The product(s) from a manufacturer reaches the customers through the company distribution channels,and this can be done either directly or indirectly. Also, the manufacture can either use a few intermediaries or a large number of intermediaries in the distribution channel to sell their goods. In this primer, we will examine different types of distribution channels used by manufacturers.
Direct Company Distribution Channels
Manufacturers use direct distribution channel to sell goods or products directly to the customer; this is done by opening retail shops, door to door sales, and through mail order. The advantage of this distribution channel is that it is the shortest route to customers, and it is used by most luxury brands, industrial machinery, premium automobiles, and computer manufacturers. Listed below are the different methods used.
Selling At The Manufacturing Plant: This distribution method is also known as direct selling. It is one of the cheapest and earliest methods for distributing goods. Also, it is more suitable for selling perishable goods like agricultural produce, bread, egg, meat, and milk, etc. This is because these goods lose their value when stored for long periods.
Door To Door Sales: Some manufactures employ door to door salesmen for introducing new products to the customers. This is because, most often dealers do not want to stock up unknown products, especially from new brands. However, door to door sales is costly when the market is known.
Mail Order: In this distribution method or selling, producers approach customers by sending pamphlets, catalogs, and price lists, etc. This is mainly used for selling books, magazines, medicines, personal care products, and apparel, etc.
Opening Factory Outlet: A factory outlet is a brick and mortar or an online store where the manufacturer sells the products directly to customers. The advantage of this distribution method is that the producer can study the market trend, offer satisfactory service to customers, and directly communicate with the buyers.
Indirect Company Distribution Channels
Most of our regular household items are sold through indirect distribution channels that involve intermediaries like wholesalers and retailers. It is also a fact that most of the time, these are essential for the distribution of goods to consumers. Listed below are the different indirect distribution channels used.
Producer-Consumer: This channel of distribution in business planis preferred when the number of buyers is small. This is because the customer is an industrial buyer, and the goods are costly. Some of the common examples are industrial machinery, luxury cars, high technology hardware like computers and peripherals, etc. Moreover, buyers are contacted directly, and the goods are sold personally.
Producer-Retailer-Consumer: In this distribution channel, the goods from the manufacturer are purchased by big retailers like hypermarkets, a supermarket chain, and consumer co-operative stores, etc., and sold directly to the consumers. For example, electrical appliances, garments, perishable items, and a host of other consumer goods falls under this category. Moreover, the retailers must have logistics and warehousing facilities to support this distribution channel.
Producer-Wholesaler-Consumer: This distribution channel is suitable for distributing industrial goods that are used for production and not meant for resale. Most often, buyers are consumer co-operative stores, business houses, and government agencies, etc.
Producer-Wholesaler-Retailer-Consumer: This distribution channel is used for distributing and marketing most consumer goods, and it is the longest route in the distribution link. Because of this, it is highly flexible and hence suitable when a large number of similar products are available, and the demand for the good varies. This channel of distribution in the business planis also suitable for the scenarios listed below.
- When the producer has a limited number of products.
- When the producer has limited finances.
- When the wholesaler specializes in certain goods.
- Products are not subjected to change according to the change in demand.
- Both wholesalers and retailers can give good promotional support.
Producer-Sole Agent-Wholesaler-Retailer-Consumer: In this distribution channel, the producer sells goods to a sole agent for further distribution. This sole agent either sells it directly to the customer or may distribute it to a wholesaler who in turn may distribute it to retailers. Moreover, the producer can sell the goods to a sole selling agent or appoint area wise sole agents.
Hybrid Company Distribution Channels
Nowadays, manufacturers, instead of using a single channel distribution, opt for multichannel or hybrid channel distribution to reach customers in different segments. For example, a company can use mail order for selling goods to consumers in segment 1, and it reaches consumers through retailers in segment 2. This channel of distribution in the business planis ideal for manufactures selling their products in large and complex markets and thereby expands market coverage to increase revenues. As a result, a hybrid distribution channel is difficult to control and might develop conflict between different channels.
We hope that the aforementioned details gave you a better understanding of distribution channels used by manufacturers and businesses to sell their products.