From direct and indirect to hybrid and reverse channels, there are many types of distribution channels. There are also many participants within those channels, such as vendors, distributors, channel partners, and of course, end users. Getting your product to the end user is the ultimate goal, but there are different ways of achieving that.
First, let’s define what a distributor does. They oversee sales and marketing of products while establishing strong relationships with manufacturers. Distributors are responsible for fulfilling and delivering orders, but they can also sell on behalf of the producer, and even study market trends and consumer activity to plan for future orders, sales and shipments. Distributors typically sell to wholesalers, agents and retailers.
Growing your business and expanding into new markets depends on a robust knowledge of the different types of distributors and how to use them. Let’s take a look at the main types of distributors.
This is when the producer of a product sells directly to a consumer. The simplest distribution method, direct distribution, doesn’t require an intermediary between manufacturer and consumer. However, it can get expensive depending on where you’re located, what your product is and how you plan to distribute your goods.
That said, with direct distribution, you are better able to instill trust with your customers, control the consumer experience and offer customer service.
Direct distribution sells to consumers through anything from mail order and e-commerce websites to manufacturing plants and store fronts. It’s essentially the shortest sales path to the end consumer and is ideal for industries such as technology, auto and agriculture.
Indirect distribution relies on other channels to get a product to the consumer, ideal for businesses with limited product lines or financing options, or retailers and wholesalers that specialize in certain goods. Manufacturers can use one or many indirect channels to result in a larger distribution network so they are able to reach more customers. Such paths can include:
- Producer to retailer to consumer (clothing, electronics, food)
- Producer to wholesaler to consumer (goods sold to government agencies)
- Producer to wholesaler to retailer to consumer (daily use goods that are stifled by high competition)
- Producer to agent to wholesaler to retailer to consumer (agricultural goods)
This involves utilizing limited sales outlets that are only available in certain locations or stores. The goal here is to create rarity and exclusivity for your brand or a particular item – usually a luxury brand. This channel gives you more control over rates, contract negotiations, and product distribution due to the fewer entities involved.
This method allows you to sell your product in as many sales outlets as possible within a set amount of time, often with a seasonal element to it (lawn and garden, holiday décor, etc.). Intensive distribution channels will involve anything from supermarkets and malls to warehouses and big-box stores.
In addition to seasonal items, Intensive distribution is also ideal for commonly-used and affordable products such as gum, soda, and candy bars – basically offering consumers an alternative to a similar brand that may be higher priced.
This method settles somewhere in between exclusive and intensive distribution, allowing you to select specific locations while being more visible in the market. You still retain control and enjoy consumer exclusivity while achieving greater consumer reach.
Selective distribution is ideal for luxury brands such as makers of high-end shoes that may want to showcase their items in a luxury department store to extend their reach. Such a luxury brand would not necessarily sell their wares in a big-box or warehouse store, as this could take away from its high-end appeal.
This is a combination of direct and selective methods, and it allows you to reach a larger audience. Companies that want to maintain direct customer sales while growing market influence can benefit from this method. Examples include clothing, coffee or even cell phone brands that sell these items in their own stores while relying on independent retailers to also sell their products.
Reverse distribution is just that – it flows back to a company from the consumer, common for recycling, refurbishing or disposing of items. The least frequently used distribution type, reverse distribution can involve reusing products (construction materials, shipping containers) refurbishing items (electronics, furniture), recycling products (glass, paper), and disposing of items (organic material and waste).
When considering which distribution method you will choose, consider the cost, your target audience, and the impact on your branding.
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