4 Types of Distribution Channels Explained with Examples

Manufacturers, sales teams, and sales representatives are all involved in the distribution of products to points of sale. This is known as Level 1 distribution, where the manufacturer sells the products to a distributor, who then delivers them to retailers or wholesalers for consumers to purchase. Level 3 channels are a traditional distribution model, where retailers act as middlemen. Generally, product prices are higher at retailers than at other points of sale.

Wholesalers are also middlemen who buy and resell products to retailers. Wholesalers sell to those who will put the products in their own stores, while distributors sell, store, and provide technical support to retailers and wholesalers in specific regions. Agents are legal entities contracted to sell a company's products to end consumers and receive a commission for their sales. Brokers are also hired to sell and receive a commission, but they have short-term relationships with the company.

The Internet can also act as an intermediary for the distribution channel, especially for those selling technology and software. 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. It is important to consider the location of the middlemen, whether resellers, retailers, wholesalers, or distributors.

For example, the largest soft drink manufacturer in the world uses different sales channels with franchisors, distributors, and retailers. The distributor delivers products to retailers who then sell them to consumers. Now that you know what a marketing channel is and its functions, let's look at some examples of marketing channels. There are four types of channel distribution: direct selling, selling intermediaries, e-commerce channels, and physical locations. Direct selling involves manufacturers selling their products directly to consumers without any intermediaries. According to reports from the United States Direct Selling Association (DSA), in 2000, 55% of adult Americans sometimes bought goods or services from a direct seller and 20% reported that currently (6%) they were direct sellers (14%).Selling intermediaries is a channel in which a company can request the help of brokers or agents, wholesalers, and retailers to reach its customers.

A supplier develops a marketing strategy called channel strategy or distribution channel strategy to determine what types of intermediaries to target and how to optimize relationships with partners to increase sales and improve distribution. E-commerce channels involve using the Internet as an intermediary for the distribution channel. This includes e-commerce companies as well as resellers who buy from manufacturers or retailers and then sell to consumers in retail. Finally, physical locations involve having middlemen located in specific areas. For example, real estate agents and insurance brokers have short-term relationships with companies.

Amber Reynolds
Amber Reynolds

Typical internet junkie. Typical music trailblazer. Extreme web practitioner. Amateur music guru. Extreme beer advocate.