Each of these channels is made up of institutions whose objective is to manage the transaction and the physical exchange of products. Who are these intermediaries? They could be wholesalers, retailers, distributors or brokers, for example. The manufacturers themselves, sales teams and sales representatives are involved in this method. They are responsible for distributing the products to the points of sale.
In Level 1, the manufacturer sells the products to the distributor, who can sell them to consumers through retailers or wholesalers. The difference is that, in this case, the distributor delivers products only to retailers, who sell them to consumers. Level 3 channels are a traditional distribution model. Retailers are middlemen frequently used by companies.
In general, product prices are higher at retailers. Wholesalers are middlemen who buy and resell products to retailers. Wholesalers sell to those who are going to put the products in their own stores. Distributors sell, store and provide technical support to retailers and wholesalers.
Its operations are focused on specific regions. Agents are legal entities contracted to sell a company's products to end consumers and are paid a commission for their sales. Brokers are also hired to sell and receive a commission. The difference between agents and brokers is that brokers have short-term relationships with the company.
This is the case with real estate agents and insurance brokers, for example. For those who sell technology and software, the Internet itself functions as an intermediary for the distribution channel. E-commerce companies also use the Internet as a distribution intermediary. Resellers are companies or individuals that buy from manufacturers or retailers and then sell to consumers in retail.
Finally, consider the location of the middlemen, whether resellers, retailers, wholesalers, or distributors. The largest soft drink manufacturer in the world uses different sales channels with franchisors, distributors and retailers. For example, soft drinks reach different retailers thanks to distributors. He is the co-founder of NP Digital.
The Wall Street Journal calls him one of the top influencers on the web, Forbes says he's one of the top 10 marketers, and Entrepreneur Magazine says he created one of the 100 brightest companies. Neil is one of the New York Times best-selling authors and was recognized as one of the 100 best entrepreneurs under 30 by President Obama and one of the 100 best businessmen under 35 by the United Nations. Direct selling is a good distribution model for selling any type of product that is in the middle price range, that is not purchased every day and that has a long lifespan. Stationery, air purifiers, or jewelry, to name a few.
E-commerce digitizes inventory management, warehousing and shipping, direct sales. While a company with classic distribution channels may have problems with the need to accumulate knowledge, connections and contacts, an e-commerce company can operate securely only with staff with training in IT. There are 3 main types of distribution channels. The second excludes wholesalers and goes directly to the retailer.
Car dealerships are a good example of this type of channel. Dealers typically buy new cars directly from the manufacturer and then sell them directly to the paying customer. The third and last type goes directly from the manufacturer to the paying customer. One of the best examples of this is Apple.
You can buy Apple products directly at their retail stores. In order to sell directly from the manufacturer to the customer, your brand must have a lot of influence and you will have a much higher initial cost. Direct distribution channels involve only the manufacturer and the customer. In this case, the producer sells the product directly to customers through a website or a physical store.
A good example is that of a farmer who prefers to sell his products directly to his customers through a farm stand instead of selling his products in bulk at a market. A hybrid distribution channel is a combination of direct and indirect distribution channels. Manufacturers partner with intermediaries, such as authorized retailers, to sell products to consumers on hybrid channels. If a manufacturer sells products to consumers through one or more intermediaries, the channel is called an indirect distribution channel.
In indirect distribution channels, the functions of buying, selling, transportation and storage are taken over by intermediaries. When the manufacturer or producer supplies goods directly to consumers, it is called a direct channel. The manufacturer at this stage of the distribution channels performs all the marketing functions on its own. In direct distribution channels, the manufacturer tries to reach consumers through its indirect channels, also called exclusive distribution channels.
It can be defined as the marketing of goods first to the retailer, who in turn sells them to consumers, is known as an indirect distribution channel. It is the most effective method of product distribution and is effectively used to promote clothing, machines, cars, furniture, etc. Direct distribution is a strategy in which manufacturers sell and ship products directly to consumers. There are several ways to implement this method.
