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Have you defined the distribution
channels that will be used by your company?

Nội dung chính

  • The Three Types of Distribution Channels
  • 1.
    Direct Channels
  • 2. Indirect Channels
  • 3. Hybrid Channels
  • Three Methods for Distribution Channels
  • 1. Exclusive Distribution
  • 2. Selective Distribution
  • 3. Intensive Distribution
  • Distribution Channel Levels
  • Level 0 Distribution Channel
  • Level 1 Distribution Channel
  • Level 2 Distribution Channel
  • Level 3 Distribution Channel
  • The Nine Main Intermediaries in
    Distribution Channels
  • 1. Retailers
  • 2. Wholesalers
  • 3. Distributors
  • 6. The Internet
  • 7. Sales Teams
  • 8. Resellers
  • Reverse Distribution Channel
  • How to Define
    Distribution Channels for Your Product
  • 1. Benchmarking
  • 2. Project Review
  • 3. Costs and Benefits
  • 4. Company’s Daily Routine
  • 5. Market Potential
  • 6. Logistics
  • 7. Location
  • Managing Distribution Channels
  • Examples
    of Distribution Channels
  • Coca-Cola’s Distribution Channels
  • Natura’s Distribution Channels
  • Distribution Channels Conclusion
  • Which of the following is direct channel of distribution?
  • What is a direct channel of distribution for consumer goods and services?
  • What is direct consumer distribution?
  • Which products use direct channel of distribution?

If not, it’s time.

In short, distribution channels determine the path goods will take from the manufacturer to the final consumer.

Thus, they have direct impact over sales.

There are many types, formats, and levels of distribution channels.

The first step is to understand each of them.

To help you with this task, this page will go over the main things you need to know about distribution channels:

  • what
    distribution channels are
  • the three types of distribution channels
  • three distribution methods
  • distribution levels
  • the main intermediaries
  • how to define them

Distribution channels are the path products take from their initial manufacturing
stage to selling them to consumers. The main goal of these channels is to make goods available to final consumers in sales outlets as soon as possible.

Distribution channels directly impact a company’s sales, so you want to make them as efficient as possible.

The Three Types of Distribution Channels

There are three ways to make sure a product gets to the final consumer.

Direct Channels

With direct channels, the company is fully responsible for delivering products to consumers. Goods do not go through intermediaries before reaching their final destination. This model gives manufacturers total control over the distribution channel.

This is the case with people who do catalog sales, for example.

Since the
manufacturer alone is responsible for delivering products, this channel generally makes it impossible to have a high number of customers.

At the same time, it’s possible to offer lower prices, since the company does not have to pay commission to intermediaries.

2. Indirect Channels

indirect channels products are delivered by intermediaries, not by the sellers.

Who are these intermediaries? They could be wholesalers, retailers, distributors, or brokers, for example.

In this case, manufacturers do not have total control over distribution channels.

The benefit is that this makes it
possible to sell larger volumes and sell to a range of customers. However, products have higher prices due to the commissions paid to intermediaries.

3. Hybrid Channels

Hybrid channels are a mix of direct and indirect channels.

In this model, the manufacturer has a partnership with intermediaries, but it still takes control when
it comes to contact with customers.

One example is brands that promote products trực tuyến but don’t deliver them directly to customers.

Instead, they nominate authorized distributors.

Three Methods for Distribution Channels

There are three different delivery methods for distribution.

Basically, they concern who will be
allowed to sell your products.

1. Exclusive Distribution

With exclusive distribution, intermediaries take the company’s products to specific sales outlets.

This is usually done by a sales representative.

This means that only exclusive retail outlets will be able to sell the items to consumers.

Depending on the quality of the product,
this is a great strategy not only for manufacturers but also for the retail outlets or chain stores selected.

2. Selective Distribution

With selective distribution, the company allows sales to a specific group of intermediaries who are responsible for selling items to final customers.

important factor in how succesful this strategy will be is the reputation of the intermediaries since they have a direct impact over the company’s performance.

