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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
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:
- 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.