Distribution is an endless race for profit

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The product does not reach the final consumer immediately, it goes through a certain path. The process of passing this distance is called "distribution" (or distribution, both options are considered correct). The Latin word distributio literally translates as distribution. But to say that distribution is just the distribution of goods, it was possible twenty-five years ago.

Now this is a more complex, multi-stage process. Moreover, it is necessary to distribute the products so that they do not lie on the trading shelf as a dead weight. Since then, when people abandoned barter and switched to commodity-money relations, humanity has been improving in the art called "commodity distribution". In the system of these relations, each has its own specialization. The plant produced, made a margin sufficient to resume the production cycle, pay all costs and further development. Then passed it on to the next link. There they made a trade margin and sent it on. So up to the end consumer.

If the manufacturer does not want to share, he will have to create his own distribution network, no one has tried it from the assembly line yetsell. And creating your own outlets is a considerable expense, so it’s better for everyone to mind their own business.

Distribution is a process that is impossible without distribution channels.

Their levels:

• Producer - consumer. To do this, as already mentioned, you need to create your own distribution network. The exception is fast food: I fried a sausage and 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 transnational companies. For example, cigarettes, household appliances, mobile phones get to us through it.

With today's level of competition, distribution is a process that is equally important for all participants. No matter how great a product is, if the distribution channels don't work well, competitors will take the shelf space. Therefore, before signing a distribution contract, a manufacturer (having a promoted trademark) studies a potential partner for a long time. Its delivery and warehouse logistics, coverage of the territory, the level of training of sales personnel, and financial capabilities are being considered.

The contract imposes many obligations on the wholesaler. But it also promises serious benefits (if we are talking about a well-knowntrademark). For him, distribution is an obligation to pump through his distribution channels the minimum agreed amount of the product being distributed, to have minimum balances in stock (say, in the amount of a monthly sales volume), to strictly adhere to payment terms, to provide retail network merchandising, to conduct promotional campaigns, and so on.

But for this he receives the minimum input 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 manufacturing company).

An illustration of the benefits of a direct contract is the distribution of drinks of the concern "BBH" (beer and drinks "B altika"). The exclusive right to the territory and direct deliveries from the manufacturer make it possible to turn from a small wholesaler into a serious market participant in a short time.