In this case, the intermediary becomes the real consultant for consumers, answering questions and recommending appropriate products for their needs.

3. Intensive Distribution

intensive distribution, the manufacturer tries to place their product in as many sales outlets as possible.

The manufacturers themselves, sales teams, and commercial representatives are all involved in this method. They are responsible for distributing products
to sales outlets.

This distribution method is generally used by manufacturers of low-cost products with a high frequency of consumption.

Distribution Channel Levels

Besides the types and methods of distribution channels, they may also operate on different levels.

Their levels represent the distance between the manufacturer and the final consumer.

Level 0 Distribution Channel

In this level, there is a close and direct
relationship between the manufacturer and the client.

For the company, the costs of the relationship with the consumer are higher.

Level 1 Distribution Channel

In level 1, the manufacturer sells the products to the distributor, who might sell it to consumers via retailers or wholesalers.

The distributor keeps some of the rights to the product, but not all.

The distributor is also responsible for the costs of sales and transportation to sales

Level 2 Distribution Channel

Level 2 is similar to level 1.

The difference is that in this case, the distributor delivers products only to retailers, who sell them to consumers.

Level 3 Distribution Channel

Level 3 channels are a traditional distribution model.

The product’s journey from the manufacturer involves distributor, retailer, and customer.

The costs relative to sales and
marketing are divided between the parties.

The advantage of this model is that it’s possible to reach a larger number of consumers.

On the other hand, products have a higher price because of the operational costs of all the parties involved.

The Nine Main Intermediaries in
Distribution Channels

After finding out more about operation details, it’s time to see who are the main intermediaries who take products to consumers.

1. Retailers

Retailers are intermediaries used frequently by companies.

Examples include supermarkets, pharmacies, restaurants, and bars. Each of these types of businesses has full sales rights.

Generally, product prices are higher in retailers.

2. Wholesalers

Wholesalers are intermediaries that buy and resell products to retailers. Wholesalers sell to those who are going to put products in their own stores.

These intermediaries generally don’t sell small quantities to final consumers, though there are exceptions, like supermarkets that sell in the wholesale model.

Prices are lower because sales involve large quantities.

3. Distributors

Distributors sell, store, and offer technical tư vấn to retailers and wholesalers. Their operations are focused on specific regions.

4. Agents

Agents are legal entities hired to sell a company’s goods to final consumers and are paid a commission for their sales.

In this case, the
relationships between intermediaries and companies are for the long term.

5. Brokers

Brokers are also hired to sell and receive a commission.

The difference between agents and brokers is that brokers have short term relationships with the company.

That’s the case with real estate agents and insurance brokers, for example.

6. The Internet

To those who sell tech and
software, the internet itself works as the intermediary of the distribution channel.

The consumer only has to tải về the material to have access to it.

E-commerce companies also use the internet as a distribution intermediary.

7. Sales Teams

company can also have its own sales team who are responsible for selling goods or services.

There is also the possibility of creating more than one team to sell to various segments and audiences if the company has a wide range of products.

8. Resellers

Resellers are companies or people who buy from manufacturers or retailers to later sell to
consumers in retail.

9. Catalog

Catalog sales, as the name indicates, is when a salesperson is connected to a company and sells its products using a magazine. Salespeople in this model also usually earn a commission for their sales.

This type of sales is common in the beauty segment, with brands like Avon and the Brazilian Natura.

Reverse Distribution Channel

Now you know the types and methods available for products to reach
customers. But what happens when consumers need to return items to manufacturers?

Consumers need to rely on reverse distribution if they receive defective products or need to return clothes or shoes they bought trực tuyến that don’t fit.

In this case, the consumer is responsible for returning the items and needs to find information from the manufacturer about how to do this. Usually, consumers find information about returns on the site for the product.

How to Define
Distribution Channels for Your Product

Now you know the different types of distribution channels and intermediaries. But all this is of no use if you don’t know how to select the appropriate channel for your company.

Next up are seven essential
tips to help you make this decision.

