Distribution channels

Distribution Channels Definition

• A distribution channel represents the path a product or service follows from the producer to the final customer.
• The main function of a distribution channel is to ensure that the product is available when and where the customer wants it.

Types of Distribution Channels

• Direct Distribution: The producer sells the product directly to the consumer without an intermediary.
• Indirect Distribution: Involves intermediaries such as distributors, wholesalers, and retailers.
• Dual Distribution: The combination of direct and indirect distribution.

Levels of Distribution

• Zero-Level Channel (Direct Marketing): The producer sells directly to the customer.
• One-Level Channel: One selling intermediary such as a retailer is involved.
• Two-Level Channel: Two intermediaries typically a wholesaler and a retailer are required.
• Three-Level Channel: Three intermediaries are involved, often a distributor, wholesaler, and retailer.

Choosing Distribution Channels

• Customer Preferences: The distribution channel should align with where and when your target customer wants to buy.
• Product Characteristics: Perishable goods might need a shorter, more direct channel than durable goods.
• Market Characteristics: If the market is geographically dispersed, indirect channels may be more efficient.
• Company Resources and Capabilities: Smaller companies with fewer resources often prefer indirect channels, while larger companies may manage their own distribution.

Role of Intermediaries

• Intermediaries create efficiency in distributing products by bridging the gap between the manufacturer and the customer.
• They can provide storage, transport goods, offer financing, and assume risk in the distribution process.
• Intermediaries have strong knowledge of the specific market, can provide feedback to the manufacturer, and help improve product offerings.

Impact of E-commerce on Distribution Channels

• E-commerce allows direct distribution via the internet, eliminating the need for physical stores and several intermediaries.
• It increases convenience for customers and provides broader reach for businesses.

Evaluating Distribution Channels

• Check whether the channel aligns with your overall business strategy.
• Understand if it is effectively reaching your target audience.
• Identify how much profit margin the business is able to retain with the channel.
• Continuously review and adjust the distribution strategy as per the changing market environment.

Importance of Distribution Channels

• Ensures availability of the product to the customer.
• Aids in breaking bulk and making the product conveniently accessible.
• Facilitates speedy delivery and reduces time lapse.
• Determines the price consumers pay for products.
• Contributes to the total customer experience.