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Marketing local products:
Short and long distribution channels

[ Summary ]

Section II
Collectively marketing local
products via long distribution channels

 

Introduction

 


The existence of intermediaries between the producer and the final consumer is the chief characteristic of long distribution channels.

In general the term “long” distribution channels refers to the majority of marketing channels situated outside of local markets. This is not an academic definition, nor does it purport to establish a cut-and-dried distinction between “short” and “long” distribution channels. However, as mentioned earlier, long distribution channels do possess certain characteristics generally associated with the existence of several intermediaries between the producer and the consumer, which has obvious consequences:

  • in view of the lack of direct contact, it is more difficult for the producer to ascertain the extent to which his products meet consumer expectations;

  • the product also plays a more important role in identifying the producer, about whom it is the only source of information in certain cases;

  • because the producer’s “customers” are themselves intermediaries, the quality of their relationship will have a heavy impact on sales; the producer is also a business associate for the intermediary.

According to such a rationale, factors such as geographical distance may be less significant. For instance, whereas organised distribution and exportation can be considered as long distribution channels, by contrast, mail order selling, in cases where there is a direct relationship between the producer and the consumer, can be considered as a short distribution channel.

Elements like the “anonymity” of producers in the eyes of the final consumer, the relationship with customers who, for the most part, are market professionals (purchasing managers, importers, wholesalers, etc.) and the quantities involved in each consignment, all mean that long distribution channels differ fundamentally from the channels within which small local producers usually operate. As mentioned in the previous dossier [1], between farm selling and major retail chains there is a “cultural rift between two universes that are not made for one another”.

Indeed, history is littered with the failures and negative experiences of small food companies attempting to develop new marketing channels. It is frequent in the most diverse geographical contexts to encounter a phenomenon of “absorption” by mass retailers (a process through which, by increasing its orders, a mass retailer virtually becomes the business’s sole customer. It is then forced to conclude increasingly less lucrative deals, to the point where its production becomes completely distorted). Another is institutional collective promotion initiatives in new markets (exports, exhibitions, advertising campaigns, etc.) that end up in failure.

In the light of experiences of this kind, many local producers perceive selling outside of local markets as more of a threat than an opportunity: ”... mass retailers offer unreasonable purchasing terms... exportation is a channel to which few people can aspire... collective business development projects do not work” [1]. In many rural areas today, this sort of attitude is common, and entry into long distribution channels is considered as a necessary evil only for cases where the local market is no longer able to absorb product supply.

Although a small business operating at local level has every reason to be suspicious of long distribution channels, the spread of preconceived ideas like those cited above could engender dangerous misconceptions that are liable to shrink the prospects of small businesses, alienating them from market trends and hence from on- going changes in market access conditions and in the “rules of the game”.

Before drawing any strategic conclusions about “long” distribution channels, at least three elements must be taken into account:

  • strong growth in the demand for local products;
  • new market conditions;
  • changes in the rural context.

 

Long distribution channels

Producers
Mass retailing Traditional distribution Export
National purchase centres Sales agencies Domestic importers, sales agencies
Regional purchasing platforms Wholesalers
Distributors
Wholesalers
Distributors
Points of sale (supermarkets, hypermarkets, etc.) Points of sale (minimarkets, specialised shops, etc.) Points of sale (shops, supermarkets, etc.)
Consumers Consumers Consumers

Restaurateurs Restaurateurs
Domestic market Foreign market

 


[1] Daniel Pujol, op. cit.



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Commission

Agriculture
Directorate-General