Channel of distribution is a path or route along which the goods move from producer. These channels bring economy of effort. They cover large geographical areas, bring efficiency in distribution, and include transportation and storage.

The functions performed by channels of distribution are –

1) Arrangement: The intermediary arranges the goods from various sources so as to fulfil the market demand.

2) Collection allocation and packing: The intermediary accumulates stock with him to ensure smooth flow of supply and he allocates the goods into smaller units and then packs them conveniently and makes them available as and when required.

3) Variety: The intermediary provides variety of goods to the consumer so that he could make a proper choice.

4) Product promotion: The intermediaries take necessary steps to promote the product locally.

5) Mediation: The intermediaries act as a mediator between producer and consumer so that they could understand each other properly.

6) Warehousing and financing: The intermediaries provide warehousing facilities to the producer so that they can clear their stores and make space for the next production and at the same time they provide finance by purchasing their goods so as to start the new production cycle.