Distribution channels – GCSE Business and Communication Systems CCEA Revision

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