Distribution channelled by a distributor to the end users is termed Distribution Channel. Distribution can either be direct or indirect. Direct distribution is one of the major four components of the total marketing mix used by companies. Distribution is essentially the act of making a specific product or service readily available to the consumer or company user who requires it. This can either be done directly by the manufacturer or provider or through intermediaries or third-party channels.
Direct distribution channels can include retail stores, websites, post offices, trade shows and promotional campaigns. At times, the manufacturer may use distribution channels to sell their products directly to the end users. For example, the manufacturer may design and develop a website for distributing their goods, collect payments and deliver the goods to the end users. This is a simple example of indirect distribution.
Both direct and indirect channels play a vital role in today’s market. As per a survey, almost 90 percent of companies utilise some form of channels to communicate with customers. Distribution channels have become an important part of today’s competitive scenario. Distribution channels help to spread the word about a brand or a product to a large number of people in a short time. They also help in increasing the loyalty of existing customers.
A manufacturer can either choose to directly sell their goods or establish a distribution company to sell their goods through. The manufacturer can also opt for direct selling, where they directly interact with the end users while the third party channels provide them with the opportunity to interface with retailers. Some of the companies providing this facility are Amazon, Wal-Mart and Sam’s Club among many others. In addition to being cost effective, this form of selling helps in improving the quality of service and selling efficiency by reducing costs and improving the quality of service.
Direct distribution is mainly used by big manufacturers and retailers where bulk of the stock comes from the manufacturer. In this case the retailer holds stocks from the manufacturer and delivers it to the end users. Smaller retailers also opt for this method, wherein the retailer locates the stocks of the product that need to be distributed to the end users through agents or warehouses. The distributors keep track of inventories of goods and keep updating information of sales to the retailers.
The distribution process follows certain criteria like location, size, inventory, pricing etc. The most common type of distribution is based on size of inventory with the channel size depending on the profitability of the company. Smaller firms can opt for small-scale distribution and hence face fewer problems when it comes to fulfilling orders. Larger firms can go for medium and large scale distribution to increase their profit margin and enjoy a good margin on their goods.