Channels of Distribution Marketing Channels of Distribution

What are Channels of Distribution?

More Formally… Channels of distribution is the component of your marketing plan within the venture plan where you develop the best method or methods of getting your product or service to your customers. Depending on the scope of your venture this can be a challenging activity as the following picture illustrates:

Direct Channels A B

Direct Channels PRODUCER TO CONSUMER By selling directly to the consumer, producers can potentially offer their product at prices lower than those of competitors who supply through channel intermediaries Cutting out the “middle man” profits that had previously been shared with channel intermediaries can be retained by the producer

Indirect Channels A B C D

Indirect Channels 1st Type Producer to Wholesaler to Retailer to Consumer This traditional channel of distribution has two intermediaries or middlemen : the wholesaler and the retailer Often used by manufacturers of food, clothing, drugs, and hardware, the Wholesaler purchases the product in large bulk quantities from the producer, and then breaks these bulk purchases down into smaller quantities, which are then sold to retailers, who then sell them to the consumer, often in individual quantities.

Indirect Channels 2nd Type Producer to Retailer to Consumer Producers of televisions, furniture, and major appliances tend to sell their product to large retailers such as Hudson 's Bay, Wal-Mart or Future Shop. Able to buy in the large quantities preferred by the producer, the major retailers organize their own distribution of the product to their retail By purchasing in large quantities they are able to negotiate discounts from the producer