Distribution Channel

[Reyed Mia (Apprentice, DIU)]

Distribution Channel

A distribution channel is a chain of businesses through which a manufacturer sends his products to get them to a final buyer. It may involve wholesalers, distributors, agents and retailers. Companies often use multiple methods to get their goods to consumers. They may have several indirect channels and several direct channels of distribution.

Any distribution channel with one or more intermediaries between the manufacturer and the final customer is an indirect distribution channel. This is typical for goods sold through brick-and-mortar stores.

Each intermediary adds value to the process by taking the product further to its destination, but also charges for this service. Therefore, the price to a customer increases for each intermediary in the channel.

A direct distribution channel is one where a customer buys directly from a manufacturer. This is the shortest distribution channel. Because there are no intermediaries, this often results in the lowest price to the consumer. Catalog sales are one form of direct distribution. So are direct sales through a sales team. Many companies also sell direct via the Internet.

"Distribution channel" is generally used to refer to the downstream perspective, answering the question, "How does our product get to customers?"

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