A distribution channel is a process by which products are made available, from the manufacturer right down to the consumer. It the ease of access, and the medium to which it gets to the consumer. Distribution channels play a key role in all marketing strategies that revolve around the product, as well as the way it gets to the consumer to maximize the manufacturer’s revenue and brand awareness.
What is a Distribution Channel?
A distribution channel also is known as “marketing channel” is a chain of businesses or intermediaries via which goods or services pass through until it gets to the end consumer.
How the Distribution Channel Works?
A distribution channel acts as the medium by which all goods and services have to travel to get to the intended consumer. Looking at it from the consumer’s end, it describes the payments made from the end consumer to the original vendor. Now distribution channels can either be long or short depending on the number of intermediaries needed to deliver a product or service.
Goods and services most of the times make their way to consumers via multiple channels, which can be either through the short or long channel.
Functions of Distribution Channels
Distribution channels have numerous functions for both the manufacturer and the end consumer as well as the middlemen.
- When it comes to logistics and physical distribution, distribution channels are responsible for assembly, storage, sorting, and transportation of goods from manufacturers to customers.
- It creates efficiency in two ways, which is bulk breaking and creating assortments. What this means is that wholesalers and retailers buy large quantities of goods from manufacturers but break the bulk by selling the products a few at a time to many other channels of customers. They also make available different types of products at a single place, which accounts for a huge benefit to customers, because they don’t have to visit different retailers for different products.
- Marketing channels, provide time, place, as well as ownership utility. This means that they make the product available when, where, and in what quantities the consumers want them.
- It provides pre-sale and post-purchase services like financing, maintenance, information dissemination, and channel coordination.
- Distribution channels are also referred to as marketing channels because they execute marketing strategies. Here, there are in direct contact with the end customers and help manufacturers in spreading the brand’s message.
- Since most channels buy the products beforehand, they also share the risk with the manufacturers and try their best to have it sold.
Types of Distribution Channels
There three main distribution channels, all of which include the combination of a producer, wholesaler, retailer, as well as end consumer.
Direct Channel or Zero – level Channel (Manufacturer to Customer)
The direct marketing channel is one of the oldest forms of selling products. This channel excludes intermediaries and brings the manufacturer directly with the end consumers at the point of sale. These channels are mostly used by manufacturers who sell perishable goods, expensive goods, and those whose target audience is geographically concentrated.
Indirect Channels (Selling Through Middle-Men)
An indirect channel of marketing is when a manufacturer involves middlemen in selling the products to end-users. Indirect channels are classified into three categories:
One-level Channel (Manufacturer – Retailer –Consumer)
Here, retailers buy the products from the manufacturers and sell the same to the consumers.
This channel of marketing is best suited for manufacturers who deal with shopping goods like, furniture, clothes, shoes, etc.
Two-Level Channel (Manufacturer – Wholesaler –Retailer – Consumer)
In this channel, wholesalers buy the bulk from manufacturers, and break it down into small packages and sell them to retailers who eventually sells them to the end-users. This channel is best suited for goods that are durable, standardized, and inexpensive as well as those whose target audience is not limited to a confined area.
Three-Level Channel (Manufacturer –Agent – Wholesaler – Retailer – Consumer)
This channel of distribution involves an agent. These agents are needed when goods need to move quickly into the market after an order has been placed. The agents are saddled with the tasks of handling the product distribution of a specified area or district in exchange for a certain percentage commission. The agents can be further divided into super stockists and carrying and forwarding agents. Now, these agents keep the stock on behalf of the company.
The super stockists buy the products from manufacturers and sell them to the wholesaler and retailers of their area. While on the other hand, carrying and forwarding agents work on a commission basis and offer their Warehouses and shipment expertise for order processing and last-mile deliveries. This channel of marketing is best suited for products that the user base is spread all over the country and one that has a high product demand.
This is when a manufacturer uses more than one channel of distribution to simultaneously reach the consumer. The dual distribution strategy may open their showrooms to sell the product directly, and at the same time use internet marketplaces and other retailers to gain more customers.