A channel structure refers to the way in which a company distributes its products or services to customers. It is the network of intermediaries, such as wholesalers, distributors, and retailers, that a company uses to bring its products or services to market.
There are several types of channel structures that companies can use, including:
- Direct distribution: This involves selling products or services directly to customers, without using intermediaries. This can be done through a company’s own retail stores, online sales platforms, or by selling directly to businesses.
- Indirect distribution: This involves using intermediaries, such as wholesalers or distributors, to reach customers. Indirect distribution can be used to reach a wider range of customers, or to tap into established distribution networks.
- Multiple channel distribution: This involves using a combination of direct and indirect distribution channels to reach customers. This can be an effective way to reach a wider range of customers, or to cater to different customer segments.
- Omni-channel distribution: This involves using a variety of channels, including online and offline channels, to reach customers. This can provide customers with a seamless shopping experience, as they can purchase products or services through the channel of their choice.
Overall, companies need to carefully consider their channel structure in order to effectively reach their target customers. Choosing the right channel structure can help a company to increase sales and grow its business. Here are some illustrative examples.
Direct
Selling directly to the customer using channels such as personal selling, retail or wholesale. For example, a fashion brand that uses its own shops, websites, and social.
producer → customer
Retail
Selling to retailers who sell to the end-customer.
producer → retail → customer
Value Added Reseller
Selling to firms that add value to your products or services before selling them. For example, a firm that sells components that are used in mobile devices.
producer → value added reseller → customer
Wholesale
Selling to wholesalers who distribute the product to retailers and sometimes direct to consumer (DTC).
producer → wholesaler → retail → customer
Agents
Using agents or brokers to manage your sales to wholesalers, retail and/or ecommerce sellers.
producer → agent → wholesaler → retail → customer
Complex
It is common for organizations to have many channel structures for different products and regions. For example, a fashion brand that sells direct in the United States but uses agents, wholesalers and retailers in other countries.
United States
producer → customer
France
producer → customer
producer → retail → customer
Japan
producer → agent → retail → customer
producer → agent → value added reseller → customer
Detailed
Channel structures may include details such as the types of channel that are involved. For example, a direct producer → customer structure might be expanded out with more details:
United States
direct retail → flagship → customer
direct retail → brand shops → customer
direct retail → outlet shops → customer
direct sales → customer
