Distribution Channel
A distribution channel is the network of businesses or intermediaries through which
a good or service passes until it reaches the final buyer or the end consumer .Distribution
channels can include wholesalers, retailers, distributors, and even the internet.
In other words distribution channel represents a chain of businesses or
intermediaries through which the final buyer purchases a good or service. Distribution
channels include wholesalers,retailers,distributors,and the Internet. OR A distribution
channel is the network of individuals and organizations involved in getting a product or
service from the producer to the customer . Distribution channels are also known as
marketing channels or marketing distribution channels.

Definition of Distribution channels
 According to Philip Kotler, “Every produces seek to link together the set of
marketing intermediaries that best fulfill the firms’ objective. This set of marketing
intermediaries is called marketing channel also trade channel and channel of
distribution.”
 According to William J. Stanton, "channel of distribution for a product is the route
taken by the title of the goods as they move from the producer to the ultimate
consumer or the industrial user.”
 According to American Marketing Association,” The structure of intr a company
organization units and extra company agents and dealers, wholesaler and retailer,
through which a commodity, product or service is marketed.”

Types of distribution channels
There are three types of distribution channels :direct ,indirect and hybrid.
•Direct channel/Zero channel/Direct Marketing
With the direct channel,the company sells directly to the customer. For example , a
brewery that brews its own beer and sells it to customers at its own brick-and- mortar
location employs a direct channel of distribution. The seller delivers the product or service
directly to customers. The vendor might also maintain its own sales force or sell its
products or services through an e- commerce The direct channel approach requires
vendors to take on the expense of hiring and training a sales team or building and hosting
an e-commerce operation.

• Indirect channels
Indirect channels use multiple distribution partners or intermediaries to
distribute goods and services from the seller to customers . Indirect channels can be
configured in the following ways: With the single- tier distribution model , vendors
develop direct relationships with channel partners that sell to the customer In the two-
tier distribution model,the vendor sells to distributors that provide products to channel
partners,which,in turn,package products for the end customer.Two- tier distribution helps
smaller channel partners that would have difficulty establishing direct sales relationships
with large vendors.With the single-tier distribution model , vendors develop direct
relationships with channel partners that sell to the customer
.

In the two-tier distribution model ,the vendor sells to distributors that provide products to
Channel partners, which, in turn, package products for the end customer. Two-
Tier distribution helps smaller channel partners that would have difficulty establishing
direct sales relationships with large vendors.
•Hybrid channels
Hybrid channels combine the characteristics of direct and indirect channels. The seller
uses both direct and indirect methods. For example, a manufacturer might sell an item on
its e-commerce website , but then an intermediary delivers the physical product to the
customer . The customer still has a direct interaction with the seller, but an intermediary
is also involved.

Distribution channel Decisions
There are two main processes in supply chain management down stream and up
stream.The up stream process sources materials for production, while the down stream
process focuses on bringing the product to consumers. Distribution decisions belong to
the down stream process.
Main distribution channels include wholesalers, retailers, brokers, and delivery
companies. The purpose of distribution channels is to ensure the timely arrival of
goods and prevent delayed sales. Distribution channel decisions refer to selecting
distribution types, levels, and strategies. Distribution is also one of the four marketing
mix elements. As a result,it can significantly impact a product's positioning, pricing,and
promotion

 Impact on positioning : Products distributed in a few outlets enjoy a more luxurious
image compared to those sold in multiple outlets.
 Impact on pricing: Commission paid to middlemen can affect the price of the goods.
Also, local goods may be less expensive than foreign goods as they have a shorter
distribution channel
 Impact on promotion: Without wholesalers and distributors, businesses must
market and deliver the products themselves, which could consume a lot of
resources. On the other hand,out sourcing tasks to a third- party distributor allows
the firm to reach a wider market with less effort.

Distribution Channel Decisions
Distribution channels can be split into 4 levels
Distribution: Zero - level channel
A direct distribution channel is called the zero-level channel. Goods are
Delivered directly to the customers, without intermediaries. Some examples
include selling in brand stores and taking orders through the hot line or the
company's website. This strategy works well for perishable goods or expensive
goods where the consumer point is close to the manufacturers. One-level, two-
level, and three-level channels are indirect channels. In these channels, goods travel
from manufacturer to consumer through one or many levels of intermediary

Distribution: One-level channel Retailers buy goods from the manufacturer and sell
them to the customers. The one- level channel is often used for products such as
clothing, toys, furniture, etc.
Distribution: Two-level channel Wholesalers buy the products in bulk from the
manufacturer, and sell smaller batches to the retailer who later markets them to the end-
user. It applies to inexpensive goods.
Distribution: Three-level channel Agents are split into stockist agents, and carrying and
forwarding agents.Stockist agents keep stock on behalf of the company and sell them to
wholesalers in the area. Caring and forwarding agents only provide the warehouse and
shipping expertise for the order process and they work on a commission basis.

