Distribution channel: understanding, stages function and how to choose it

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Distribution channel: understanding, stages function and how to choose it

Distribution channel understanding stages function and how to choose it

Distribution channels can be used by the company so that the product production level can reach customers or buyers well. Distribution channels are also very useful for running business activities, such as trading companies, manufacturing companies, retail, and so on.

Definition of distribution channels, in general, is a marketing path that will be determined by the company in distributing or providing services related to goods to its customers.

The purpose of this distribution channel is to be able to facilitate the company in channeling the goods so that later the items produced will not accumulate in the warehouse and can result in expiration or damage.

Definition of distribution channels

The definition of distribution channels or distribution channels is a distribution, distribution, or delivery of goods on several parties or some certain places. In addition, Distribution Channel is an object in the form of goods.

So, the meaning of the word distribution is the marketing channel of goods that must be determined by producers on each consumer. This channel will also be related to retail, retailers, wholesalers, distributors, and so on.

That way, we can conclude that the distribution channel is a collection of intermediaries in which it will depend on one another with the other. The aim is to help the producers in sending goods to end consumers.

Distribution channel function

There are several distribution channel functions to distribute goods to consumers, namely:

1. Information

Distribution channels can collect all important information related to consumers and company competitors. So, this information will be very useful for planning and also helping goods exchange activities.

2. Negotiation

Distribution channels are useful for trying to make price agreements and various other requirements, to allow the transfer of property rights.

3. Payment

For each buyer who wants to pay bills on the seller, it can generally be done through the bank or with other financial institutions.

4. Order

Distribution Channel for order serves as a distributor that will order goods in the company through PO or PURCHASE ORDER mail.


With the company carrying out transportation and storage of goods from the production process of raw materials to finished goods, then the item will get to the final consumer well.

6 Promotion

Promotions in this case function as a deployment or development of persuasive communication, convince consumers related to the products offered.

7. Risk-taking

Distribution channels are useful for bearing various risks in doing work from distribution channels, for this must be done first in marketing research.

8 Title

The distribution channel can encourage the ownership of goods through the body or parties to the agency or other parties.

9. Finance

Distribution channels are useful as utilization of funds for various costs in the process of distribution channel work activities

By calculating the production costs and also the distribution issued by the company manually, it will certainly be very difficult and confusing in presenting financial statements, especially in terms of entry and also costs out of the company.

The solution to be able to do neat freezing is to use accounting software technology that has now developed a lot. Accounting software technology can make it easier for you to make financial statements in real-time, making company invoices, regulating various elements of tax calculation, and payroll.

Distribution channel stages

The distribution channel has several stages that must be passed, namely:

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1. Manufacturer

Manufacturers are product owners who sell product sales to distributors, so the owner will also have a responsibility in terms of guaranteeing the availability of its products.

In addition, producers must also have an agreement with distributors so that the level of distribution of goods can be implemented optimally.

2. Distributors

This party has direct product purchasing activities from producers, in selling products to wholesale or retailers. Generally, distributors not only have one manufacturer. The goal is that the item can be resold at a cheaper price.

3 sub-distributors

Sub distributors are parties who buy products from the main distributors. Generally, spending on products such as this sub-distributor has been determined by the main distributor.

4. Wholesale

They are entrepreneurs who conduct trade activities by buying products from distributors and then resold at retailers or wholesalers

5. Retail traders

Retailers will carry out direct buying and selling activities on end-level consumers where generally the merchants will communicate directly to consumers and consumers will not resell the item again.


6. Consumers

Consumers are a final-level buyer who enjoys goods or services directly with the aim and also their respective personal needs.

Distribution channel determination factor

As an activity of distributing goods, of course, distribution channels have several determinants, namely:

1. Market

In the process of determining the market or distribution of production goods, distribution channels can be driven by market demand determination factors.

2. Determination of goods

As a determinant of goods, the company must be able to see from the quality of goods, so that the item can be assessed whether it is heavy or not. If indeed the item is heavy, the manufacturer must think of shipping costs in the distribution.

3. Determination of the company

As a research company will certainly provide abilities in terms of channeling, buying, and overseeing goods as supplying goods.

4 Determine intermediaries

As an intermediary determinant, the manufacturer will provide services to buy goods to consumers.

Distribution channel types

1. Direct distribution channel producers to consumers

This type is generally often referred to as a direct distribution channel, which this path is the simplest and short path without any intermediary. Generally, this type will also sell goods directly to consumer homes. Examples of this type of distribution channel are newspapers, ice cream, and others.

2. Distribution channels producers to retailers to consumers

For this type, the producers only have to sell large sales and deliver on the traders to retailers, after consumers will give directly to the retailer.

Examples of this distribution channel are noodles, meatballs, and eggs that sell their products directly to meatball chicken noodles.

3. Distribution channel producers to wholesalers to retailers to consumers

This type of distribution channel is almost similar to before, but producers only make large sales on the big traders. Simply put example is rice, vegetables, drinking, instant noodles, and others.

 4. Distribution channel producers to agents to retailers to consumers

This type is a choice of producers to sell products to the agent, then later the agent will carry out coaching to the retailers. An example of this channel is the trade of imported goods.

5. Distribution channel producers to agents to large traders to retailers and consumers

This type is a type of distribution channel that is through the lines of producers in using agents as an intermediary for product distribution to wholesalers.

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Afterward, the item will be sold to the retailer so that consumers can enjoy the product. This simple example of a distribution channel is the purchase of a machine out of the country and sells it back.

At present, the distribution channel has become the right step in marketing goods slowly and also effectively, so that later in the future it will not provide a large loss effect for the company.

The company must also be able to pay attention to various things in building a maximum distribution of channels, the way by carrying out inventory management is good so that the entire stock of goods is always in the right calculation.

The trick is to manually use the inventory system to carry out the calculation process for goods and also product monitoring. However, this will certainly take a lot of time and have a risk of recording wrong and causes fraud.

How to choose a distribution channel

After we understand what type of distribution channel and their understanding, then at this time we will provide tips on choosing a good distribution channel for you. The following are some points that can help you choose distribution channels.

  • Consider business competitors

Before you select the right distribution channel, then you must first consider your competitors. This is very important because if your competitors ignore some distribution channels, then these points can become a profit gap for you.

Simply put an example, if your competitors distribute their products through big traders, then you can take advantage through direct sales of internet media so that every customer can be easier to reach your product.

  • Check costs and benefits

Make a support system by considering the costs and benefits. When you have disconnected a certain distribution channel, it will be quite difficult to restore the decision. That’s the reason why you should be more careful in considering the costs and also the benefits of every existing choice.

  • The rate in each choice

Try to make a ranking order based on the highest estimated income that you can get every year with an option. It would be better if you choose choices that can reach many customers and can still be affordable in your budget.

In every consideration you get, you can conduct detailed checks related to the advantages or weaknesses hidden behind it, finding a more capable way to save budget, and do other innovations.

The last tips are to consider carefully in terms of choosing a distribution channel. So, don’t just choose it for reasons of industry standards or choose the most convenient way for you.


Thus the explanation of us about distribution channels. By understanding the discussion this time, it is expected to be a businessman you can choose the right distribution channel for your business so that later you can maximize every advantage of your business every year.

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