1. Benchmarking

First, you must look your competitors to find the best practices they adopt.

This kind of mapping is known as benchmarking.

The idea is to figure out how your competitors are distributing their products and adopt a similar model.

2. Project Review

So you have
mapped out best practices in the market and identified solutions that could work for your business.


The next step is to review the project/channel you created.

Check if there are errors and how processes may be optimized and adapt the project to the needs and characteristics of the type of sales you make.

3. Costs and Benefits

When we talk about distribution channels, one important factor is the cost associated with them.

Always look
for the best cost-benefit ratio.

To do this, it is not enough to have a vague idea of the costs. You must record all costs and analyze if the benefits of the channel you selected are worth it.

4. Company’s Daily Routine

Another relevant factor is the business’ routine.

What are the projects, processes, and activities in your business?

distribution channel must be aligned with all these details.

Otherwise, you might have logistics problems that result in product delays that damage your relationship with customers.

5. Market Potential

Before selecting a channel, you should also consider the market potential of intermediaries.

After all, unless you choose to use
direct channels, they will also be responsible for sales results.

Analyze intermediaries’ market participation, reputation, and performance to only then try to select the most appropriate option.

6. Logistics

Consider logistical questions like:

  • How will products be transported?
  • Is there security for when the products are in transit and/or where they are stored?
  • Where will goods be stored?
  • What will be the delivery time, on

Considering all stages of logistics is crucial to avoid problems taking goods to sales outlets.

7. Location

Finally, consider the location of intermediaries, whether they are resellers, retailers, wholesalers, or distributors.

After all, your product must be sold in the region where your target audience is, especially if you supply a
specific niche of the market.

Managing Distribution Channels

How should you manage your company’s distribution channels? This is usually the responsibility of marketing departments.

To do it, it’s essential to monitor key performance indicators (KPIs).

Carry out regular assessments of
reports with metrics and indicators related to distribution processes.

Monitor sales indicators, for example, analyzing the performance of each channel the company uses.

Also, carry out satisfaction surveys with consumers, especially when customers are dissatisfied with the selection and availability of goods or when sales volume is below expectations.

of Distribution Channels

Before concluding this reading, how about we get to know two examples from great companies?

Coca-Cola’s Distribution Channels

The largest soft drink manufacturer in the world uses different sales channels with franchisers,
distributors, and retailers.

For example, soft drinks get to different retailers thanks to distributors.

This includes bars, restaurants, and supermarkets, who sell directly to final consumers.

Natura’s Distribution Channels

Cosmetics brand Natura basically uses catalog
distribution, though today there are sales outlets as well.

The company has a network of consultants that sell to consumers using magazines showing the products.

Distribution Channels Conclusion

Are you ready to define and manage distribution channels for your company?

Follow the steps I mentioned in this article, from benchmarking to sales outlet analysis.

Consider the
cost-benefit ratio of each channel.

And regardless of your choice, always monitor indicators and metrics.

This analysis makes it possible to check the efficiency of the distribution channel so you can optimize it

Did you like the tips in this article?

Leave a comment with your opinion or any questions you may have.

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Which of the following is direct channel of distribution?

Key Takeaways
Distribution channels include wholesalers, retailers, distributors, and the Internet. In a direct distribution channel, the manufacturer sells directly to the consumer. Indirect channels involve multiple intermediaries before the product ends up in the hands of the consumer.

What is a direct channel of distribution for consumer goods and services?

A direct distribution channel is one where a company sells directly to the consumer, usually through their website or retail store.

What is direct consumer distribution?

Direct distribution is a direct-to-consumer approach where the manufacturer controls all aspects of distribution. Indirect distribution involves third parties, like warehouses, wholesalers, and retailers. Direct distribution gives companies more control over the whole process.

Which products use direct channel of distribution?

Is one where a company sells directly to the end consumer. For instance, an athletic apparel company who manufactures sports shoes and sells them through an e-commerce website or their own retail store is employing a direct channel of distribution.
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