Distribution channel Selection
The choice of distribution channel depends on the type of product, the target market, the
cost and availability of the channel, and the level of control and support that the
producer wants to have over the product.
Factors to consider when choosing a Distribution Channels for a new
product:
Channels of distribution for man important part of the marketing mix. Decision relating to
it involve decisions regarding type of channels, type of intermediaries, channel strategies,
motivation to channel members, physical distribution etc. These decision affect and are
affected by various factors.

There are various factors which Influence channel of distribution decision. They
categorized as,
(A) Product Characteristics.
(B) Market Characteristics.
(C) Middle man Characteristics.
(D) Manufacturer’s Characteristics.
(E) Environment Considerations.

Product Characteristics
Product factors have significant influence on the channel selection. They are concerned :
i. Nature of the Product – Nature of the product Is the primary factor in channel selection.
If the product is perishable in nature, small channel (less number of intermediaries) should
be used, to save them from physical deterioration. Durable goods can be transferred
through longer channels.
ii.Technical Nature of the Product – Product Technical Products require greater
explanation Characteristics and training. For such products exclusive dealers may be used.
For other products which are not highly technical, intensive distribution may be selected to
make the product available.

iii.Length of the Product Line – Product line consists of group of closely related
products. Length of the product line influences the channel selection. Short product line
is more apt to sell through middle man than a long product line. Manufacturers have to
decide whether to sell all the products through single channel or use multiple channels.
iv.Unit Value – The unit value of the product also influences the selection of distribution
channels. Higher unit value products are preferred to be sold directly or through shorter
channels. On the other hand, low unit value unit product are preferred though longer
channels, as they require intensive distribution.
v.Market Position – Established product and products of the reputed manufacturers can
be easily sent through various channels. However, new products may face difficulties.

 Market Characteristics
Market factors includes following factors which influence channel decisions
i.Size of the Market – If the market is large in size, more number of middlemen will be
required to sell the product. For small markets, direct selling may be preferred.
ii.Area or the Market – National and international markets require wide and long channels
while local and regional market markets may be served through shorter channels.
iii.Concentration of Buyers – When buyers are concentrated in few are as only, short
channels will be sufficient. However, if the buyers are scattered over a wide geographical
area, then shorter channels become uneconomical and longer channel should be opted
for.

 Middlemen Characteristics
These factors relate to:
i. Availability of Middlemen – The existing channel system may not be interested in
selling the products of the manufacture. In such case, marketer has to find out other
channel members and work in a compromising manner.
ii.Competitors’ Channels– The distribution channels used by the competitors also
influence firms channel selection. When the competitors is using a particular channel
and have been successful, the concerned manufacturer may also use it in similar manner,
provided it suits his requirements. It is not always necessary to go for separate channel
system.

iii. Type of Middleman – Choosing the right middleman is important for smooth distribution
of the goods. The efficiency of the middlemen to perform various functions
(standardization and grading, branding and packaging, after- saleservices, etc.), his financial
standing in the market, his market influence and penetration, are Important factors which
affects the choice of channels.
Manufacturer’s Characteristics
A manufacturer’s own strength and weakness also significantly influence channel selection.
i. Size of the Company–A very significant factor influencing channel selection is the size of
company. Large companies prefer shorter channels and small companies use longer
channels.

ii. Financial Strength of the Company – Companies having substantial financial resources
need not depend upon intermediaries for assistance and can use shorter channels.
However, financially weak companies use indirect channel.
iii. Experience and Ability – Long established companies have good experience and ability;
therefore they do not go to intermediaries but only maintain good relations. However,
new companied heavily on middlemen, as they lack working experience.
Environmental Considerations
Changes in the marketing environmental so influence channel selection. The prevailing
economic conditions in the country may force companies to change its channel policies.
Slump periods may force the manufacturers to go for less expensive distribution channels.
Similarly technological development and innovations also influence distribution strategies.

