Even though patterns of distribution are in a state of change and new patterns are developing international marketers need a general awareness of the traditional distribution base. The traditional system will not change overnight and vestiges of it will remain for years to come. Nearly every international firm is forced by the structure of the market to use at least some middlemen in the distribution arrangement. It is all too easy to conclude, that, because the structural arrangements of foreign and domestic distribution seem alike, foreign channels are the same as or similar to domestic channels of the same name. This is misleading. Only when the varied intricacies of actual distribution patterns are understood can the complexity of the distribution task be appreciated. The following description should convey a sense of the variety of distribution pattern.
Generalizing about internal distribution channel patterns of various countries is almost as difficult as generalizing about behavior patterns of people. Despite similarities marketing channels are not the same throughout the world. Marketing methods taken for granted in the US are rare in many countries.
The service of people in trade varies sharply at both the retail and wholesale levels form country to country. In Egypt for example the primary purpose of the simple trading system is to handle the physical distribution of available goods. On the other hand when margins are low and there is a continuing battle for customer preference both wholesalers and retailers try to offer extra services to make their goods attractive to consumers. When middlemen are not interested in promoting or selling individual items of merchandise the manufacturer must provide adequate inducement to the middlemen or undertake much of the promotion and selling effort. In China, for example wholesalers see their function as storing the goods and waiting for their customers to come to them.
Every nation has a distinct pattern relative to the breadth of line by wholesalers and retailers. The distribution system of some countries seems to be characterized by middlemen who carry or can get everything in others every middleman seems to be a specialist dealing only in extremely narrow lines. Government regulations in some countries limit the breadth of line that can be carried by middlemen and licensing requirements to handle certain merchandise are not uncommon.
Costs and margins
Cost levels and middleman margins vary widely from country to country depending on the level of competition, services offered, efficiencies or inefficiencies of scale, and geographic and turnover factors related to market size, purchasing power, tradition and other basic determinants. In India, competition in large cities is so intense that costs are low and margins thin; in rural areas, however the lack of capital has permitted the few traders with capital to gain monopolies with consequent high prices and wide margins
Some correlation may be found between the stage of economic development and the length of marketing channels. In every country, channels are likely to be shorter for industrial goods and high priced consumers’ goods than for low priced products. In general, there is an inverse relationship between channel length and the size of the purchase. Combination wholesaler retailers or semi-wholesalers exist in many countries adding one or two links to the length of the distribution chain. In China, for example the traditional distribution system for over the counter drugs consists of large local wholesalers divided into three levels. First level wholesalers supply drugs to major cities such as Beijing and Shanghai. The second level services medium sized cities and the third level distributes to countries and cities with 100,000 or fewer people. It can be profitable for a company to sell directly to the two top level wholesalers and have them sell to the third level, which is so small that it would be unprofitable for the company to seek out.