Distribution Chanel Management
1. What is distribution?
Distribution refers to the process of making a product or service available to customers. It includes all
activities involved in moving goods from the manufacturer to the final consumer, such as transportation,
warehousing, inventory management, and order fulfillment.
2. What is distribution channel?
A distribution channel (MKT channel or distribution channel) includes a chain of businesses,
manufactures or intermediaries that provide products/ services to customers (final consumers). The
product distribution strategy is divided into two forms including: direct and indirect distribution.
Real life example: Coca-Cola
Coca-Cola uses a multi-channel distribution strategy, including:
Direct Distribution: Coca-Cola supplies its products directly to large retailers like Walmart and
McDonald's.
Indirect Distribution: Coca-Cola sells to wholesalers and distributors, who then deliver
products to smaller retailers, convenience stores, and vending machines.
Online Distribution: Coca-Cola products are available through e-commerce platforms like
Amazon, allowing direct home delivery.
Real life example: Apple iPhones
Direct Channel: Apple sells iPhones directly through its website and Apple Stores.
Indirect Channel: Apple also sells iPhones through retailers like Best Buy, mobile carriers
(AT&T, Verizon), and online stores like Amazon.
3. Why does producer use direct or indirect channel?
+ Direct channel:
Size of company is small
Special goods
Luxury goods
Increase brand name
Optimize profit
Easy to harm
Control customer experience
Better customer feedback and loyalty
Real life example:
Size of company is small – A local artisanal bakery selling its bread and pastries directly to
customers at its own store.
Special goods – A handmade jewelry brand that sells exclusively through its own website and
flagship store to maintain exclusivity.
1
Luxury goods – A bespoke suit tailor that only accepts direct appointments with clients to ensure a
premium experience.
Increase brand name – A niche perfume house opening exclusive boutiques in major fashion
capitals like Paris and Milan to enhance its luxury image.
Optimize profit – A high-end coffee roastery selling directly through its own café and online store,
eliminating middlemen and keeping more revenue.
Easy to harm – A small luxury handbag brand facing major backlash on social media due to a single
customer complaint about poor craftsmanship.
Control customer experience – A boutique skincare brand offering personalized consultations and
direct sales on its website to ensure customers receive the best product for their needs.
Better customer feedback and loyalty – A high-end chocolatier engaging directly with customers
in its flagship store, allowing immediate feedback and fostering a loyal clientele.
+ Indirect channel:
Coverage market
Not waste time
Use advantage of intermediate
Decrease risk
Decrease cost, focus on produce
Wider reach (products available in more locations)
Customers can find products easily in retail stores
Real-Life Examples:
Coverage market – A premium coffee brand partnering with upscale grocery chains to expand
its presence nationwide.
Not waste time – A small winery using distributors to handle logistics instead of managing
multiple retail relationships directly.
Use advantage of intermediate – A luxury skincare brand selling through Sephora, benefiting
from their marketing, customer base, and in-store beauty consultants.
Decrease risk – A designer handbag company using authorized department stores instead of
opening multiple physical stores, reducing financial risk.
Decrease cost, focus on production – A craft chocolate brand outsourcing distribution to
wholesalers, allowing them to focus on perfecting their recipes.
Wider reach (products available in more locations) – A small watch brand selling through
luxury retailers worldwide, making their products accessible in multiple countries.
Customers can find products easily in retail stores – A high-end perfume brand available in
duty-free shops at airports, making it convenient for travelers to purchase.
4. What is direct channel and indirect channel?
2
Direct channel: The producer sells directly to customers without using intermediaries like wholesalers or
retailers.
Indirect channel: The producer sells products through intermediaries such as wholesalers, retailers, or
distributors before reaching the customer.
5. Nature of distribution channel
The importance of distribution channel in business:
- Consumption of good
- Create competitive advantage
Define distribution channel:
- External: supplier
- Relation organixation: refers to a group or entity that manages and fosters relationships between
businesses, stakeholders, or customers to enhance collaboration, trust, and efficiency. (Chamber
of Commerce, which connects businesses, provides networking opportunities, and advocates for
industry growth and development.)
- Consumption activities: refer to the processes in which consumers purchase, use, and dispose of
goods or services to satisfy their needs and wants. (Ex: Buying a smartphone, using it for
communication and entertainment, and eventually recycling or reselling it when upgrading to a
new model.)
- Distribution target: refers to the specific market segment, location, or customer group a company
aims to reach through its distribution channels to maximize sales and efficiency. (Ex: A luxury
watch brand targets high-end boutiques and exclusive jewelry stores instead of mass-market
retailers to maintain its premium image and attract affluent customers.)
- Distribution system: is the network and process used to deliver products or services from
manufacturers to consumers. It includes logistics, intermediaries (wholesalers, retailers,
distributors), and direct channels to ensure efficient product availability and customer access.
(Ex: Apple uses a hybrid distribution system, selling products through its own stores (direct
channel) and authorized resellers like Best Buy and carrier stores (indirect channel). This ensures
wide market coverage while maintaining control over customer experience in Apple Stores.)
- Distribution Channel Managemet: refers to the process of overseeing and optimizing the
movement of goods from a manufacturer to the end consumer. It involves selecting, managing,
and improving direct or indirect distribution channels to ensure efficiency, cost-effectiveness,
market reach, and customer satisfaction. (Ex: Nike sells products through its own stores,
website (direct channels), and third-party retailers like Foot Locker and Amazon (indirect
channels). By managing these channels effectively, Nike ensures global reach, brand
consistency, and optimized profits.)
- The subject manages the distribution channel: producer
Distribution channel management and marketing managnement:
- Distribution is one of the four tools of the marketing mix
3
- The roles of distribution channel management in marketing management
- The distribution channel strategy belong to marketing strategy
6. Theory of the distibution process and the roles of commercial intermediaries
Basic activites of the distribution process:
- Arrange and classify goods
- Reduce spatial distance
- Reduce time gaps
- Direct distribution
- Distribution through cental market
- Distributed through many stages
Flow in the channel:
- Flow of ownership transfer
- Negotiation flow
- The physical flow of the product
- Payment flow
- Infomation flow
- Promotion flow
- Order flow
- Risk sharing flow
- Financial flow
- Packaging recovery and reuse flow
7. Distribution channel structure:
- Distribution channel length: determined by the number of different intermediary levels present in
the channel
- Distribution channel width: expressed by the number of commercial intermediaries at each
channel level
Types of commercial intermediaries at each channel level:
- Supporting structure
- Channel structure division
8. Forms of organization of distribution channel
- Single distribution channel
- Traditional distribution channel
- VMS distibution channel
Different between Traditional and VMS
4
5
