Distribution Channels in Marketing: Definition, Types & Examples

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  • 0:00 What Is a Distribution…
  • 1:01 Direct Vs. Indirect…
  • 2:43 Types of Channels
  • 2:57 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Francis

Jennifer has a Masters Degree in Business Administration and pursuing a Doctoral degree. She has 14 years of experience as a classroom teacher, and several years in both retail and manufacturing.

A distribution channel is a necessity in business. This lesson will discuss these channels, the types of distribution systems, and the goods and services that move along these channels.

What Is a Distribution Channel?

The distribution function of marketing is comparable to the place component of the marketing mix in that both center on getting the goods from the producer to the consumer. A distribution channel in marketing refers to the path or route through which goods and services travel to get from the place of production or manufacture to the final users. It has at its center transportation and logistical considerations.

Business-to-business (B2B) distribution occurs between a producer and industrial users of raw materials needed for the manufacture of finished products. For example, a logging company needs a distribution system to connect it with the lumber manufacturer who makes wood for buildings and furniture.

Business-to-customer (B2C) distribution occurs between the producer and the final user. For instance, the lumber manufacturer sells lumber to the furniture maker, who then makes the furniture and sells it to retail stores, who then sell it to the final customer.

Direct vs. Indirect

In marketing, goods can be distributed using two main types of channels: direct distribution channels and indirect distribution channels.

Direct Distribution

A distribution system is said to be direct when the product or service leaves the producer and goes directly to the customer with no middlemen involved. This occurs, more often than not, with the sale of services. For example, both the car wash and the barber utilize direct distribution because the customer receives the service directly from the producer. This can also occur with organizations that sell tangible goods, such as the jewelry manufacturer who sells its products directly to the consumer.

Indirect Distribution

Indirect distribution occurs when there are middlemen or intermediaries within the distribution channel. In the wood example, the intermediaries would be the lumber manufacturer, the furniture maker, and the retailer. The larger the number of intermediaries within the channel, the higher the price is likely to be for the final customer. This is because of the value adding that occurs at each step within the structure.

Direct or indirect distribution structures may include any combination or all of the following entities:

  • A wholesaler or distributor
  • The Internet (direct)
  • Catalogs (direct)
  • Sales teams (direct)
  • The value-added reseller (VAR)
  • Consultants
  • Dealers
  • Retailers
  • Agents

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