Distribution Channels

Distribution Channels

Distribution channel is defined as a chain of intermediaries; each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user.

Typically there are four types of distribution channels:

Company to stockist to retailers to consumer is a traditional trade channel being adopted by most consumer goods companies.

Company to stockist to consumer is a channel adopted by bulk sales of core industries like cement and power.

Company to retailer to consumer is a typical sales channel in organised or modern retailing

Company to consumer is typical in the direct sales channel approach of multi-level marketing companies like Amway and Modicare.

 

Selecting Distribution Channel


The choice of the distribution channel depends of the type of product, volumes of sales and type of customers/consumers. The type of distribution channel required depends upon

 

  • The nature of your product (is it fragile/sensitive heat/cold/movement and requires specialist transportation or storage?)
  • The target market (where do the customers like to purchase similar products from, what are their expectations?)
  • The nature of the market place (there may firmly-entrenched distribution channels with well-defined territories)
  • How the typical customer prefers to purchase.


Click here to read a checklist for selecting a distribution channel

Selecting Channel Partners

Selecting the right channel partner (CNF/distributor/ wholesaler) is critical especially for a small business which might not have many channel partners. In order to select the right channel partner, one must look at the following basic characteristics:-

  • Years of experience
  • Number and types of consumers
  • Type of products
  • Geographical Reach
  • Market Knowledge
  • Financial Strength