The product does not immediately reach the end consumer; he goes a certain way. The process of crossing this distance is called "distribution" (or distribution, both options are considered correct). The Latin word distributio literally translates to distribution. But to say that distribution is simply distribution of goods, it was possible twenty-five years ago.
Now this process is more complex, multi-stage. Moreover, it is necessary to distribute the products so that they do not lie on the trading shelf with dead goods. Since then, when people refused to exchange in kind and switched to commodity-money relations, mankind has improved in the art called “distribution of goods”. In the system of these relations, each has its own specialization. The plant manufactured, made an extra charge sufficient to resume the production cycle, pay all costs and further development. Then passed it to the next link. They made a trade margin and sent on. So to the end user.
If the manufacturer does not want to share, he will have to create his own distribution network, no one has tried to sell from the assembly line. And the creation of their outlets is a considerable expense, so it is better for everyone to do their own thing.
Distribution is a process that is not possible without distribution channels.
Their levels:
- The producer is the consumer. For this, as already mentioned, you need to create your own distribution network. The exception is fast food: fried sausage, sold it here.
- Manufacturer - Retailer - Consumer. A level suitable for small and medium producers.
- Manufacturer - wholesaler - retailer - consumer. So we get the bulk of the goods.
- Manufacturer - wholesaler - wholesaler - retailer - consumer. This is the level of multinational companies. On it, for example, cigarettes, household appliances, mobile phones get to us.
Given the current level of competition, distribution is a process equally important for all participants. No matter how wonderful the product is, if the distribution channels do not work well, competitors will occupy a shelf space. Therefore, before signing a distribution contract, the manufacturer (with a well-developed brand) has been studying a potential partner for a long time. Its delivery and warehouse logistics, territory coverage, the level of training of sales staff, financial capabilities are considered.
The contract imposes many obligations on the wholesale seller. But he promises serious benefits (if we are talking about a well-known brand). For him, distribution is an obligation to pump through the sales channels the minimum agreed amount of the goods being distributed, to have irreducible balances in the warehouse (for example, in the amount of the monthly sales volume), to strictly comply with the payment deadlines, to ensure merchandising of the retail network, to carry out promotions and so on.
But for this he receives the minimum entry price in the territory of distribution, the exclusive right to wholesale trade within it (that is, in this territory he is the only representative of the manufacturer).
An illustration of the benefits of a direct contract is the distribution of BBH drinks (Baltika beer and drinks). The exclusive right to the territory and direct deliveries from the manufacturer make it possible in a short time from a small wholesaler to become a serious market participant.