Definition of Distribution: Types, Channels, Objectives, Functions, Factors of Influence, and Strategy

Definition of Distribution – You must have seen or even met someone who carries a certain product, then that person offers it to you or someone else. Now the thing that is done by someone is distribution activities.

The term distribution has become part of economic activity, especially in the marketing department. Knowledge of the distribution system needs to be studied for those of you who have the desire to become a businessman.

Then, what is the distribution activity? Why is the distribution system important in marketing a product?

Come on, see the following explanation!

Definition of Distribution

According to Oentoro (2010), distribution is a marketing activity that seeks to expedite and facilitate the delivery of goods from producers to consumers, so that their use is in accordance with the type, quantity, price, place and time needed.

Then, according to Basu Swastha, distribution has a definition in the form of marketing channels used by product makers to send their products to industries or consumers. Institutions that “live” in the distribution channel are producers, consumers, and distributors.

Then, according to Assauri, distributors are activities of moving products from sources to final consumers’ hands with distribution channels at the right time.

Meanwhile, according to Soekartawi, distributor activities become activities of distributing or sending goods and services so that they can reach consumers.

So that it can be said that distribution activities are needed so that products can reach the hands of consumers who need them.

People who carry out distribution activities are called distributors.

In distribution activities, there are physical and non-physical aspects so that the marketing flow runs smoothly. The physical aspect relates to the location of product transfer or distribution. While the non-physical aspect is related to the knowledge of the seller (producer) regarding what consumers want and consumers must also know what products are sold by producers.

Types of Distribution Channels

In short, distribution has 3 types namely direct distribution, semi-direct distribution, and indirect distribution.

1. Direct Distribution

This distribution is carried out between producers and consumers directly. For example, vegetable farmers make buying and selling transactions directly in the market.

2. Semi-Direct Distribution

This distribution is carried out through an intermediary so that products from producers can still reach the hands of consumers. For example, book publishers who sell their books through sales so that they reach consumers (schools, students, students, academic institutions).

3. Indirect Distribution

This type of distribution is carried out through several intermediaries, so that the product cannot be received directly from the producer directly. For example, a beverage factory sells its beverage products to consumers through several agents or sales first.

Producers → wholesalers → small traders → retailers → consumers

Channels in Distribution

According to Suhardi Sigit, channels in distribution activities are intermediaries between buyers and sellers through which goods are transferred both physically and by owners from producers to consumers.

Channels in distribution activities can be divided into two groups, namely traders and special intermediaries.

1. Traders

A trader is a person or institution that buys and resells a product without changing its form to gain profit from the consumer.

Traders are divided into several types, namely:

  1. Wholesalers: traders who buy a product in large quantities and resell it to other traders.
  2. Retailers (Retailers): traders who buy a product and sell it directly to consumers. Usually retail traders will buy a product from the manufacturer in large quantities, then resell it in smaller quantities.

2. Special Intermediaries

These special intermediaries have the same duties as sellers, but special intermediaries are not fully responsible if the product is not sold. Special intermediaries include several types, namely:

  1. Agent (Dealer): an authorized marketing intermediary on behalf of a company in a certain area.
  2. Brokers (brokers): marketing intermediaries who bring together sellers and buyers to carry out a certain contract.
  3. Commissioner: a marketing intermediary who uses his own name and is responsible for himself.
  4. Exporter: marketing whose activities distribute a product abroad.
  5. Importer: marketing activities whose activities are to distribute a product from abroad to within the country.

Distribution Purpose

  1. Guarantee the continuity of production of a product
  2. Delivering certain products or services to consumers
  3. Maintaining the economic and business system

Functions or Main Duties of Distribution

1. Freight

As the population increases, the need for a product also increases. From this statement, goods products must be able to be distributed to various places, so that means of transportation are definitely needed to transport these products so that they reach the hands of consumers.

2. Sales 

In the field of goods marketing, the activity of selling a product by producers will always exist. The transfer of rights from the hands of producers to consumers can be done by way of sales. From the sales process, the product can reach the hands of consumers and use it as needed.

3. Purchase

Every sales activity must be accompanied by a buying activity or what we usually call a buying and selling transaction. If sales are made by producers, then the buying process is carried out by consumers who need these products.

4. Storage 

Before products are distributed to consumers, these products are usually stored first in a warehouse. This is done so that the product remains safe and intact until it is received by consumers.

5. Standardization of Goods Quality Standards

Any consumer will always want the product he wants to buy to have quality requirements regarding the type and size of the product. Therefore, there is a need for standardization both in the type, size, and quality of the goods to be traded. Standardization or standardization of a product is carried out so that the product to be distributed is in accordance with consumer expectations.

6. Risk Bearer

Sometimes, there are distribution products that fall or break so that the product can be damaged. This will be a risk that must be borne by a distributor. However, nowadays there are institutions or insurance companies that can bear this risk.

Factors Influence Distribution Activities

1. Market Factors

In terms of market factors, distribution channels will be influenced by consumer purchasing patterns, namely the number of consumers, the geographic location of consumers, the number of product orders, and the habits in purchasing these products.

2. Goods Factor

In terms of goods, there will be considerations from a product perspective related to unit value, product size and weight, product perishability, product standards to product packaging.

3. Company Factors

In this third factor, namely the company factor, there will be considerations related to the source of funds, experience and ability of management, supervision, and services provided.

4. Habit Factors in Purchasing

In the last factor, namely the factor of buying habits, there will be the necessary considerations in the form of the use of intermediaries, the attitude of intermediaries towards producer policies, sales volume to the cost of sending goods.

Distribution Strategy

According to Oentoro, in order to get the maximum profit, it requires the right distribution strategy so that the product can reach the hands of consumers. There are several distribution methods or strategies so that the product can be distributed properly, namely:

1. Intensive Distribution Strategy

This strategy will place products at retailers (retailers) and several distributors in various places. This strategy is suitable for daily necessities, such as groceries, soap, cigarettes, and others.

2. Selective Distribution Strategy

In this strategy, a product will be distributed to certain marketing areas by selecting several distributors or retailers. So that there will be competition between distributors and retailers to get consumers with their respective techniques.

This strategy is suitable for electronic products, bicycles, clothing, and others.

3. Exclusive Distribution Strategy

In this strategy, distributors or retailers will be given privileges over the products they will sell. This strategy is usually used for products with high quality and price, for example car showrooms , factory outlets , and others.

Distribution Channel Conflicts

All business activities must often cause conflict, including in this distribution activity. According to Bruce J.Walker, there are several conflicts that often occur in distribution channels, namely:

1. Horizontal Conflict

In horizontal conflicts usually occur between intermediaries of the same level of distribution. The reason is the habit of intermediary traders who diversify product supply by adding new types of products. For example, nowadays, supermarkets have started selling beauty equipment to medicines, causing other retailers to feel competitive.

2. Vertical Conflict

In vertical conflicts, it usually occurs between producers and wholesalers, but it can also occur between producers and retailers (retailers).

a) Manufacturers with wholesalers

This conflict between producers and wholesalers can be caused by several aspects, for example, there are differences in views between each party.

For example, from a big trader’s point of view, they are only given wide opportunities in the early stages which lead to losses.

However, from the producer’s point of view, these wholesalers are unable to promote their goods resulting in losses, so that in the end the producers choose to use their own sales force to sell their products.

b) Manufacturers with retailers

This conflict usually arises because the two parties feel interested and have “weapons” in distributing the product to the final consumer.