Some organizations may choose to take a more modern approach and use an e-commerce website where users can make an online purchase. This is an effective option for companies with a customer base with moderate knowledge of technology, that request a specific solution to meet their needs, or that are dedicated to a particular brand. Another method of direct distribution is through catalogs or orders over the phone. This option can be aimed at an older customer base or users from specific industries who are familiar with placing orders in this way.
An important factor to consider when implementing a direct distribution strategy is the amount of investment required. For example, manufacturers will need to add warehouses, vehicles and delivery staff to their portfolio to effectively distribute products on their own. The term “middleman” often gets a bad rap, but in the case of distribution, these organizations can be useful in getting products to consumers. Indirect distribution strategies involve intermediaries who help in the logistics and placement of products so that they reach customers quickly and in an optimal location based on consumer habits and preferences.
The products are distributed in as many points of sale as possible with the intensive distribution strategy. For example, chewing gum is a product that normally uses this strategy. You can find gum at gas stations, supermarkets, vending machines, and retail stores like Target. This method is based on making a large number of products available in multiple locations.
These items don't usually require a complicated purchase decision in which the customer does research before making a purchase. Rather, these items are routine purchases that involve minimal sales effort. Selective distribution is an intermediate option between intensive and exclusive distribution. With this strategy, products are distributed in more than one place, but not as many as with an intensive distribution strategy.
For example, clothing from different brands can be offered selectively. A brand like Gucci may choose to distribute its items in its own stores, in addition to some selected department stores, instead of placing its products in a variety of locations, such as Walmart or Target. This can help create an implicit high-end brand message and, at the same time, increase opportunities for buyers to purchase one of your products. For companies that opt for an indirect distribution method, there are several ways to put products in the hands of customers.
These are some of the intermediaries that companies use to comply with distribution strategies. With the indirect distribution strategy, retailers are the last step in the distribution channel before customers buy an item. Retailers can buy products directly from a manufacturer or from a wholesaler. Retailers often buy products at a low price that are then raised to make a profit.
Retailers aren't always storefronts, but they can also operate by phone, online, and even by catalog. With the proliferation of the Internet, many retailers decide to manage an e-commerce website instead of a physical store to sell. Limited purchasing decisions are a kind of middle ground between routine and extensive purchases. These items are usually moderately priced, and more time may be spent selecting an item than on a routine purchase.
Examples of limited-purchase products include clothing and small appliances, such as toasters. Customers think a little bit about buying these items because of the price and ease of use, but not as much as they would with an extensive purchase item, such as a house or car. A selective or intensive distribution strategy may be appropriate for these items. We've already mentioned how specific customer demographics can inform the distribution strategy.
However, to get more details on which distribution strategies are most effectively applied to different customers, we need to look at some of the ways in which companies use indirect and direct distribution. Some of the direct distribution methods include e-commerce, direct mail, and stores managed by the manufacturer. You might remember the days when companies sent catalogs of their items directly to customers and you had to call the company to place an order. Nowadays, direct mail distribution is less common due to technological advances, but some companies that have a user base that is used to buying goods in this way may continue to opt for this distribution method.
Whether your company uses a direct or indirect distribution strategy depends on whether you are willing or able to invest in aspects such as a transport fleet, shipping staff and a warehouse to store goods. This is not something that a manufacturer should blindly engage in: acquiring these necessary factors involves a significant initial investment. Creating an effective distribution strategy is a multifaceted process. There are five different distribution strategies to choose from, and the best one for your company depends on factors such as the ideal demographic, the type of item, and the current logistics configuration.
Because distribution has many moving parts, many companies choose to use an indirect distribution strategy or to purchase distribution software to streamline the process. Regardless of the method your company chooses, it's essential to ensure that customer needs and the level of purchase decision are taken into account, as these factors will help determine the optimal distribution strategy. .
Leave a Comment