Channels of distribution | Distribution channel

Educationleaves

25 Oct 202204:04

Summary

TLDRThis video educates viewers on the concept of distribution channels, which are the pathways through which products move from producers to consumers. It distinguishes between direct and indirect channels, with examples like bakeries using direct sales and the alcoholic beverage industry relying on a longer chain involving wholesalers and retailers. The video also emphasizes the importance of selecting a distribution channel that aligns with a company's mission and strategic vision, considering factors like product type and desired speed of reaching the buyer. It concludes with a discussion on three main types of distribution channels, illustrating each with relevant examples.

Takeaways

🔗 A distribution channel is a network of intermediaries that facilitate the movement of products from producers to end consumers and handle payments.
🛣️ Distribution channels can be short or long, determined by the number of intermediaries involved in delivering a product or service to the consumer.
🏪 Common intermediaries in distribution channels include wholesalers, distributors, retailers, and online stores.
🔄 There are two main types of distribution: direct, where manufacturers deal directly with consumers, and indirect, which involves intermediaries.
💰 Direct channels are often used for expensive or perishable goods, such as those produced by bakers, meat and milk producers, and jewelers.
🏬 Indirect channels are typical for goods sold in traditional stores, involving multiple intermediaries before reaching the consumer.
🎯 Companies should choose a distribution channel that aligns with their mission, strategic vision, and sales goals, considering the speed at which they want their products to reach buyers.
⚖️ If a company uses multiple distribution channels, they must ensure these channels complement rather than conflict with each other.
📈 There are three main types of distribution channels: the longest involving manufacturer, wholesaler, retailer, and end customer; one eliminating wholesalers and going straight to retailers; and one direct from manufacturer to end customer.
🍷 Examples of each channel type include the alcoholic beverage industry for the longest, car dealerships for the second, and Apple for the direct-to-consumer model.
🔗 For more detailed information or to download a PDF, viewers are directed to a link in the video description.

Q & A

What is a distribution channel?
-A distribution channel is a chain of intermediaries that facilitates product delivery from the producer to the end consumer and transfers payments from the buyer to the producer.
How does a product travel from the production end to the point of consumption?
-A product travels from the production end to the point of consumption through a distribution channel, which is the route that ensures products and services reach consumers.
What are the two forms of distribution channels?
-The two forms of distribution channels are direct and indirect. Direct channels allow manufacturers to deal directly with customers without intermediaries, while indirect channels involve intermediaries like wholesalers, retailers, and distributors.
Why do some manufacturers use direct distribution channels?
-Manufacturers of expensive goods and perishable items such as bakers, meat and milk producers, and jewelers typically use direct distribution channels to ensure their products reach customers without intermediaries.
What is an indirect distribution channel and why is it used?
-An indirect distribution channel is one where products travel from producers through intermediaries like wholesalers, retailers, and distributors until reaching the consumers. It is used for goods sold in traditional brick and mortar stores.
How should a company choose the right distribution channel?
-A company should choose a distribution channel that aligns with its overall mission, strategic vision, and sales goals. It should consider how quickly it wants its product to reach the buyer and whether a direct or indirect channel is more suitable.
Why is it important for a company to avoid conflict between multiple distribution channels?
-If a company uses multiple distribution channels, it should strategize to ensure that one channel doesn't overpower the other, as this could lead to inefficiencies and confusion in the market.
What are the three main types of distribution channels?
-The three main types of distribution channels are: 1) a long channel including manufacturer, wholesaler, retailer, and end customer, 2) a channel that goes straight from manufacturer to retailer, and 3) a direct channel from manufacturer to paying customer.
Can you provide an example of a long distribution channel?
-An example of a long distribution channel is the alcoholic beverage industry, where manufacturers sell to wholesalers, who then sell to retail stores, and finally to the end customer.
What is an example of a distribution channel that eliminates wholesalers?
-Car dealerships are an example of a distribution channel that eliminates wholesalers, as they buy new cars directly from manufacturers and sell them to customers.
How does Apple exemplify a direct distribution channel?
-Apple exemplifies a direct distribution channel by selling its products directly to customers through its retail stores, bypassing intermediaries.

Outlines

00:00

📦 Understanding Distribution Channels

This paragraph introduces the concept of distribution channels as a sequence of intermediaries that facilitate the movement of products from producers to end consumers, while also handling the transfer of payments from buyers to producers. It explains that these channels can be short or long, depending on the number of intermediaries involved. The paragraph further distinguishes between direct and indirect distribution channels, with direct channels allowing manufacturers to deal directly with customers without intermediaries, and indirect channels involving intermediaries such as wholesalers, retailers, and distributors. The importance of choosing the appropriate distribution channel that aligns with a company's mission, strategic vision, and sales goals is emphasized.

