Types of Distribution Channels

Distributor checking the inventory

Choosing the right distribution channels for your business should be an essential part of any business plan. The right decisions will allow you to work at peak efficiency and bring in maximum profits. But what does a distribution channel do? Are there different kinds? Read on to find out.

What Is a Distribution Channel?

Manufacturers use distribution channels to get their products in the hands of consumers. They are a kind of conduit that links two elements of the food supply chain together. The food distribution channel includes every process, from harvesting products through marketing and selling them.

There are different kinds of distribution channels, but the goal of all of them is the same – to bridge the gap between producers and buyers in the most efficient way possible. Also known as placement, distribution channels are a major factor in any company’s marketing strategy.

What Purposes do Distribution Channels Serve?

  • Transactions – including buying, selling, and assuming risk
  • Logistics – including assembly, storage, and transportation
  • Facilitation – including returns and exchanges, financing, and compiling information

How Do Direct and Indirect Distribution Channels Work?

Distribution channels can be divided into two different types – direct and indirect. As its name suggests, customers buy goods directly from the manufacturer in a direct distribution channel, whereas indirect channels use intermediaries to facilitate the process.

Direct distribution channels are created and managed by the manufacturer and do not involve any middlemen. This allows a company to have complete control over how goods are delivered, as well as being able to independently set prices, streamline processes, and add new services. Manufacturers that use direct distribution have their own infrastructure, which includes logistics teams and transport vehicles. Companies like Amazon, Dell, and Apple all employ this system, which is why you can only buy a Kindle from Amazon or purchase an iPhone in an Apple store.

With indirect channels, food distributors (such as Atlantic Dominion) purchase products from either a manufacturer or another distributor, then sell those products to retail establishments, which sell them to customers. Indirect channels are the most common choice for goods that are sold in traditional brick-and-mortar stores.

Indirect channels eliminate the need for startup costs and tend to be simpler to manage than direct distribution channels. When working with an indirect distribution channel, the producer doesn’t need to become a shipping expert and can focus on what it does best – manufacturing its products. In addition, working with a wholesaler or retailer means that they assume the risk if the product sells poorly.

What is Dual Distribution?

The more ways a buyer can find a particular product, the higher the end profit will be. Dual distribution is when manufacturers or wholesalers use more than one distribution channel at the same time. For example, a company might sell directly to customers while also reselling its products through other companies in order to reach the same target markets.

This is the same principle used in business franchising, where the franchisors license some stores while also owning and operating a few themselves. If your product is best served by using both direct and indirect distribution channels (for example, if you want to sell through a retailer as well as online), make sure your strategy ensures that the two work in harmony.

Choosing the Right Distribution Channel

Whatever distribution channel you choose, make sure that it’s in alignment with your mission and sales goals. This is also an important consideration when choosing a food distributor. Think about your potential customer’s desires. Will they want to speak to a salesperson? Do you think they’ll want to physically touch the product before buying it? Or do you think they would prefer to purchase it online?

In addition, take into consideration how quickly your product will need to reach buyers. Merchandise requiring refrigeration, like produce or meat, do better with a direct distribution channel, while others, like the goods distributed by Atlantic Dominion, a leader in Virginia grocery distributors, will benefit from an indirect channel.

Are you searching for food and beverage distributors or looking into CBD distribution for your convenience store? Atlantic Dominion is here to help. Among food distributors in Virginia, North Carolina, and South Carolina, Atlantic Dominion has a proven record of exemplary service as well as a strong product mix. You can find out more and get the answers to commonly asked questions about our operations here.