It is a distribution network through which the producer puts his products in the market and passes it to the actual users. This channel consists of: producers, consumers or users and the various middlemen like wholesalers, selling agents and retailers (dealers) who intervene between the producers and consumers. Therefore, the channel serves to bridge the gap between the point of production and the point f consumption thereby creating time, place and possession utilities.
Considerations related to market are given below:
a. Number of buyers:
If the number of buyers is large then it is better to take the services of middlemen for the distribution of the goods. On the contrary, the distribution should be done by the manufacturer directly if the number of buyers is less.
b. Types of buyers:
Buyers can be of two types: General Buyers and Industrial Buyers. If the more buyers of the product belong to general category then there can be more middlemen. But in case of industrial buyers there can be fewer middlemen.
c. Buying habits:
A manufacturer should take the services of middlemen if his/her financial position does not permit him/her to sell goods on credit to those consumers who are in the habit of purchasing goods on credit.
d. Buying quantity:
It is useful for the manufacturer to rely on the services of middlemen if the goods are bought in smaller quantity.
e. Size of market:
If the market area of the product is scattered fairly, then the producer must take the help of middlemen.
