A distribution channel is a route all goods and services must travel to reach their intended consumers. It can be defined as a chain of companies or intermediaries through which a product or service reaches the final buyer or end user. Contrariwise, it also describes the payment path from the final consumer to the original provider.
How does it function in a business?
Goods and services may reach consumers through multiple short-term and long-term channels. You can increase your sales by giving consumers more ways to find your product. Not all distribution channels work for all products, so businesses need to choose the right channel. Channels should align with the company’s overall mission and strategic vision, including sales goals.
3 methods for distribution and their differences
You essentially need a distribution channel to get the product to the end consumer. Choosing a distribution channel carefully is a proven way to help your business grow and is essential to achieving your goals. When choosing a distributor, analyze the prospective distributor. Will they have the characteristics to be effective distributors, and can they help you achieve your business development goals? These are some significant factors to consider.
Exclusive Distribution
Exclusive distribution is a concentrated selective distribution that appoints only one distributor in each region. Claiming an exclusive sales opportunity is not difficult, but there are steps to follow. This distributor maintains brand image, integrity, and often higher prices when channel control is important. An exclusive distributor means more control over the market, more active intermediaries, and higher brand loyalty.
When a manufacturing company sells its products through one or two major outlets that exclusively handle the market, it is said to employ a monopoly strategy. Exclusive distributors typically cover designer merchandise, major consumer electronics, and the most exclusive items and brands, such as Louis Vuitton and Burberry.
Intensive Distribution
This is a marketing strategy in which companies sell through the widest possible range of channels and cover as many outlets as possible so that customers can find their products practically wherever they go, such as drugstores, gas stations, and supermarkets. They help increase sales, build broader customer awareness, and drive impulse purchases.
This strategy is common for snacks, basic consumables & supplies, and magazines. Intensive distributors work with many manufacturers and typically sell large quantities of goods at low prices and low margins.
Subjective Distribution
This strategy is typically used for more specialized products distributed through specialized distributors covering specific geographic locations. The company selects several points of sale for product distribution. This option helps the manufacturer to focus its sales on select distributors rather than spreading them out over many exclusive distributors. Subjective distributors can save costs, increase marketing efficiency, and control marketing.
Product distribution always considers high-end items such as designer goods, e.g., Aldo, Titan, Sketchers, and H&M.
7 types of intermediaries in distribution channels (With examples)
Various sales intermediaries intervene as the products pass from the manufacturers to the final consumer or commercial user. These marketing intermediaries are also known as wholesalers, distributors, retailers, franchise dealers, brokers, authorized dealers, and agents. Such marketing intermediaries put distribution channels at risk. These distribution channels minimize the gap between places of production and consumption, thereby creating space, time, and ownership. Let’s further understand each intermediary in the distribution channels.
Wholesaler
Wholesale is an important part of the distribution channel. Wholesalers increase the range of a company’s products and increase the risk of selling to customers. Wholesalers can stock a range of different products, thus reducing company costs and customer time. They act as the ears and eyes for companies to understand their competitors and customers.
Retailers
Retailers are essentially shopkeepers. Retailers include everything from your neighborhood grocery store to the mall. The only difference between them is their size. Retailers will buy goods from wholesalers or distributors and sell them to end users. They will profitably sell these products to their customers.
Sales Team
A company may also have its own sales team selling goods or services. If the company has a diverse product line, it may be necessary to form more than one team to sell to different segments and audiences.
Brokers
Brokers are also employed to sell and earn a commission. The distinction between agents and brokers is that brokers have only a short-term relationship with the company. For example, real estate agents and insurance brokers.
Internet
One of the most important aspects of any business is getting your products or services in front of the right people and reaching the target audience. Numerous distribution channels available on the Internet could be used effectively to benefit your website. Using social networks like Instagram and YouTube as distribution channels allows you to reach out to more people and raise awareness of your products and services.
Resellers
A reseller is a channel partner who acts as a go-between for companies that manufacture, distribute, or provide IT products or services and end customers, who can be businesses or consumers. Working with a reseller can also help you find products faster. A company that needs to buy multiple technology components can do so through a single reseller rather than directly approaching multiple manufacturers or service providers. Some of the most popular resellers in India are Meesho & eBay.
Direct to Consumer- D2C
D2C is the process by which a company manufactures, markets, and distributes its products. There are no “middlemen” in producing and selling goods and services. A D2C brand typically ships to consumers, partners with retail locations, or operates pop-up shops to distribute products. By eliminating extra ‘parties’ from the sales journey, a brand can cut prices, communicate directly with the end customer, and provide a streamlined brand experience. It can establish a customer-first approach, direct communication channels through digital channels, and harness the power of influencers and word of mouth. For example, Pepperfry, Boat, and Lenskart, to name a few.
Distribution channels can be short or long, depending on the number of intermediaries required to deliver a product or service.
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