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In the business of manufacturing, only setting up a manufacturing process is not enough. You need to be equally focussed on distribution strategy as it determines the success of your business. This article explains what distribution channel strategy is and examples of distribution channels.


What is a distribution channel strategy?

Distribution channel strategy in marketing means a plan that a manufacturer adopts to get its products in the market and essentially to the end users. While formulating a distribution channel strategy, a company needs to consider various factors including cost, channel length, geographic reach, customer preferences, transportation and logistics arrangements. In other words, forming a distribution channel strategy is ensuring your product is present at the right time and right place for consumers.

Effective distribution channel strategy needs to be aligned with the overall marketing and business goals.

Types of distribution channel strategy

Broadly, there are two types of distribution channels. They include:

Direct distribution channel strategy:

Direct distribution channel means the manufacturer directly sells its products to the consumer. There is no intermediary involved.  Some of the examples of direct distribution include:

  • Direct sell through the travelling sales team
  • Setting up a retail outlet (a company outlet)
  • Direct mail

Examples of direct distribution strategy

  • Apple: In India, the iPhone maker used to sell through retailers i.e., indirect distribution strategy. However, the company has established its store in a couple of cities adopting a direct distribution strategy.
  • Bata: The shoemaker has established company-owned retail stores country-wide.
  • Lenskart: Lenskart, primarily an online eyewear manufacturer, sells its product directly to customers through e-Commerce and established retail stores. Additionally, the company’s executives also visit customer’s residences on request for conducting eye vision tests and taking an order for eyewear.
  • Farmers’ market: farmers’ market is an attempt to sell agricultural produce directly to consumers and avoid intermediaries.

Some of the other types of businesses that adopt direct distribution models include:

  • Magazine & journals: Often you may remember filling up a form and sending a request along with the subscription fees to magazines and journals. Readers Digest is one of the examples for the same. However, with technology ways and means of selling subscription is changing to digital.
  • Bakery and café: Many local bakeries and cafés make and sell food items in the same retail store. Many times, they do not have a distribution network.
  • B2B businesses: Many B2B businesses also follow a direct distribution strategy. For example, a packaging solutions provider will directly sell packaging products to its customers which are from the FMCG industry. Here are some more examples of direct distribution of products and services in the B2B segment:
    • Packaging companies selling solutions to consumers
    • Consultants assisting businesses
    • B2B logistics services

Advantages of direct distribution channel strategy:

Here are some of the advantages of the direct distribution strategy:

  • Direct relationship with customers: Manufacturers can maintain direct relationships with customers and seek their feedback which improves customer experience.
  • Customisation: Delivering custom-made products is easily possible through a direct distribution strategy.
  • Profit margins: Since there is no involvement of intermediaries, profit margins can be higher in the case of a direct distribution strategy.

Indirect distribution channel strategy:

An indirect distribution strategy is selling products and services through intermediaries. There could be a single layer intermediator or multiple. In this case, intermediaries play an important role in the distribution and selling process. Here is a list of intermediaries that may be included in the indirect distribution strategy:

  • Wholesalers
  • Agents
  • Distributors
  • Dealer
  • Retailers
  • Franchise, etc.

Examples of indirect distribution channel strategy

  • Hindustan Unilever Limited (HUL): It is one of the giants in fast moving consumer durables (FMCG). The company has a range of products in the personal care and home care category. The company has a strong distribution network that includes distributors, wholesalers, stockists, Clearing and Forwarding (C&F) agents, retailers and so on.
  • Auto manufacturers (Tata Motors/Maruti Suzuki/Toyota Kirloskar Motors, etc.): Automobile businenesses such as Tata Motors, Maruti Suzuki, Toyota Kirloskar Motors, Hyundai India, and so on sell their products through dealerships. The dealership is a retail outlet for selling vehicles, where consumers can see the model and place an order.
  • Parle Products: Parle Products is one leading company in the food industry that used a multi-layer indirect distribution strategy. The distribution network involves distributors, wholesalers, retailers and so on.
  • MacDonalds: The popular restaurant sells its burgers and fries on the franchise model and does not have a direct relationship with its customers.
  • Samsung India: A leading electronics brand sells its products through indirect distribution and maintains a strong network of distributors and retailers.
  • Jawed and Habib beauty salon: It is yet another example of a franchise model.
  • Modelez: It is a leading chocolate brand that has a strong distribution network all over the country.

Benefits of Indirect distribution channel strategy:

  • Emphasis on core activities: Since a company does not have to focus on selling products to customers, the company can focus on its core competencies of developing and manufacturing products.
  • Expand reach: Distributorship can help your business to its reach and enter new geographies.
  • Scale: As it can help businesses expand reach, an indirect distribution strategy can help the businesses to scale business.

Concluding remarks: how to determine the right distribution channel strategy

Here are easy steps to develop a distribution strategy for your company:

  • Study the behaviours of your end users. Understand their buying pattern. This will help you to place your products accordingly.
  • Determine your market and business goals. For example, if your business goal is to enter new markets, distributors and wholesalers can help you to establish in the new region.
  • Identify if you want to adopt a direct distribution strategy or an indirect distribution strategy. Indirect distribution channels can help you expand reach and scale, however direct distribution strategy can help you to serve your customers better.
  • If you plan to adopt an indirect distribution strategy, determine your business model and distribution channels – franchise, dealership, distributors, etc.
  • Identify distributors and wholesalers who are aligned with your business goals.
  • Negotiate with them and finalise on terms and conditions before proceeding with the business.
  • Many companies adopt both strategies – meaning they adopt direct distribution channel strategy in the regions it has a strong presence, while taking a help of indirect distribution channels in new regions.

Swati Deshpande

Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.