Distribution Channels: Types and Functions
When you start a new business, one of the first actions you should take is to study the market. You must consider the environment, identify competitors, and, above all, understand your target audience.
Ultimately, understanding the profile of the people you will be addressing influences the rest of your decisions. Your target audience is the group you want to focus your specific marketing efforts on. Once you have defined this ideal audience, deciding which channel to use to deliver your goods and services becomes much easier.
At Lógicos 3PL, we explain the basic distribution channels and explore which channels you can use to carry out your sales. Additionally, we highlight the advantages of having a logistics operator manage your distribution chain.
What is a Distribution Channel? Basic Types
A distribution channel is the route or path through which products and services pass until they reach the final buyer or the end consumer. Depending on the nature of the product or its destination, the relationships and length of the distribution channel will vary.
If we focus on the most common division of distribution channels, these channels can be divided into: direct and indirect.
Direct Distribution Channel
In this channel, there are no intermediaries between the producer or manufacturing company and the final consumer.
Indirect Distribution Channel
In this scenario, companies work with one or more intermediaries to bring their products or services to the final customer.
There are numerous intermediaries, depending on their nature or function. The length of this distribution channel will depend on the total number of intermediaries or partners involved.
- Short Distribution Channel - The number of intermediaries is reduced. Normally, there is only one intermediary between the manufacturer or producer and the final consumer.
- Long Distribution Channel - A distribution channel is considered long when it is made up of at least four levels.
- Double Distribution Channel - In this type of channel, apart from wholesalers and retailers, the figure of the agent comes into play. This agent becomes the exclusive distributor of a service or product. The double distribution is very characteristic in businesses that work through franchises.
Factors Influencing the Choice of Distribution Channel
When choosing the distribution channel that best suits your company, you need to assess several factors:
Internal Factors
- The Product - You must consider each product's characteristics to determine if a short or long channel is favorable. For example, if your product is high-quality and perishable, the shorter the distribution channel, the better.
- Company or Manufacturer - The company must determine if it has the resources to be autonomous in shipping goods or services, or if it needs intermediary support.
External Factors
- The Market - This is one of the essential factors that will determine which distribution channel best suits your business. Consider factors such as geographical extent, order volume, and sector purchasing capacity.
- Competition - Before choosing a distribution channel, companies often examine the channels chosen by competitors. This channel is typically familiar with both the product type and consumers.
- Intermediaries - Although they must align with the manufacturer or producer, intermediaries are considered an external factor. Choose the right intermediary by considering their availability, operational markets, and product expertise.
At Lógicos 3PL, we aim to be your main logistics operator, and we invite you to explore all our services.
Types of Ecommerce Business Models
Ecommerce businesses have transformed the way we buy today and the role of distribution channels. If you are about to start an ecommerce business, you will likely fall into at least one of these categories:
B2B or Business to Business
This model involves transactions between companies. The flow of goods is related to a corporate need.
In B2B, the relationship between the two parties is long-term and the transactions are of greater value. Understanding the customer's needs is crucial, as the Customer Lifetime Value depends on it.
The best strategy for this type of business is to offer the highest quality and reliability through an infallible logistics chain. At Lógicos 3PL, we handle integral logistics so you can focus on other activities that add value to your company.
B2C or Business to Consumer
In this model, the flow of goods goes directly from a company to the end consumer. This model is common in our daily lives and has grown significantly with the rise of ecommerce.
Although this model involves a more direct customer relationship, the disadvantages of managing it yourself are greater.
If you outsource warehouse management to 3PL Logic, you save time and costs. Additionally, we help you achieve the geographical reach you've always dreamed of by sending your orders anywhere in the world!
Besides B2B and B2C, other business types have emerged in recent years, such as B2B2C and C2C.
- B2B2C - In this model, a company serves both businesses and the final consumer. Online marketplaces are a clear example of this business type.
- C2C or Consumer to Consumer - C2C businesses connect consumers to exchange goods or services. A clear example of this business type is online platforms where we can buy and sell used items.
Ecommerce has benefited both relationships between producers and consumers and between producers and intermediaries. We have adapted to this world, which is why our cloud-based system integrates with yours, providing total visibility of your operations and making management easier.
We hope you find this information useful. Please do not hesitate to contact us if you have any questions.
