What are distribution channels

Updated: Feb 10

There are four distribution channels

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Direct Distribution: Producer to customers


This distribution channel enables customers to buy directly from producer. It is gaining popularity through online marketplace such as etsy.com, where goods can be delivered through orders made and paid online. It is most suitable for perishable goods such as food that needs to be delivered fresh. Goods may be sold cheaper to consumers as there are no added value from retailers.


Retail Channel Distribution: Producer to retailers, than customers


Through this distribution channel, retailers buy from producers to be sold to customers. Examples of retailers are supermarkets, retail outlets in shopping malls, such as clothing stores. However, online e-commerce sites such as Amazon and Shopify enables online retailers to sell their goods like shopping malls. Online shopping can be cheaper to consumers, as online retailers save on rental cost in shopping malls. It is also more competitive as customers can purchase products from anywhere around the world.


Wholesale Channel Distribution: Producer through wholesaler/distributors, retailers, than customers


In this distribution channel, goods are purchased by bulk by the distributors from producers. Producers will prefer this channel to save cost as distributors/wholesalers bear transportation cost and sales, while distributors can save on bulk purchasing. Retailers are then able to purchase a variety of goods in small amounts from wholesalers to be sold to consumers.


Agent Channel Distribution: Producer through agent, wholesaler/distributors, retailers, than customers


Goods sold through this channel usually involve import and exports as an agent with knowledge on the legal controls and procedures of the country is required to facilitate transactions. Producers rely on these agents, who have knowledge of local conditions and contacts of local distributors or retailers, to help sell their goods.


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