A distribution channel (also called a marketing channel) is the path or route decided by the company to deliver its good or service to the customers. The route can be as short as a direct interaction between the company and the customer or can include several interconnected intermediaries like wholesalers, distributors, retailers, etc.
Hence, a distribution channel can also be referred to as a set of interdependent intermediaries that help make a product available to the end customer.
Role of Distribution Channels
In order to understand the importance of distribution channels, you need to understand that it doesn’t just bridge the gap between the producer of a product and its user.
(i) Distribution channels provide time, place, and ownership utility
They make the product available when, where, and in which quantities the customer wants. But other than these transactional functions, marketing channels are also responsible to carry out the following functions:
(ii) Logistics and Physical Distribution
Marketing channels are responsible for assembly, storage, sorting, and transportation of goods from manufacturers to customers.
Channels of distribution even provide pre-sale and post-purchase services like financing, maintenance, information dissemination and channel coordination.
(iv) Creating Efficiencies
This is done in two ways: bulk breaking and creating assortments. Wholesalers and retailers purchase large quantities of goods from manufacturers but break the bulk by selling few at a time to many other channels or customers. They also offer different types of products at a single place which is a huge benefit to customers as they don’t have to visit different retailers for different products.
(v) Sharing Risks
Since most of the channels buy the products beforehand, they also share the risk with the manufacturers and do everything possible to sell it.
Distribution channels are also called marketing channels because they are among the core touch points where many marketing strategies are executed. They are in direct contact with the end customers and help the manufacturers in propagating the brand message and product benefits and other benefits to the customers.
Factors Determining the Choice of Distribution Channels
Selection of the perfect marketing channel is tough. It is among those few strategic decisions which either make or break your company.
Even though direct selling eliminates the intermediary expenses and gives more control in the hands of the manufacturer, it adds up to the internal workload and raises the fulfilment costs. Hence these four factors should be considered before deciding whether to opt for the direct or indirect distribution channel.