What are Distribution Channels? Distributors typically find themselves at the crossroads when it comes to their businesses. It’s either going to be an established market, or one that’s just starting out. Either way, they need to know which distribution channel will give them the best possible chance of getting their product to their customer with the lowest possible overhead. So how do you choose which channel to go with?
Types of Distribution Channels: There are three basic types of Distribution Channels: Online, Outlet, and Brick-and-mortar. Each type has its own strengths and weaknesses, as well as the possibility of growing or contracting during a recession. A distribution channel isn’t a one-size-fits-all; instead, it is the way that retailers utilize the power of the internet and their unique set of customers to leverage new market opportunities. The idea is to connect the gap in the fastest and most efficient way. Distribution channels work, whether the gap is some hundred to one thousand miles or a few miles to a national audience.
Types of Distribution Channels: Distribution channels can either interconnect with other distributors or they can provide their own resellers (also known as retail intermediaries). Retail intermediaries provide the retailer with the ability to resell the product available through the distribution channel and make money on the back end. This is how many companies make money today. But it’s also how some companies fail, because while they’re able to offer products to the end customer for commission, they have no way of getting their product to the customer. It’s important for an intermediary to be connected with a distributor that can take their products from point A to point B, but that also has the infrastructure to deliver the product available through that distribution channel, as well as the staff to carry out the necessary tasks.
Distribution channels fall into two categories, direct selling and marketing channels. Direct selling channels directly contact the end user, while marketing channels rely on the manufacturer to do the contacting. Marketing channels include national, regional, and local promotions that are coordinated by the manufacturer or distributor. A manufacturer can choose to do all the contacting and the marketing themselves, or they can hire an indirect marketing channel such as an indirect sales company. Some distributors specialize in particular types of distribution channels.
Distribution channels generally fall into two categories, direct selling and reverse channels. Direct selling channels directly contact the end user and, through the manufacturer, distributors are able to market directly to the end user. This type of channel tends to be highly targeted and is good for lower priced items. On the other hand, reverse channels depend upon the manufacturer to provide the sales and marketing infrastructure required by the distributor in order to generate sales. These types of channels are not as targeted and generally have a wider range of products, but tend to be much more expensive.
A distribution channel provides a solid economic structure to manufacturers and distributors. This structure provides support when a manufacturer needs to increase production or expand their manufacturing capacity. Distribution channels also protect the manufacturer from the potential impacts of bad product timing or unanticipated changes in consumer behavior. Without a distribution channel, a manufacturer would face severe financial penalties if demand fell suddenly and they had no backup plan to meet demand. Many distribution channels also provide the backup logistics necessary to protect the manufacturer from the impact of unanticipated changes in consumer behavior.