Distribution Channel


DEFINITION of 'Distribution Channel'

The chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. A distribution channel can include wholesalers, retailers, distributors and even the internet. Channels are broken into direct and indirect forms, with a "direct" channel allowing the consumer to buy the good from the manufacturer and an "indirect" channel allowing the consumer to buy the good from a wholesaler. Direct channels are considered "shorter" than "indirect" ones.


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BREAKING DOWN 'Distribution Channel'

Goods and services often pass to consumers through multiple channels. While increasing the number of ways in which a consumer can find a good has the potential to increase sales, it also creates a complex system that can make distribution management difficult. In addition, the longer the distribution channel the less profit a product manufacturer might get from the sale.

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  1. What are the advantages of having fewer distribution channels?

    The advantages of having fewer distribution channels is that a company can focus on becoming a dominant expert in a few distribution ... Read Full Answer >>
  2. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  3. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  4. What are the primary disadvantages of forming a joint venture?

    A joint venture is a common method to combine the business prowess, industry expertise and personnel of two otherwise unrelated ... Read Full Answer >>
  5. Is a financial advisor allowed to pay a referral fee?

    A financial advisor is allowed to pay a referral fee to a third party for soliciting clients. However, the Securities and ... Read Full Answer >>
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    A long tail becomes profitable because the costs to produce, market and distribute a product or service in a niche are low, ... Read Full Answer >>

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