Distribution Channels

Understanding Distribution Channels

• Distribution channels refer to the process and methods through which goods and services move from the manufacturer to the end consumer.
• This involves several interlinked entities or intermediaries such as manufacturers, distributors, wholesalers, retailers and consumers.

Types of Distribution Channels

• A direct distribution channel involves the producer selling directly to the consumer.
• An indirect distribution channel involves intermediaries such as wholesalers and retailers participating in the process of distributing the products from the producers to end consumers.
• Restrictive or Selective distribution utilises few selected intermediaries matching the company’s product lines.
• Intensive distribution works by supplying the product to all available channels to gain maximum market coverage.

The Role of Retailers in Distribution Channels

• Retailers act as the final link in the distribution chain, directly interacting with the consumers.
• They purchase products in significant volumes from wholesalers or directly from manufacturers, and then sell them in small quantities to end consumers.
• Their key role involves showcasing products, interacting with customers, selling the products and providing after-sale services.

The Impact of Online Retail on Distribution Channels

• The growth of online retail has disrupted traditional distribution channels.
• It has allowed producers to connect directly with consumers without the need for physical retailers, altering the length and structure of the distribution channel.
• Retailers operating online shops also use different distribution methods, such as home delivery and click-and-collect services.

Importance of Managing Distribution Channels

• Properly managed distribution channels ensure products are available to consumers at the right place and time, enhancing consumer satisfaction.
• Efficient distribution channels also minimise costs associated with storage, transportation and product losses, increasing the profitability for the manufacturer and/or retailer.
• Strategically selected and managed distribution channels can offer a business competitive advantage, through faster delivery times, lower costs or better service levels.

Changes in Distribution Channels

• Modern distribution channels are continuously evolving, due to factors such as technology advances, changes in consumer behaviour, and the emergence of e-commerce.
• Retailers need to be adaptable to these changes and optimise their supply chain and distribution processes to remain competitive.