Types of distribution channels: Which one is right for your business?

Knowing the different types of distribution channels and making a good selection of them is part of the business strategy of any company. How to get products to customers while maximizing the profit margin? Finding the answer to this question means finding a valuable competitive advantage. In this article we will review the concept and types of distribution channels, as well as the criteria to be taken into account to make good decisions in this regard. Contents hide 1 What is a distribution channel? 2 Functions of distribution channels3 What types of distribution channels are there? 4 Own channel vs external channel5 Distribution strategies What is a distribution channel? Distribution channels are the means that companies use to bring the service to the final consumer. These media are companies or intermediary agents, whether wholesalers, retailers or distributors. Since the internet existed, most companies have been using it as a distribution channel, which has meant an important revolution. The Internet has enabled many companies to reach new markets, thus increasing their turnover. Almost any company now has the capacity to reach any part of the planet with its product. Does this mean that traditional channels have stopped working? Not much less! Technological advances provide new solutions when it comes to responding to market demands and have helped to improve these traditional channels, in addition to opening up new distribution channels. Functions of distribution channelsAlthough they are defined as the means to get products to the end customer, distribution channels are much more than that. In addition to fulfilling this function, channels must also provide value to end customers and play an important strategic role. To begin with, distribution includes or can include a series of logistics activities such as the storage and classification of products, in addition to their transportation. Intermediaries also often operate as facilitators of operations, offering information or pre- and post-sales services: information, financing, insurance or maintenance, to name a few examples. Distribution channels add strategic value as a point of contact with end customers. In certain cases, they can be used to communicate the brand's message or to implement marketing actions. In other cases, the participation of certain intermediaries can improve the efficiency of the entire chain. This is the case, for example, of the lower prices of bulk purchases or large logistics networks, which make transportation more efficient. It is important to point out in this regard the importance of knowing the profitability of each channel. To do this, rely on Mobilvendor's analytical tools, which allow you to know the performance of your sales representatives, a distribution channel for your key products for many companies or the data related to your e-commerce, so that you know exactly the margins of each of them. What types of distribution channels are there? There are different ways to classify distribution channels based on different criteria or theories. Depending on the length of the channel, that is, depending on the number of intermediaries present, we can distinguish between direct, short or long channels. For example, Amazon applies the use of the direct channel when it sells its books in Kindle format to end consumers using its own platform. And yet it is used as an intermediary by other companies to get their products to the final consumer. Depending on whether or not they use the technology, a distinction can be made between traditional and automated channels. Nowadays, most companies use both dogs in their distribution strategies. Depending on the way it is organized, we distinguish between our own and external channels. There are companies that manufacture and market their own products, such as certain optics, while the vast majority of eyewear manufacturers sell their products in multi-brand optics. Own channel vs external channel Which one is the best for your business? For some companies, the answer to this question is obvious, while in other cases, it's not that simple to make a decision. In general, indirect distribution allows companies to benefit from the infrastructure and expertise of an intermediary, avoiding the headaches that logistics sometimes cause. The counterpart is the increase in the time needed to complete the arrival of the product to the final consumer and the loss of direct contact with it. Indirect distribution may be the best option in cases where the distribution of products is especially expensive, such as perishable products. Only the largest companies can make the heavy investment necessary to create a transport and refrigerated storage network and make it profitable. On the other hand, although direct distribution has its drawbacks, it offers important advantages, such as the possibility of having direct contact with customers, knowing first-hand their buying habits and shortening the path between products and their consumers. The company must carefully weigh both options to decide which one is the most appropriate for their case.Distribution StrategiesThe distribution strategy refers to the distribution channels through which the products will be sold. A distinction is made between: Exclusive strategy: When a single intermediary is used and he works exclusively for the brand. This strategy is typical of the most luxurious and exclusive brands. Intensive strategy: Just the opposite of the previous type. The objective is to reach the maximum possible number of businesses, so we work with many intermediaries. It is the strategy typical of mass consumer products. Selective strategy: In this case, we work with a selection of intermediaries, who are chosen according to the most convenient criteria for the brand, in line with its objectives and strategic vision. In short, knowing and choosing the right types of distribution channels is crucial for businesses in any sector, since it directly impacts the price of products, the company's strategy and customer satisfaction.