The world of commerce is changing extremely fast today, and distribution is becoming more and more important to businesses, as many of them now target their customers all over the planet. At the same time, companies are also trying to expand into several markets in order to be able to boost their turnover. This is why distribution channels have become key factors for your marketing strategy, as they are the ones that can help you reach your customers by maximizing your revenue and brand awareness.
In this article that covers the types of distribution channels, we’ll go over all the information you need to know about the different distribution channels and networks, so that you can make the right channel choice for your business.
What is a distribution channel?
A distribution channel is the distance traveled by a product or service, from the producer to the end consumer. We speak of a short distribution channel or short circuit when a customer purchases a product or service directly from the manufacturer, and a long distribution channel or long circuit when a distributor, supplier or retailer is involved in the process. distribution process.
Distribution channels are created so that companies can answer the following question: “How do we get our product to the consumer?” “.
What are the different types of distribution channels?
There are several channels or distribution channels that brands can adopt to distribute their goods, products and services, especially now that digital channels are partnering with traditional physical outlets and online selling is becoming vital for the overwhelming majority. business.
Here are the 7 most important distribution channels to know:
1- Direct sales
A direct sales, or direct channel, business model eliminates any middleman in the distribution process, leaving the brand to sell products to customers itself. This means that there are no third party retailers or outlets between the producer and the consumer, either to stock the inventory or to promote the products.
The most visible example of a direct sales approach is embodied today by the majority of mobile phone brands, including Apple. In many cases, customers have to go through the brand itself to purchase software, devices, and other products. Apple operates its own physical and online stores, and sells directly to consumers. It has a presence in third-party retail stores, but the company tries to direct potential and loyal customers to its branded stores.
The ultimate example of direct selling is a business that creates products and goods on site and sells in the same place, like a baker, for example.
Direct selling has a number of advantages. As companies manage distribution without any middleman or outside help, they do not need to share their income with third parties. By removing every middleman from the distribution channel equation, brands have the financial flexibility to set lower prices to attract customers and gain a competitive advantage. Those companies that are able to adequately control distribution costs while reaching their target audience can find an optimal level of profitability.
These brands can also tightly control the customer experience when selling directly and can create stores – both physical and digital – that directly align with their core values and messages.
Managing internal distribution and selling directly to end users bring brands closer to their customers and are the vectors of an optimal customer relationship, since there are no filters or intermediaries separating the customer from the brand.
Retail is the most common distribution channel for consumer brands. It uses third-party outlets to bring the products to market. Supermarkets, big box stores, what is commonly referred to as large retailers, and department stores all play the role of intermediary and direct point of contact for customers.
However, not all retail distribution strategies have the same approach. Depending on the brand, product and audience, some companies may aim for the widest possible market penetration, while others focus on establishing exclusivity by limiting the availability of their product.
3- Intensive diffusion
Consumers are probably more familiar with this form of retail distribution, where products are sold in as many outlets as possible.
This style of retail distribution is best suited for goods and products that rarely generate high brand loyalty. If a customer’s preferred brand is not available, they may well purchase another product at a similar price.
Intensive distribution gives brands the greatest possible presence, reaching more potential customers in disparate markets. Only a few brands can achieve this high level of distribution. Inventory management, supply chain logistics, and marketing requirements can become complicated with an intensive distribution strategy, and many companies simply don’t have the resources or capabilities to make this type of distribution work.
This approach is ill suited to niche products with limited appeal, which require a more focused strategy. Luxury goods with high prices can also suffer from intensive distribution, as lower quality offerings can easily attract less demanding buyers.
4- Selective distribution
Not all businesses that sell through retailers seek to achieve the widest possible distribution. Luxury brands are most of the time very selective about where their products are located and how they are represented. You won’t find Hermès handbags in a supermarket, for example. For these businesses, the in-store experience is part of their brand and they tightly regulate retail displays and even how salespeople describe or demonstrate their products.
The target audiences of this type of brands are extremely demanding and are ready to go to specific points of sale where their favorite brands are available.
5- Exclusive distribution
Selective distribution strategies sometimes use multiple intermediaries and outlets to sell merchandise, but premium brands have an even better option to consider: exclusive distribution. Under this business model, companies partner with a single wholesaler or retailer in a particular market. The idea is to restrict availability to protect the brand and project a more selective and exclusive brand image.
Rolex is one of the most famous examples of exclusive distribution. The company partners with a wholesaler in each market to control precisely where its products are sold and how they are represented. Even if a third party, such as an agent, takes on the role of the ultimate point of contact with the end customer, the brand can still dictate the shopping experience it wants to see in-store, creating strict brand guidelines that agents must follow.
6- Double distribution
Many companies choose to use multiple distribution channels to sell their products, working with wholesalers and retailers, while maintaining branded storefronts to sell directly. This approach is known as dual distribution. Apple, which we cited above, is an example of dual distribution, although it leans more towards the direct distribution channel.
Smartphone manufacturers, in general, use this approach, as manufacturers sell their devices through big box stores, telecom partners, and their own stores, physical or online.
7- Sale via a wholesaler
Like retailers, wholesalers act as middlemen who buy products from manufacturers and then sell those products to end users at a higher price. The biggest differences between these business models remain scale and audience.
With this channel, customers end up spending less money per unit, while purchasing large amounts of a particular product.
Choose the right distribution channel
Choosing the right channel (s) for distribution is critical to the success of your business. Whichever channel you choose, it’s going to affect how your items are handled, how quickly they get shipped, and the overall efficiency of distributing your products to your customers.
The distribution method can bring great added value to the end user. Is it essential to provide personalized service to the customer? Is it necessary to take care of all aspects of the sale for the merchandise you produce, or is it better to collaborate with several intermediaries? Does your target audience prefer to buy your product online or want to test it first? Your business must answer these questions before deciding which distribution channel and platform to use to market its products and services, depending on the type of merchandise you market, your production capacity, storage, delivery, and your audience. target and all aspects of your marketing mix.
But what must absolutely be taken into account today is the omnipotence of digital sales tools and digital marketing. So to be sure to effectively connect your brand to your customers, it is essential to benefit from a powerful and optimized website. Also try to maximize direct sales as much as possible.