What are distribution channels?
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This section provides an overview of distribution channels and the three main types of distribution channels.
Distribution Channels
- Distribution channels are the means by which businesses get products to their consumers.
- There are three main types of distribution channels:
- Direct to the consumer
- To the consumer via retailers
- To the consumer via wholesalers and retailers
Direct Distribution
- Products with relatively low volume sales are often sold directly to consumers.
- Direct sales can be made online, through mail order, or through shops owned by the manufacturer.
- Businesses selling direct do not rely on shops or other intermediaries to sell their product.
Distribution via Retailers
- Large retailers often purchase goods from manufacturers and sell them on to consumers.
- This method allows producers to focus primarily on making the product without needing complicated distribution systems.
- Retailers have enough buying power to negotiate bulk discount prices with producers.
Distribution via Wholesalers and Retailers
- This type of distribution channel involves at least two intermediaries: wholesalers and retailers.
- Wholesalers purchase in bulk from producers and sell smaller batches to retail businesses.
- Using wholesalers is an effective way for manufacturers to get products stocked in small retail businesses without incurring transport costs for individual deliveries.
Factors Influencing Distribution Method Choice
- Decisions about which method of distribution to choose are influenced by factors such as cost, market nature, and producer's control over marketing.
- Direct distribution reduces the cost of distribution but may involve more intermediaries seeking profit margins.
- Using intermediaries like retailers can provide better promotion opportunities but may limit control over marketing.
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This section discusses how different factors influence decisions about distribution methods and provides examples based on market size and product type.
Market Size and Distribution
- High-volume mass-market products are typically distributed through retailers to reach a large number of customers.
- Mass-market products have a national or international market, making distribution through retailers more feasible.
Direct Distribution for Smaller Markets
- In markets with a smaller number of customers, direct distribution becomes more feasible.
- Producers of industrial goods may consider direct distribution due to their small customer base.
- Delivering industrial goods directly to consumers is less complex than delivering consumer goods to millions of people.
Control over Promotion and Price
- When using intermediaries, producers hand over control over promotion and price to them.
- Being stocked in an established retail chain can lead to better product promotion.
- However, the marketing approach of intermediaries may not always align with the producer's preferences.
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This section summarizes the main points discussed about distribution channels and factors influencing distribution method choices.
Summary
- Distribution channels are the means by which businesses get products to consumers.
- The three main types of distribution channels are direct, via retailers, and via wholesalers and retailers.
- Decisions about distribution methods are influenced by factors such as cost, market nature, and control over marketing.