A distribution channel represents a chain of businesses or intermediaries through which the final buyer purchases a good or service. Distribution channels answering the question "How do we get our product to the consumer?", is in contrast to the upstream process, also known as the supply chain answering the question "Who are our suppliers?"

For instance, a manufacturer of home appliances may produce the refrigerators, but the distribution channel that takes them from factory to customer is likely to include wholesalers and retailers. These links in the sales chain are the refrigerators' channel of distribution.

Companies and brands develop various distribution strategies or channel strategies for their products and services, based on a variety of factors and potential steps in the distribution process or intermediaries.

How do you choose a distribution channel for your business or product?

Channels are broken into two different forms—direct and indirect. A direct channel allows the consumer to make purchases from the manufacturer while an indirect channel allows the consumer to buy the goods from a wholesaler or retailer. Indirect channels are typical for goods that are sold in traditional brick-and-mortar stores.

Generally, if there are more intermediaries involved in the distribution channel, the price for a good may increase. Conversely, a direct or short channel may mean lower costs for consumers because they are buying directly from the manufacturer.

First of all, one size of distribution channel does not necessarily fit all of your products. You may have different approaches within your company. How do you know which distribution channel is the best for your product or service?

• Look at the product itself.

Does it need to reach the customer quickly? Does it need to be bundled with other products in order to be useful or attractive? If you' re selling fresh vegetables from a small farm, your best distribution channel might be direct, selling at a local farmers' market. If you' re selling a specific piece of home appliance, you might be better off working with other retailers of the domestic appliance that complement your product.

• Consider your sales goals.

Are you trying to target a very specific, international population of enthusiasts? Then maybe a direct channel of distribution

via the Internet geared towards connecting with influencers in the community may work better than using common strategies. Take propane refrigerators as an example. Today, propane refrigerators are a popular option for recreational vehicles, cabins, lake houses, or any place that doesn’t have ready access to electricity. For those keen on camping lifestyle, chances are that they are interested in a gas- or propane-powered refrigerator. And also, this kind of “off-grid” lifestyle may be shared by a group of people. In this situation, connecting with influencers in the community is more effective than conventional distribution channels.

But there might already be a retailer that has created a meaningful relationship with that community and has expertise in this area - in which case, an indirect distribution channel might be a better bet. Are you trying to achieve the widest possible audience for your product? Then, perhaps the bigger wholesalers and retailers are the perfect intermediaries within an indirect distribution channel.

What are the benefits of having a distribution mix?

Increase sales and brand awareness while reducing risk.

Every small business wants to sell more. Rather than simply thinking of ways to get more customers into your store, however, start thinking of ways to get your products or services out to more consumers. One of the best strategies for gaining more buyers and increasing revenue is to sell through additional venues. Your small business can choose from a variety of distribution channels, all of which can affect your target market, product, price and reputation. You may need to experiment with a mix of distribution options to determine the best strategy for your company to be successful.

Expanding your distribution channels can be an effective way to increase your business. These are some advantages of broader distribution channels:

Selling to more customers can raise revenue, cut per-unit costs and boost the bottom line.

If you’re selling through one channel, you’re putting all your eggs in one basket. Selling through multiple channels distributes the risk and gives you the flexibility to experiment with new channels.

Making products available in more locations raises consumer awareness of your offerings and expands your brand.

Deciding when to invest in a new channel

Rather than investing in new channels, some companies may benefit from strengthening their existing distribution channels. Evaluate how your current channels are operating, and make sure they are being managed in the most efficient way before you invest in a new channel. Finding the right distribution channel requires an understanding of your customer base. Figuring out the best way to get your product in front of consumers takes time and requires some trial and error, but having an effective distribution channel can be your key to success.