lower price.

Sub-Distributors

Sub-distributors purchase products from primary distributors. In most cases, the direct distributor selects the distribution location for the products of the sub-distributors.

Wholesalers

Wholesalers are business owners who buy products from dealers and then sell them back to retailers and wholesalers.

Retail Traders

Retailers engage in direct buying and selling to final-level consumers. Typically, these distributors connect with consumers directly, and consumers do not resale the goods.

Consumers

This ultimate stage is a buyer who loves goods or services closely related to their aims and personal needs.

Almost every business today is required to have a good strategy in maintaining relationships with customers. One of the reasons is the increasing number of businessmen which makes the competition even more competitive. So we need a program like CRM Software that can help the business to be able to retain its customers.

Also read: CIF and FOB: What are their Differences in International Trade?

Examples of Distribution Activities

The following distribution actions can help to clarify the distribution process.

The first example is purchasing shallots from market onion traders, who source their onion farmers. Did you realize that this procedure indirectly distributes products since shallot dealers distribute shallot production to consumers?

Second, the purchase of chicken eggs from poultry farmers is now included in the example of direct sales of products because this distribution is carried without intermediaries, specifically the manufacturing of chicken eggs. Instead, poultry the sell directly from chicken growers to consumers.

Finally, you must have bought products through e-commerce shopping. This called as direct selling, but if the distributor only acts as a reseller, this activity can classified as indirect selling.

Also read:  Production Process in Business: Definition, Types, and Characteristics.

Conclusions

The purpose of sales activities and consumption processes is to enable producers to deliver items to customers.

People or corporations who engage in business activities are referred to as business partners. Direct distribution, indirect distribution, and semi-direct distribution are the three parts of the implementation. Sales activities are carried out to ensure the production process, ensuring that items reach consumers safely and make it easier to obtain these products.

You can use HashMicro’s best Transportation Management Software in Singapore to facilitate product distribution activities within the company. This system can help you analyze your company’s revenue quickly and accurately by simplifying the process of transportation and delivery of goods.

What are you waiting for? Try the free demo and switch to HashMicro now!

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Olivia Mariane Gunawan
Looking forward to give the readers more new insights and useful informations everyday! For business inquiries: [email protected]

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