Distribution channel policy
Distribution policy is an essential part of corporate management. It encompasses all
activities aimed at getting a company's products or services to its customers. This
includes the design of distribution channels, the determination of sales prices and
advertising. The distribution policy has a great influence on the success of a company. It
determines whether and how customers receive the products or services. Therefore, it
is important to plan and implement it carefully. Distribution policy is closely linked to
marketing policy, as it is largely responsible for how a company's products or services
are positioned on the market. The right design of distribution policy is therefore crucial
to acompany's success.

Types of Distribution Channel policy
• Direct policy – you sell your products directly to the customer and by means of a
simple strategy.
• Indirect policy – You distribute your products through several intermediaries and
channels.
• Intensive policy – This is the most wide- ranging strategy, as it includes a larger
number of intermediaries and channels. Its degree of complexity depends on how
ambitious you are: do you want to internationally, for which you will need diverse
distributors? Will you be betting on an all- channel strategy that integrates
physical and digital channels, in which case you’ll need to direct more effort
toward your warehouses and contracting a large number of sellers?

• Selective Policy– you only distribute your products through a limited number of
channels (such as, only physical stores or only online market places), or in a small
geographical network(a country or a city)
• Exclusive policy– This involves You granting the distribution rights of your products
exclusively to one channel or outlet. It can be your branded online Store or are tailer
with whom your each an agreement. This type of distribution is common in brands
with a very specific target or selling luxuary products, in order to feed their image of
prestige; for example, certain Bulgari jewelary that can only befound at Harrods in
London.

Functions ofDistributionChannels
The main functions performed by the distribution channels can be divided into following
categories
1. Transactional Functions
These functions relate to the various transactions performed for moving the goods from
one channel end to other. It includes functions like buying, selling and risk bearing. These
functions are performed by channel members. The goods are sold by the producer or
manufacturer to various intermediaries who in turn sell it to the ultimate
consumer.Movementof goods also include change in the title of goods from one to
another

2. Logistical Functions
These include functions like assembling ,storage ,grading and
transportation for physical movement of the goods from one place to another. It is
very necessary
That the goods are properly assorted and stored at the right place . Channel members
have to ensure that stored
Goods are transported at right time , so that it is made available to the consumers.
3. Facilitating Functions
These functions facilitate the performance of different functions
by the channel members. With these functions , activities by the channel members
can be performed smoothly. It includes financing, credit facilities, after-sale
services,maintenance,etc.

Objectives
Distribution channels have several key objectives in the business context .Some of the
most common targets are
•Achieving maximum coverage: One of the main objectives of distribution channels is to
ensure that products reaches many consumers as possible in the target market . This
involves establishing an efficient network of sales outlets and distribution channels
covering wide geographic areas.
•Optimize logistics efficiency: Distribution channels seek to minimize costs and maximize
efficiency in the supply chain. This involves the efficient planning and execution of
logistics activities , such as transportation,warehousing,storage and warehousing and
inventory management.

• Improve customer experience: Distribution channels strive to provide a
satisfactory customer experience, ensuring product availability and accessibility, as
well as adequate customer service. The objective is to satisfy the needs and
expectations of consumers.
• Increase sales and generate revenue: The main objective of distribution channels
is to generate sales and increase the company’s revenue . This is achievedby ensuring
That products reach consumers at the right time and place.

Importance of Distribution Channels
• Reaching a Broader Customer Base
The significance of distribution channels in e-commerce cannot be overstated when it
comes to Expanding your customer reach. Through these channels, your products or
services can transcend geographical boundaries and reach customers across the globe .
Whether you're a niche boutique or a global brand , distribution channels can help you
tap in to new markets and demographics.
• Faster Product Distribution
Speed is of the essence ,every where.
Customers expect swift delivery of their orders, and distribution channels play a crucial
role in meeting these expectations. They ensure that products are readily available, and
orders are fulfilled promptly.

This not only satisfies customers but also enhances their overall shopping
experience, leading to increased loyalty and repeat business.
•Maximizing Product Reach through Distribution Channels
For a further deep dive, let’s understand e- commerce distribution strategies for
maximizing your product reach.

Conclusion
The various intermediaries constituted in a distribution channel are themselves a
chain of intermediaries running a business of providing goods and services to the
ultimate consumers. A manufacturer should determine the distribution channel
or method of distribution suited to the product and accordingly choose the
channel.

Marketing presentation of distribution channel