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Business Dictionary defines distribution channel as the “path or 'pipeline' through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the vendor). A distribution channel can be as short as being direct from the vendor to the consumer or may include several inter-connected (usually independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer. Distribution channel is also called channel of distribution or marketing channel.”

Distribution is all about transferring or moving the product or service to the right customers without delay, considering the profit and effectiveness. It is not only to develop a product or service but to find the appropriate target audience with a view to sell the products at the 'right price'. When a consumer purchased a product or service, the product may have been bought directly from the producers of manufacturers, or through a series of intermediaries (wholesaler, retailer, etc): otherwise known as distribution channels. Consequently, these channels could be adopted in the future to accommodate for any changes and to help your business grow.

There are three major types of distribution channels, which include direct marketing channel, retailer marketing channel, and wholesaler – retailer marketing channel.

Direct Marketing Channel is the first types of distribution channel in which a manufacturers supplies or serves goods and services directly to an ultimate costumers or consumers. This structure is known to be no middlemen or intermediary level. Such process is called producer to consumer channel. Some members of the Direct Selling Association of the Philippines (DSAP) include: Amway (personal and home care); Avon ( cosmetics and related products); Nu Skin (beauty and health care); Sara Lee (personal care and clothing); Tupperware (plastics ware); and waters (water purifiers).

Retailer Marketing Channel is the second type of distribution channel. In this channel goods and services are sold or serve indirectly to the costumers. Examples are drug stores, book stores, supermarkets, etc. Retailer is a French word in origin. The prefix “re” signifies “again” and “tailer” means “to cut”. This type of marketing channel has middlemen and one intermediary level. Retailers serve as the passage of the product from manufacturers and sell it to the final consumer at a higher price. The added amount to the product includes all the total expenses from the operation, customer service and profit.

Wholesaler-retailer marketing channel is another type of distribution channel which goods and services are sold or served indirectly to the final consumer. This structure has middlemen and two intermediary levels which are the wholesaler and the retailer. Wholesaler and retailer are the passage of product from the producer to the final consumer. In the process, the wholesalers purchase the product in a bulk in a particular price with big discounts. These discounts are then shared to the retailers. Retailers purchase the product from the wholesaler toe sell to the final consumer.

The process of selecting marketing channel involves a series of stages. First, consumer service needs should be analyzed. It is important to analyze the service needs of the consumer because it is very critical in the design process. Questions like: do customers prefer to go mall shopping or just buy their products in the nearby ‘sari-sari’ store or retail outlets? This kind of questions must be analyzed so that the firm will come up to a channel design decision that the company will benefit. Second, Set Channel Objectives and Constraints. In this stage, the company should consider their desired target market as well as their service level. Then, identify the market segment and the expected levels of channel services. And, choose the desired segment and channel level as well. This channel objective should be consumer oriented, so that the decision becomes more effective.

In selecting or designing marketing channel, there are several factors to consider. Factors such as market, product and company influence the choice of distribution channel.

The Market Segment is the first and most important factor to consider in selecting a distribution channel. The buying behavior of the target market which changes from time to time may influence channel decision. In addition, it is necessary to use multiple channel of distribution, if a product can be marketed to more than one segment. Like detergent soap, costumers of this product are scattered throughout the country. So, manufacturers may choose multiple distribution channel serve this kind of market.

The Product Characteristics also influence the choice of distribution channel. Perishable and complicated products such as meat, fish, fruits, vegetables, and the like requires shorter distribution channel. In contrast, products that highly expensive and standardized like ships and airplanes are usually sold to longer distribution channel.

The company’s size and its organizational set-up is also a factor, which influences the choice of distribution channel. Multi-National companies like SMC (San Miguel Corporation) uses multi channel approach to reach their costumers.

Distribution channel is a path or pipeline through which goods and services flow in one direction and the payment generated by them flow in the opposite direction. Three types of distribution channel are direct, retailer, and wholesaler-retailer marketing channel. The product flows either directly from the producer to the consumer or indirectly through the use of several intermediaries such as wholesaler and retailer. In the selection of distribution channel, the costumer service needs should be identified and the channel objectives and constraint must be set thoroughly. Objectives must be consumer-oriented, in order for the firm to come-up with the very most effective decision. The market segment, product characteristics, and the company or producers are the three important factors to consider in selecting distribution channel. Thus, for it to be successful, the business firm has to choose competitive channel member, motivate them and monitor their performance towards achieving the company’s goals and objectives.

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• Business Dictionary. (2010). Definition of Distribution channel. Available: http://www.businessdictionary.com/definition/distribution-channel.html

• Business Dictionary. (2010). Definition of direct channel. Available: http://www.businessdictionary.com/definition/direct-channel.html