There are many forms of distribution channels for different industries. A company can plan either to distribute his/her product directly or indirectly to the prospective buyers. In case of direct distribution of a company has the complete liberty to select any mode of distribution, but in case of a long chain there is a probability of getting a lower price as the cost of transport increases with the length of the chain. Similarly, in case of indirect distribution the company can utilize any of the methods such as distributing through trade shows, advertising in the media and selling directly through the catalogue or directly by creating awareness through distribution of brochures, etc.
The distribution channels have a considerable impact on the price of the product. Different types of distribution channels have different effects on the price of the commodity. Distribution through a single manufacturer, distributor and retail outlet will definitely reduce the price of the product. However, if the manufacturer, distributor and retail outlet are situated at different places, the distance between them will have an impact on the price of the commodity. For example, if the retailer has a warehouse at the opposite side of the country from where the manufacturer ships the raw material, the retailer will have to pay more money as compared to the manufacturer who ships the raw material at the same place.
Distribution channels have a direct and an indirect effect on the price of a commodity. A distributor who distributes directly to the end users will definitely have an upward pressure on the price of the product. This upward pressure is due to higher operating cost and commission charged by the distributor. On the other hand, the indirect channels such as the retail outlets and wholesalers have a downward pressure on the price of the product. As the retailer purchases goods directly from the wholesaler or distributor, there is no additional cost for him.
Distribution channels allow retailers to sell directly to their customers. However, direct selling through the internet has been found to be more effective in increasing sales among retailers. Direct selling is usually done by wholesalers and retailers. Online selling via auction sites like eBay helps retailers to advertise and sell their products. Other indirect channels of selling include distribution through stockist stores and distribution through brokers and agents.
Distribution channels have varying levels of penetration according to different geographical areas. Distribution can be done at the retail level or at the wholesale level. Retail distribution can be done at the retail store, retail kiosk or at the doorstep of the customer. Wholesale distribution can be either direct or indirect.
Distribution can be done at the national, state or the local level. At the national level, the distribution can either be done through direct selling or can be done through hybrid channels. Hybrid channels combine the advantages of both direct and indirect selling mechanisms. There are hybrid channels like the Multi-level Marketing (MLM) systems that combine the benefits of direct selling with the opportunities that multi level marketing presents. Distribution can be done at the distributor and retailer or at the customer segments.