Summary
Highlights
A distribution channel is a series of intermediaries that facilitate the delivery of a product from the producer to the end consumer and handles payments. It's the path a product takes from production to consumption. These channels can vary in length depending on the number of intermediaries, such as wholesalers, distributors, retailers, and online stores. Reliable distribution ensures products reach consumers efficiently.
Distribution channels are categorized into direct and indirect forms. A direct channel allows manufacturers to deal directly with customers, bypassing intermediaries. This is common for expensive or perishable goods like baked goods, meat, or jewelry. Indirect channels involve intermediaries such as wholesalers, retailers, and distributors, and are typical for products sold in traditional brick-and-mortar stores.
Companies must select a distribution channel that aligns with their mission, strategic vision, and sales goals. Factors like product perishability (e.g., meat vs. other goods) influence this choice. If multiple channels are used (e.g., online and retail), they should not conflict, and companies should strategize to prevent one channel from overpowering another.
There are three main types of distribution channels, each involving a combination of manufacturer, wholesaler, retailer, and end customer. The longest type includes all four, as seen with alcoholic beverages (manufacturer to wholesaler to retailer to consumer). The second type eliminates the wholesaler, like car dealerships buying directly from manufacturers and selling to customers. The third, most direct type, goes straight from manufacturer to customer, exemplified by Apple selling products directly from its retail stores.