Distribution channels are the methods that companies use to enter the consumer market with their product. While many methods exist, they have changed over the years because of the Internet and global sales.
A distribution channel is the method a company uses to get its products into the marketplace for consumer use. The traditional channel goes from supplier, manufacturer, distributor, wholesaler and retailer. Two types of distribution channels exist: indirect and direct.
The indirect channel is used by companies who do not sell their goods directly to consumers. Suppliers and manufacturers typically use indirect channels because they exist early in the supply chain. Depending on the industry and product, direct distribution channels have become more prevalent because of the Internet.
A direct distribution channel is where a company sells its products direct to consumers. While direct channels were not popular many years ago, the Internet has greatly increased the use of direct channels. Additionally, companies needing to cut costs may use direct channels to avoid middlemen markups on their products.
Indirect Channel Methods
Distributors, wholesalers and retailers are the primary indirect channels a company may use when selling its products in the marketplace. Companies choose the indirect channel best suited for their product to obtain the best market share; it also allows them to focus on producing their goods.
Direct Channel Methods
Selling agents and Internet sales are two types of direct distribution channels. Selling agents work for the company and market their products directly to consumers through mail order, storefronts or other means. The Internet is an easy distribution channel because of the global availability to consumers.