The meaning of distribution channels

The channels of distribution are the means employed by manufacturers and sellers to get their products to market and into the hands of users. Channels are management tools used to move goods from production to consumption; they are the means by which title to goods is transferred from seller to buyer.
In essence, therefore, channels are tools hired to do the job of getting goods from factory or place of production into the hands of the ultimate user. It is natural that the cost of hire should be paid by those who benefit from the service; in most instances, the ultimate consumer.
The entire function of getting goods into the hands of the consumer is often referred to as distribution. This function includes transportation in the broadest sense, as well as the middlemen who handle the goods and help to transfer title to the goods. Thus, it would be unwise and inaccurate to refer to channels of distribution as the middlemen engaged in moving goods from production to consumption unless we include transportation in our category of middlemen.
Channels of distribution help to move goods from one place to another; hence, they add place utility. They bring goods to the consumer when the consumer wants them; hence they add time utility. They bring the goods to the consumer in convenient shape, unit, size, style, and package; hence they add convenience value. They make it possible for the consumer to obtain goods at a price he is willing to pay, and under conditions which bring satisfaction and pride of ownership; hence, they add possession value.
Not all channels perform all these services with equal efficiency. Some cost more than others. Some render greater service to the consumer than others. Some add greater value to the goods in transit than others. Manufacturers and sellers are therefore constantly reviewing their channels of distribution with an eye to improving efficiency and reducing cost. There is consequently continual change going on at both the wholesale and retail level.
It is essential ior the student to distinguish between the service rendered by the various channels of distribution and the cost of distribution. Many persons have glibly advocated eliminating the middleman as the cure-all for rising costs of distribution. This is fallacious thinking because these critics confuse the function with the performer.
The function performed by the distribution channels must be performed if we are to get the goods from the furniture factory in Grand Rapids, Michigan, for example, to the housewife in Boston, Massachusetts. Someone must handle, ship, package, transport, warehouse, store, sell, retail and deliver the furniture before the consumer can use it. And, of course, unless the consumer can use it-that is, can get utility out of it-the particular item, whether furniture, gasoline or a head of lettuce, has little use to the consumer.
It is possible, of course, to eliminate a given individual, such as a wholesaler or a retailer middleman, and buy direct from the factory. But this means that the service of transfer, storage, handling, and transportation has to be performed either by the manufacturer or by the consumer himself.
The services or functions connected with the movement of goods from factory to home must be performed. The desired objective is to perform these services or functions at the lowest possible cost, with the greatest possible efficiency in order to serve the consumer best. This is not charity but common sense. If one manufacturer or seller does not seek to do this, a competitor will replace him. Even if a manufacturer should not want to serve the consumer to the best of his ability, he would be forced by competition to do so.