By definition, the distribution channel is the route chosen by the manufacturers to deliver their products to the customers. This route or path may or may not involve intermediaries. In simple terms, the distribution channel business can be said as the middle ground between the customer and the manufacturer. The distribution channels will make the products available for the customers anywhere, anytime, and in quantities they want and this makes it really important for many businesses manufacturing consumer goods.
Categories Of Distribution Channels
The distribution channels are broadly classified into two; direct and indirect distribution channels. Based on the number of intermediaries between the manufacturer and customers, an indirect channel is further divided into three levels. First, we will look at direct channels.
Direct Distribution Channel
As the name suggests, in a direct distribution channel, the manufacturers sell their products directly to the users. In direct distribution, there are no intermediaries involved in the selling of products. Brand retail stores are a great example of the direct distribution channel. Most often, direct distribution channels are used for selling perishable and expensive goods.
Indirect Distribution Channels
In indirect distribution channels, manufacturers involve intermediaries to sell their products to the customers. Indirect distribution channels can be categorized mainly into three. The first one is the manufacturer to retailers to customers. Retailers buy the products directly from the ones manufacturing the same. They in turn sell the products to the customers. This works best for products like clothes, furniture, toys, etc.
The next level of indirect distribution channel is the manufacturer to wholesaler to retailer to consumer. In this type of distribution channel, the wholesalers will buy products from the manufacturers in bulk quantities. These are then sold to retailers in small packages. The retailers will eventually sell the products to the consumers. The two-level channel will only sell products that are durable and not-so-expensive.
Besides the wholesaler and retailer, the three-level channels involve an agent in selling the goods produced by the manufacturer. The agents help in moving the goods quickly into the market to fulfill the orders. The agents distribute the products in a specific area in return for a commission.
Business To Business Distribution Channel
As the name suggests, this type of distribution channel involves the distribution of goods from a business to the other. A company that produces heavy equipment sell them to another company instead of individuals. Another example for business to business distribution channel is a lens manufacturing company selling their lenses to a company that manufactures professional cameras.