Channel Structure

Channel Structure

Channel Structure Jonathan Poland

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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

Small Business Jonathan Poland

Small Business

A small business is a privately owned and operated company with a small number of employees and relatively low volume…

Brand Vision Jonathan Poland

Brand Vision

A brand vision is a statement that paints a picture of the future your brand. Brand vision is the long-term…

SWOT Analysis 101 Jonathan Poland

SWOT Analysis 101

SWOT analysis is a tool that is used to evaluate the strengths, weaknesses, opportunities, and threats of a business or…

Cross Merchandising Jonathan Poland

Cross Merchandising

Cross merchandising is a retail strategy that involves placing related or complementary products in close proximity to each other in…

Acceptable Risk Jonathan Poland

Acceptable Risk

An acceptable risk is a level of risk that is deemed to be tolerable for an individual, organization, community, or…

Basis of Estimate Jonathan Poland

Basis of Estimate

A basis of estimate (BOE) is a document that outlines the methodology and assumptions used to create an estimate for…

Change Management Metrics Jonathan Poland

Change Management Metrics

Change management metrics are quantitative measures used to evaluate the effectiveness of change management practices within an organization. These measures…

Creative Destruction Jonathan Poland

Creative Destruction

Creative destruction is a process in which new, innovative ideas and technologies disrupt and replace older, established industries and firms.…

Operational Risk Jonathan Poland

Operational Risk

Operations risk is the risk of financial loss or other negative consequences that may arise from the operation of a…

Learn More

Payback Theory Jonathan Poland

Payback Theory

Let’s say you live in a town with two bakeries for sale at $1 million each. Both offer similar products…

Value Pricing Jonathan Poland

Value Pricing

Value pricing is a pricing strategy in which a company sets its prices based on the perceived value that its…

Examples of Consumer Goods Jonathan Poland

Examples of Consumer Goods

Consumer goods are physical products that are purchased by individuals for their own personal use. These goods are typically tangible,…

Thought Process Jonathan Poland

Thought Process

Thought is the mental process of perceiving, organizing, and interpreting information. It is the foundation of all higher cognitive functions,…

What is Big Data? Jonathan Poland

What is Big Data?

Big data refers to extremely large and complex datasets that are difficult to process using traditional data processing tools. These…

Brand Identity Jonathan Poland

Brand Identity

Brand identity refers to the overall image and perception that a company wishes to convey to its customers. This includes…

Business Efficiency Jonathan Poland

Business Efficiency

Business efficiency refers to the effectiveness with which a company or organization converts inputs, such as capital, labor, and materials,…

Net Nuetrality Jonathan Poland

Net Nuetrality

Net neutrality is the principle that all internet traffic should be treated equally, without discrimination or preference given to certain…

Dispute Risk Jonathan Poland

Dispute Risk

Dispute risk refers to the potential for a disagreement or conflict to arise in a business context, resulting in negative…