Meaning: Farmers producing agricultural produce are scattered in remote villages while consumers are in semi-urban and urban areas. This produce has to reach consumers for its final use and consumption. There are different agencies and functionaries through which this produce passes and reaches the consumer. A market channel or channel of distribution is therefore defined as a path traced in the direct or indirect transfer of title of a product as it moves from a producer to an ultimate consumer or industrial user. Thus, a channel of distribution of a product is the route taken by the ownership of goods as they move from the producer to the consumer or industrial user.
Factors affecting channels: There are several channels of distribution depending upon type of produce or commodity. Each commodity group has slightly different channel. The factors are :
- Perishable nature of produce .e.g. fruits, vegetables, flowers, milk, meat, etc.
- Bulk and weight–cotton, fodders are bulky but light in weight.
- Storage facilities.
- Weak or strong marketing agency.
- Distance between producer and consumer. Whether local market or distant market.
Types of Market Channels:
Some of the typical marketing channels for different product groups are given below:
Channels of rice:
- Producer–miller->consumer (village sale)
- Producer–miller->retailer–consumer (local sale)
- Producer–village merchant–miller–retailer–consumer
- Producer–govt. procurement–miller–retailer–consumer
Channel of other foodgrains:
- Producer – consumer (village sale)
- Producer–village merchant–consumer (local sale)
- Producer–wholesaler-cum-commission agent retailer–consumer
- Producer–primary wholesaler–secondary wholesaler– retailer– Consumer
- Producer–Primary wholesaler–miller–consumer (Bakers).
Channels of cotton:
- Producer–village merchant–wholesaler or ginning factory– wholesaler in lint–textile mill (consumer)
- Producer–Primary wholesaler–ginning factory–secondary wholesaler–consumer (Textile mill)
- Producer– Trader– ginning factory– wholesaler in lint– consumer (Textile mill)
- Producer–govt. agency–ginning factory–consumer (Textile mill).
- Producer–Trader–ginning factory–wholesaler–retailer– consumer (non-textile use).
Channels of Vegetables:
- Producers–consumer (village sale)
- Producer–retailer–consumer (local sale)
- Producer–Trader–commission agent–retailer–consumer.
- Producer–commission agent–retailer–consumer
- Producer–primary wholesaler–secondary wholesaler– retailer– consumer (distant market).
Channels of Fruits:
- Producer–consumer (village sale)
- Producer–Trader–consumer (local sale)
- Producer–pre-harvest contractor–retailer–consumer
- Producer–commission agent–retailer–consumer.
- Producer–pre-harvest contractor–commission agent– retailer–consumer
- Producer–commission agent–secondary wholesaler– retailer–consumer (distant market).
These channels have great influence on marketing costs such as transport, commission charges, etc. and market margins received by the intermediaries such as trader, commission agent, wholesaler and retailer. Finally this decides the price to be paid by the consumer and share of it received by the farmer producer. That channel is considered as good or efficient which makes the produce available to the consumer at the cheapest price also ensures the highest share to the producer.