Mindmap

Keywords

💡Distribution Channel

A distribution channel refers to the network of intermediaries that facilitate the movement of products from the producer to the end consumer. In the video, it is described as a chain that not only delivers products but also manages the transfer of payments from the buyer to the producer. This concept is central to the video's theme as it sets the stage for discussing how products reach consumers.

💡Intermediaries

Intermediaries are the entities such as wholesalers, distributors, and retailers that form part of the distribution channel. They act as middlemen, buying products in bulk from manufacturers and then selling them to end consumers. The video explains that the length of a distribution channel can vary based on the number of intermediaries involved, which is crucial for understanding the complexity of product delivery systems.

💡Direct Distribution

Direct distribution is a channel where manufacturers or producers sell their products directly to consumers without the involvement of any intermediaries. The video uses examples like bakers, meat and milk producers, and jewelers to illustrate this concept, emphasizing that direct channels are typically used for expensive or perishable goods where direct customer interaction is beneficial.

💡Indirect Distribution

Indirect distribution involves multiple intermediaries between the producer and the consumer. The video explains that products pass through wholesalers, retailers, and other intermediaries before reaching the end customer. This type of channel is common for goods sold in traditional brick and mortar stores, highlighting the importance of intermediaries in the retail landscape.

💡Strategic Vision

Strategic vision in the context of the video refers to a company's long-term goals and direction, which should guide its choice of distribution channels. The video suggests that aligning the distribution channel with the company's mission and strategic vision is essential for ensuring that products reach the target market effectively.

💡Sales Goals

Sales goals are the targets that companies set for selling their products. The video emphasizes that the choice of distribution channel should consider these goals, as different channels may be more effective for achieving different sales objectives. For instance, a direct channel might be chosen for rapid sales, while an indirect channel might be more suitable for building long-term customer relationships.

💡Conflicting Channels

Conflicting channels occur when a company uses multiple distribution channels that compete or interfere with each other. The video advises against this, suggesting that companies should strategize to ensure that one channel does not overpower another. This is important for maintaining a harmonious sales ecosystem and avoiding confusion in the market.

💡Manufacturer

A manufacturer is the entity that produces goods. In the video, manufacturers are depicted as the starting point of the distribution channel. They decide which type of distribution channel to use, whether direct or indirect, based on factors like product type and sales strategy. The role of the manufacturer is pivotal in determining the path a product takes to reach the consumer.

💡Retailer

Retailers are businesses that sell goods to end consumers. The video mentions retailers as one of the intermediaries in the distribution channel, particularly in indirect distribution. Retailers purchase products from manufacturers or wholesalers and then sell them to consumers, playing a crucial role in making products available to the public.

💡Wholesaler

A wholesaler is a business that sells goods to retailers rather than to the end consumer. In the video, wholesalers are described as an intermediary in the distribution channel, buying products from manufacturers in bulk and then selling them to retailers. The presence of wholesalers can affect the length and complexity of the distribution channel.

💡End Customer

The end customer is the ultimate consumer who purchases a product for personal use. The video discusses the importance of reaching the end customer as the final destination of the distribution channel. The efficiency of the channel is measured by how effectively it delivers products to the end customer, making this concept central to the video's narrative on distribution.

Highlights

A distribution channel is a chain of intermediaries that facilitates product delivery from the producer to the end consumer.

It is the route through which a product travels from the production end to the point of consumption.

Distribution channels can be short or long, depending on the number of intermediaries required.

Using a reliable distribution path assures manufacturers that their products and services will reach consumers easily.

Distribution channels often include wholesalers, distributors, retailers, and online stores.

Distribution channels are broken into two different forms: direct and indirect.

A direct channel allows manufacturers or producers to directly deal with customers without intermediaries.

Indirect channels involve products traveling through intermediaries like wholesalers, retailers, and distributors.

Indirect channels are typical for goods sold in traditional brick and mortar stores.

The choice of a distribution channel should align with the company's overall mission and strategic vision.

Companies should consider how quickly they want their product to reach the buyer when choosing a distribution channel.

If a company chooses multiple distribution channels, they should not conflict with one another.

There are three main types of distribution channels: long, intermediate, and direct.

The longest distribution channel type includes manufacturers, wholesalers, retailers, and end customers.

The intermediate type eliminates wholesalers and goes straight to the retailer, like car dealerships.

The direct type goes from the manufacturer to the paying customer, exemplified by Apple's retail strategy.