Distribution channels are one of the essential aspects of a company. It allows companies to deliver their products or services to the customers. It consists of wholesalers, retailers, agents, brokers, and many more that help the companies to sell their products in the market.
However, distribution channels are not limited to selling the products to the customers. There are a lot of technicalities here from the perspective of a company. These channels have various types, levels, examples, and much more.
In this article, we have mentioned everything from “what is channels distribution” to. Let’s begin the article !!
What are Distribution Channels?
Distribution strategies are typically used to deliver the products from the brands to the customers. In simple words, how the customers receive their products are known as distributing channels. These channels can vary between short and long or direct and indirect depending upon the route of the customer’s end location.
Plus, the delivery fees also depend on how many intermediaries have been used to deliver the products to your location. If your location’s distance is short, then you have to pay lesser delivery charges. At the same time, customers with longer distances have to pay more charges. Pricing also depends upon which type of intermediary has been used to deliver your product.
Some of the intermediaries are mentioned below:
- Wholesalers
- Retailers
- Agents
- Distributors
- Sales Team
- Direct Sales
- Resellers
- Digital Distributors
- Etc.
Types of Distribution Channels
Basically, there are three distribution channel types: Direct, Indirect, and Hybrid.
1. Direct Distribution Channel
Direct distribution channels refer to selling the products or services directly by the manufacturers. These direct channels of distribution are the direct method of selling that allows the customers to save a lot of additional costs over the logistics. Through this channel, companies can run their online store, which gives the liberty to the customers to purchase the products from them without any additional costs directly. In this way, both the company and the customer get a lot of benefits.
2. Indirect Distribution Channel
Indirect distribution channels indicate a complete cycle through which a company delivers its products and services to the customers. In simple words, companies sell their products to wholesalers or retailers. Then, they send the products to the customers through their sources. All the retail stores we see over the roads utilize these intermediaries to purchase their products and then sell them directly to the end-users. These intermediaries also have separate charges for the manufacturers, which slightly increases the price of products and services. Plus, everyone, including manufacturers, wholesalers, distributors, agents, and retailers, cut a certain amount of profits for them. It also increases the price of final products and services.
3. Hybrid Distribution Channel
Hybrid channels utilize both direct and indirect channels to deliver their products or services to the customers- multi-channel distribution. They utilize any of the methods based on the convenience of the customers. In simple words, if the customers order the product directly from the website of the company, they buy through a direct medium. While the rest of the customers also buy from the retailers and wholesalers, that adds additional money to your company.
Distribution Channel Levels
Level 0 Channel of Distribution
At this level, the company and customers are closely related to each other. This means this is a D2C model, which allows the brands to sell the products to the customers directly. You can take the example of Amazon Kindle, which uses no other platform to sell its products. Level 0 Channel consists of the shortest distance to reach the product to consumers.
Level 1 Channel of Distribution
This distribution channels the businesses to sell the products to the retailers directly. They can further sell the products to the consumers. Hence, in this model, only one intermediary ensures the process of products reaching the end uses. For instance, you can think about the dealers here. HP and Dell have given their dealership to selected distributors in a city that allows them to sell the products to the end-users.
Level 2 Channel of Distribution
Level 2 channel is the longest way to deliver the products to the end-users. It includes the manufacturer, wholesalers, retailers, and consumers in their supply chain. Certain products have to follow this distribution level, such as winery. Any manufacturer cannot directly sell their wines to any retailer. Instead, there is a governmental law that allows the manufacturer first to sell their wines to wholesalers. They can proceed further to the retailers, and then they can be sold to the end users.
Level 3 Channel of Distribution
At this level, a jobber assembles the products from various manufacturers, stores them, and then sells them to interested retailers. In simple words, they even act as a middle-man between the wholesaler and retailer to bring demand for the wholesalers. It slightly increases the product pricing even more.
9 Main Examples of Distribution Channels
Here are the nine main examples of varied channels that allow you to deliver your products to ensure users:
1. Wholesaler
The wholesalers purchase the bulk products from the manufacturers with good discounts. They have to maintain a warehouse or inventory to store these bulk products. Then, the retailers buy these products from them in good quantity. Wholesalers cut out their margins based upon per piece and make an overall profit.
2. Agents
Agents connect the manufacturers with the end customers. When a customer buys a product, they earn commissions over the sales.
3. Retailer
A retailer acts as an intermediary between the manufacturer and the customers. They generally sell medicines, groceries, food and more. You will find that these retailers sell the products at a very high price. Plus, the retailers are also further divided into various categories. It includes franchises, convenience stores, supermarkets, etc.
4. Sales Teams
Every company has their internal and external sales team. This team focuses on finding prospects, generating leads, and closing required deals with the manufacturers and distributors of your company. A company can have multiple sales teams to promote the different segments and audiences.
5. Distributors
They are responsible for delivering the products from the producer to customers. This process also requires them to manage logistics, finance, and market research.
6. Brokers
Brokers also work as an agent and earn a commission over the sales. But they have a very short-term relationship with the company. In simple words, they are more like a real estate or insurance broker.
7. Resellers
Resellers generally purchase the products from the producers or distributors. Then, they sell it directly to the customers by adding their profit margin.
8. Catalog
As the name sounds, a salesperson sells the products to customers with the help of printed catalogues. These salespeople earn their commission based on their hinted targets.
9. The Internet
The Internet is obviously the most important sales medium for tech and software-based companies. However, physical product-based companies can also sell online with the help of ecommerce stores.
Wrap Up
Distribution channels allow the companies to manage their product and service selling and deliveries. You should analyze your company’s current situation and then take your call towards choosing the right channel. We recommend you go for Direct Distribution for SMEs, Indirect Distribution for large companies, and Hybrid Distribution for mid-cap companies.