Distribution Channels: Definition, Characteristics and MORE

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The Distribution channels, They can be defined as those phases or stages that a product goes through, so that its ownership changes from one hand to another, that is, from the manufacturer to the consumer or end user.

For this reason, in this article we are dedicated to explaining: what are the distribution channels, what are the modern distribution channels, the characteristics of both channels, the types, and we conclude with the importance of the distribution channels.

What are the Distribution Channels?

Well, as we mentioned at the beginning of this article, the distribution channel is defined by the different stages that a product goes through. Thus, its ownership passes or changes from one hand to another, from the manufacturer to the end user.

A distribution channel is a defined circuit. And, its purpose is to provide a product (through producers) that customers can enjoy when they purchase it.

In another sense, we must highlight an important point about the distribution channel. And, this distribution usually includes certain characteristics that serve the main object of the channel, such as: industrial goods or services and consumable goods.

On the other hand, there is another type of classification that separates these channels into direct or indirect distribution. Where the direct is carried out without intermediation between the client and the manufacturer; and the indirect, where the intermediate is included in the chain.

Generally, those companies that actively participate in the process and that in turn own the property of a product, are usually included among the factors of a channel. For this reason, the banks that finance them are not considered part of the distribution channel.

Functions of the Distribution Channel

Now, once the explanation of the distribution channel is completed, we continue with the development of its functions. For this reason, we dedicate ourselves to compiling a summary of them through the following list:

  1. First of all, we have transportation.
  2. Then, organization of the offer.
  3. Product storage is included.
  4. Also, contact the target audience.
  5. In turn, one of the functions of the distribution channel is to inform about the market.
  6. Offer or provide customers or users with variety in their products.
  7. Simplify exchanges.
  8. It is also important that they participate in each and every marketing activity.
  9. Finance the business process.
  10. Take risks.
  11. And finally, normalize business transactions.

On the other hand, when a manufacturer or company arises the need to choose the right channel to market their products, you must consider a series of questions that will indicate the most appropriate system based on its operability and profitability.

  • Do I want to reach every corner of the country?
  • Do I have great financial capacity?
  • Do I want to be in the market 365 days and 24 hours a day?
  • What control do I want to carry out on my products?
  • Will I be involved in all promotional activities?
  • Do I have a great sales team?
  • How is my logistics infrastructure?
  • Do I want to intervene on the final setting of the price?
  • What level of information do I want?

What are Modern Distribution Channels?

Well, we must mention that there are many types of producers or manufacturers, retailers and wholesalers. In fact, the shorter the channel, that is, the while fewer intermediaries exist between the producer and the customer, the more control the process will have.

Likewise, it is up to us to clarify an important point about the distribution channel. And it is that, generally, the modern and traditional marketing channels differ by the characteristics of the agents involved and the number.

Modern Distribution Channel

In this channel, large operators predominate, such as: purchasing centers belonging to a few companies that move a significant volume of products purchased from a small number of large producers or manufacturers.

The modern distribution channel, It is responsible for moving large or huge volumes of merchandise. In addition, the purchasing centers have a lot of power in the negotiations and set conditions on production.

The modern channel encompasses everything related to the massive commercialization of products in a local, where customers have free access to a diverse quantity and variety of products.
Traditional Distribution Channel

Now this type of channel takes care of allow variety and adaptation in the local context. On the one hand, it includes direct buying and selling, such as, for example: farmers’ stalls in markets or sales on production farms.

On the other hand, we must emphasize that, when there is a presence of intermediaries, the agents that are part of the intervention are less grouped, so that the purchase and sale is usually carried out and carried out both in auctions and in the open market.

Characteristics

  1. The intermediaries increase and increase the consumers or final customers.
  2. By using these channels, better product control and care can be achieved.
  3. Distribution costs are reduced when there are intermediaries.
  4. Knowledge of the merchandise by intermediaries.
  5. Management of the sales force.
  6. Intermediaries are responsible for buying large quantities from producers or manufacturers and divide them into small quantities.

Benefits of using the Distribution Channel

In another order of ideas, we must mention some of the benefits that derive from the employment or use of the different distribution channels. Likewise, it should be noted that these are: of place and time to the consumer. Attentive!

Venue Benefits

The fact of bringing the products as close as possible to the consumer’s location will prevent them from having to travel long distances to satisfy their needs. In addition, in this way, a greater attractiveness towards the product can be achieved.

Consumer Time Benefits.

Taking into account that there are exclusive products that are obtained or acquired only in specific places, it is usually assumed that the customer or end user is in the disposition to make an effort to get the product.

It is a benefit of time to the consumer because at the moment in which the product is offered, it has already been measured and studied (in terms of satisfaction) to the public. This measurement and study is carried out through market studies.

Also, one of the most important advantages in terms of distribution is the presence of multiple channels. These, are in charge of assisting in the transfer and commercialization of goods or similar products by their nature, for example: cell phones and accessories.

Types

Direct Distribution Channel
  • In this type of distribution channel, the company is responsible for distributing directly to the final consumer.
  • For example: cosmetic brands that have their own reseller networks.
Indirect Distribution Channel
  • In this type of distribution channel, the company makes use of intermediary services to get its product to the consumer.
Hybrid Distribution Channel
  • On the other hand, the hybrid distribution channel is one in which intermediaries are used but at the same time participate in the process.

Levels of Distribution Channels

Level 0 Channel
  • When the producer or manufacturer is directly related to its user or end customer.
  • For example: Internet sales, door-to-door, company-owned retail outlets, mail order, telemarketing.
Level 1 Channel
  • At this level, the producer or manufacturer sells its product to a large distributor that operates wholesale and retail.
Level 2 Channel
  • In this channel, the company passes the product to a distributor and at the same time is going to sell it exclusively at retail.
Level 3 Channel
  • This is the most traditional channel.
  • It involves the distributor, representative, retailer and end customer.

Types of Distribution

Exclusive Distribution
  • This distribution is used in companies that need loyal distribution channels over which they have more control.
Selective Distribution
  • In this type of distribution, the company will choose a restricted number of distribution channels.
Intensive Distribution
  • Finally, in this distribution, the company’s strategy is to reach as many consumers as possible.

Importance of Distribution Channels

To end this report, it is up to us to clarify the importance of the distribution channel. It resides mainly in the existence of separations of two types: geographical or locational type, and chronological type.

Likewise, it is really necessary that work should be carried out on: transport, storage and sale of products or merchandise from the producer to the end customer thanks to retailers and wholesalers. Attentive to the following text.

Wholesalers

Wholesalers are those who they mediate between the producer or manufacturer and the retailers. They are dedicated to the purchase and sale of products and services in large quantities, which will be sold to other wholesalers or manufacturers.

Wholesalers never link the producer or manufacturer with the consumer or end user directly.

In short, what is stated or explained above means that, wholesalers do not sell products or services purchased from the producer or manufacturer or other wholesalers to end users or consumers of the product.

Retailers

Retailers, link the offer of wholesalers and producers or manufacturers with the user or final consumer of the products. And, as with wholesalers, they carry out functions other than the generic ones that justify their existence, such as:

  1. Offer credits and payment facilities to customers on their purchases.
  2. Group the products of different suppliers.
  3. Create an assortment for the end user or consumer.
The distribution chain or channel includes up to the end point in which a product in question has not undergone any transformation, that is, if it is modified into a new product, it will mean the creation of a new chain.

To end our writing, we invite you to help us share the information.

See you soon!

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