4.3.3 - Distribution channels
A product must be available where and when its customers want to buy it. Learn how distribution channels work, how retailers and e-tailers reach customers, and how a business chooses a route that suits its product and resources. All business examples in this lesson are illustrative.
Routes to customers
A distribution channel is the route through which a product reaches its final customer.
Distribution channel
A distribution channel is the route used to move or make a product available from the producer to the final customer, sometimes through intermediaries such as retailers.
In the marketing mix, place concerns availability and access. It is more than the geographical location of a business: it includes where orders are taken and how the product reaches customers. A good advertised widely is unlikely to sell if customers cannot find it, order it or receive it reliably.
| Illustrative route | How it works |
|---|---|
| Producer → customer | A small baker sells directly at its own shop, or a large manufacturer sells through its own website. |
| Producer → retailer → customer | A clothing producer supplies a retailer that sells individual garments to consumers. |
| Producer → wholesaler → retailer → customer | A wholesaler buys large quantities and sells smaller quantities to retailers, who sell to consumers. |
An intermediary is a business between producer and final customer. Using one can expand reach or transfer selling and handling work to a specialist. However, the intermediary needs a return, and the producer loses some control over presentation, prices or customer contact. A longer channel does not automatically mean a worse route: the specialist may perform the work more efficiently than the producer could.
Direct selling keeps more control and gives the producer customer information. It also means the producer must arrange selling, payment, inventory, delivery and complaints. A small craft business may enjoy direct contact at a market stall but lack the staff and systems for deliveries across several countries. For services, the route may be a booking website, an agency or direct contact; the business still needs to make the service accessible and deliver the promised benefit.
Removing an intermediary removes its margin, but the business must still perform or pay for the work that intermediary did.
Retailers and physical selling
Retailers sell goods to final consumers and can provide a physical setting in which customers inspect products and obtain help.
Retailer
A retailer buys or obtains goods for sale to final consumers, usually in quantities suitable for personal use.
A producer can gain access to a retailer's established customers, convenient outlets and selling skills. An illustrative small Chilean cookware producer might supply local kitchen shops. Customers can handle pans and ask staff about their suitability before buying. The producer reaches buyers without opening its own shop, but it must offer the retailer enough margin and may compete for limited shelf space.
A large appliance producer can supply retailers across countries, gaining extensive reach and access to local knowledge. Retail staff can explain the machines, while customers can compare sizes and arrange collection or delivery. The producer has less direct influence over staff advice and product placement than in its own outlet. If retailers promote a competing brand more heavily, the producer's sales may suffer.
From the retailer's perspective, physical premises can offer immediate access, personal advice and reassurance, especially for products customers want to inspect. Customers without reliable internet access can also buy in person. Rent, staffing and displays create costs, opening hours limit access, and the shop mainly draws from customers who can travel there. These costs and access limits affect whether the selling price and likely demand can support the channel.
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