What Are Distribution Channels
Distribution channels are the pathways through which products or services reach consumers. They often involve middlemen like retailers or wholesalers who help distribute the goods from the manufacturers to the end-users. These middlemen play a crucial role in making products available and accessible to customers in various locations.
3 Types of Distribution Channels
Direct Distribution Channels
In this model, the company takes charge of delivering products directly to customers. Intermediaries are involved only when the goods reach the end-users. This setup gives manufacturers total control over the distribution process.
For instance, let’s consider an online electronics store. The manufacturer handles the shipping of products to customers. Intermediary involvement happens after the goods are delivered to the customer’s doorstep.
This approach might restrict the number of customers since the company handles the shipping process itself. On the upside, it enables the company to offer lower prices as they don’t have to pay commissions to intermediaries.
Indirect Distribution Channels
In indirect channels, intermediaries take care of product delivery instead of sellers. These intermediaries can be wholesalers, retailers, distributors, or brokers. With this setup, manufacturers don’t have complete control over distribution channels.
The benefit is that it enables selling larger quantities and reaching a broader customer base. However, products may have higher prices due to the commissions paid to intermediaries.
Hybrid Distribution Channels
Hybrid channels are a blend of direct and indirect channels. In this approach, the manufacturer collaborates with intermediaries but retains control over customer interactions. For instance, some brands promote products online but don’t handle direct deliveries to customers. Instead, they appoint authorized distributors to handle the deliveries.
3 Methods of Distribution
To get your product to customers, you have options with different distribution channels. These include:
- Exclusive distribution
- Selective distribution
- Intensive distribution
These channels determine who can sell and distribute your products, as shown in the visual below:
Exclusive distribution involves intermediaries taking the company’s products to specific sales outlets. This strategy restricts sales to only exclusive retail stores, which become the sole sellers of the items to consumers. Manufacturers and selected retail outlets or chain stores can benefit from this approach, especially for high-quality products.
Selective distribution means selling products to specific intermediaries who then sell to customers. The intermediaries’ reputation is crucial for the company’s success. These intermediaries also act as consumer consultants. This means they help customers with their questions and suggest suitable products.
Intensive distribution makes a product available in as many stores as possible. This requires the involvement of manufacturers, sales teams, and commercial representatives who work together to distribute the product widely. This approach is often used for inexpensive products that are purchased frequently.