Distribution Channels 

A distribution channel refers to the way in which your product or services reach your intended customer.

Distribution channels can be short or long and depend on the number of intermediaries involved in the process of delivering your product or service to your end-users.  Usually, the longer the distribution channel (i.e. higher number of intermediaries) the less profit there might be from the sale because each intermediary charges for its service.

Investopedia states that there are 3 main types of distribution channels, all of which include a combination of a producer, wholesaler, retailer, and end consumer:

According to Investopedia, the first channel is the longest because it includes all four: producer, wholesaler, retailer and consumer. The wine and adult beverage industry is a perfect example of this long distribution channel. In this industry, thanks to laws born out of prohibition, a winery cannot sell directly to a retailer. It operates in the three-tier system, meaning law requires the winery to first sell its product to a wholesaler who then sells to a retailer. The retailer then sells the product to the end consumer.

The second channel is one where the producer sells directly to a retailer who sells the producer's product to the end consumer. This means the second channel contains only one intermediary. Dell, for example, is large enough to sell its products directly to reputable retailers such as Currys PC World.

The third and final channel is a direct-to-consumer model where the producer sells its product directly to the end consumer. Amazon uses its own platform to sell Kindles to its customers and is an example of a direct model. This is the shortest distribution channel possible.

Distributors, wholesalers, retailers, agents and consultants have long-standing relationships with, and access to, industry groups and networks who can quickly bring your product or service to market.

Developing relationships with key organisations can drive multiple ideal prospects to your sales pipeline. This approach is much more cost effective than marketing to each customer individually.

Take a look at the list of common distribution channels below and think about your current method of distribution taking into account the examples given above.

Common Distribution Channels

E-commerce website

A website that provides the information and service a customer needs before and after the sale. E-Commerce is used extensively in B2C sales but is becoming increasingly more used in B2B for repeat orders after initial contacts with sales and technical support.

Research suggests that large corporate buyers prefer not to see sales-people each time they want to order, but would rather commission follow-on orders online.

Direct sales team

Initial engagement via sales-people is often critical in establishing personal relationships and trust with buyers. Increasingly corporates are using fewer salespeople as the sales and marketing process migrates online, especially after the initial first sales.

Catalogue Selling

Can be used to illustrate an entire product range enabling buyers to clearly see product specifications, performance characteristics and prices. Catalogues can be both online and hard copy.

Retail Shop or Outlet

Sell directly to customers through a physical shop or e-commerce website and catalogues

Wholesale / Distributor

Allow you to buy and resell products at a margin, offering complete ranges to the customer. Distributors may also service and maintain products. You should support distributors and wholesalers with marketing and training materials.

Value-Added-Reselle r

Companies that add additional features or services to an existing product or service and resell it (usually to end-users) as a customised and complete “turn-key” solution.

Consultant

Often represent multiple industry contacts and are embedded in professional and industry networks and groups. They are often capable of driving multiple customers to your sales pipeline.

Sales Agent

They provide the sales function for your company and often promote several products and services, selling to specific market sectors or geographical regions.


Existing Customers

Nothing sells better than a positive recommendation from a satisfied customer. You should make a point of asking each new or existing customer for a personal introduction to three potential new end users of your product or service.

Consider any market research you have undertaken when looking at potential new market segments and have a think about which of the common distribution channels described above you could use to reach new markets.


Do you want more sales and new customers?