Distribution Channels

Distribution channels may be defined as the elements that help a business expand its reach and grow its revenue. They are the various ways that a company uses to reach its desired consumers. A distribution channel is made up of a chain of many businesses through which a product passes before it reaches the consumer (Cui 971). It may include wholesalers, retailers, distributors and also the internet. There are two main categories of distribution channels. These categories are based on how the consumer gets access to goods or services from the manufacturer. A direct channel is where the consumer can directly buy the product from the manufacturer while an indirect channel consists of an intermediary. The customer buys the product a middleman, usually a wholesaler or a retailer. An indirect channel has a fair share of the advantages and disadvantages of any business. This essay will, therefore, focus on the right and wrong side of having intermediaries in the distribution process.

As stated before, an indirect or non-direct distribution channel allows the consumer to access the goods and services from someone else other than the manufacturer. There are two ways in which this channel could work. First, the manufacturer could decide to sell their goods to the wholesaler, who will then sell to a retailer who, in turn, avails the products to the consumer (Cui 977). The second way is where the manufacturer directly sells the products to a retailer who will then sell them to the consumer. The first channel goes through three stages, making it very long but also efficient in some way. One of the pros of this strategy is that the goods can easily be accessed by the consumer, hence helping the company raise more revenue. For instance, a packet of salt is one of the most basic needs in most homes. To make it more helpful for most consumers, this product can be made available at the nearest shop, which is a retail shop. Another advantage of this channel is that it allows the manufacturer to expand his or her consumer base even if the brand is not yet famous. Partnering with a good know retailer makes it easier for a new product to enter the market as there is already a standing trust between the reseller and the customers. Therefore, if a company chooses this strategy, it increases its competitive advantage and will gain more profits because the startup costs will be meager. An example of such is Safaricom’s mobile money transfer in Africa where the company has employed some vendors to ensure that the service can be accessed even in the most remote areas. According to Quest, this plan has certainly worked since most consumers currently feel that they cannot do without the service (Cui 980).

Despite the benefits mentioned above, the indirect distribution channels also have their demerits. One of the cons is the fees that may be incurred at the very bottom of this chain. Although the startup revenue is lower than that of a direct channel, several demands may come with using a reseller. Broker fees, commissions, and allowance are some of the costs that could affect how the services are offered to the consumer. It also becomes a lot difficult for a company to control the prices of a product once it gets into the hands of a reseller. A company will, therefore, need to weigh in these costs when making its decision on whether to use a direct or indirect distribution channel.



Work Cited

Cui, Tony Haitao, and Paola Mallucci. “Fairness ideals in distribution channels.” Journal of Marketing Research 53.6 (2016): 969-987.