Channels of distribution | Distribution channel

Summary

This 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.