When deciding on a distribution channel a company’s management is typically involved, due to the overall impact on operations.
Distribution channels primarily focus on the following goals:
- Getting a product from the manufacturer to the customer
- Controlling costs and saving time as the distribution channel is executed
- Maintaining competitive distribution
There are many different ways to go about reaching these goals, but some ways are better than others and promote operational efficiency.
Here are 5 innovative forms of distribution channels:
Innovative Channel #1: Indirect Distribution
With indirect distribution, the product is received by the customer via many different channels. A good example of this is when a product starts at manufacturing then goes to C&F (cost and freight) distributor, retailer, and then the customer receives it. The downside to this is that the distribution chain is too long.
Innovative Channel #2: Direct Distribution
The direct distribution channel is normally the shortest due to less channel length. This allows the customer to receive their product in a shorter amount of time. So if you have ever bought a product online or in a traditional outlet then you have experienced direct distribution. Also, distribution channels can be decided upon by the penetration level that the company plans to meet.
Innovative Channel #3: Intensive Distribution
An intensive distribution channel is used if a company plans to mass market their products. Under intensive distribution, it tries to make the product seen in as much of the market as possible. An example of this includes products that are durable and fast-moving consumer goods.
Innovative Channel #4: Selective Distribution
Companies like Zara or Armani are labeled as selective distribution levels because of their selective distribution. These types of distribution channels also have a limited amount of outlets. An example of this is when there might be only 2-3 Armani outlets and 4-5 Zara outlets.
Innovative Channel #5: Exclusive Distribution
When it comes to exclusive distribution channels you are likely to find only one company type within a region for example, Lamborghini. If a big region is given to a distributor then it is referred to as an exclusive distribution strategy. Sometimes a distributor may also be designated an entire country to represent in. This also means that they would be the only distributor in that particular country.
All-in-all, these distribution channels all have one thing in common and that is the variety of products available. A single company could have many product lines, with each product having its own individual distribution strategy.
With some premium products, a company might require selective distribution channels, but others may be considered mass products that require the intensive distribution channel. While strategies may be different, having an overall distribution plan is considered dynamic as it contributes to the overall company advantage.
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