Channels of distribution are the means by which a seller of goods or services connects with their target customers. The management and development of these channels is a key part of the marketing mix. There are wholesale and retail channels, direct and indirect channels, narrow channels, and broad channels. A distribution channel can be any channel used by the product or service creator to get produce to the end customer. Distribution is a key element of the marketing mix. There are direct and indirect channels of distribution. Marketers can use multiple channels to get their products and services to market, but must avoid channel confusion or conflict in order that the channels work efficiently.
Direct channels are characterized by the producers of goods and services interacting directly with the end consumer. Examples include:
The direct sales force is among the oldest channels. Although declining as a volume channel relative to other channels to market, the personal sales channel is one of the more effective and most expensive to run. Increasingly, direct personal selling is being used for major complex sales rather than the sales of consumer goods and services.
The retail channel markets, sells, and services consumers directly. They will often offer credit to the customers. The retail channel determines the final price of the good or service to the customer. Retail channels can take the form of stores, catalogues, franchises, websites, telesales, mail order, and home shopping channels. Retailers act as a channel for multiple brands, but can themselves also be a brand—sometimes much more powerful than the brands that they distribute and sell. See also brand; consumer marketing. The retail channel is highly managed and often controls other parts of the supply chain. For example, an in-store eftpos (Electronic Funds Transfer at Point of Sale) system can immediately collect and transfer information about purchases to warehouse and distribution centres that can dispatch new supplies when they are needed in the retail store. This system eliminates the need for stockrooms within the retail outlet and allows the entire space to become a retail outlet serving customers. Retail channels can exercise enormous power over pricing and product design and quality.
The Internet represents a powerful intermediary channel. It has possibly the widest geographical reach of the channels to market. It can enable niche products to reach a vast audience. It is a relatively low-cost channel with low entry barriers. It uses online payments to enable purchase.
Indirect distribution channels are characterized by using a third party as an intermediary between the producer of the goods and services and the end consumer. Examples are:
Indirect distribution channels are used most efficiently when they can access either more customers than retailers or can sell more efficiently (such as to a diverse base of smaller retailers in a large geographical area) or can add more value (such as customization of product) for the retail outlet that serves end customers.