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.


Loading the player...

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.

  1. Cost Of Revenue

    The total cost of manufacturing and delivering a product or service. ...
  2. Multi-Level Marketing

    A strategy that some direct sales companies use to encourage ...
  3. Distribution Management

    Overseeing the movement of goods from supplier or manufacturer ...
  4. End To End

    A term used in many business arenas referring to the beginning ...
  5. Middleman

    A slang term for an intermediary in a transaction or process ...
  6. Channel Stuffing

    A deceptive business practice used by a company to inflate its ...
Related Articles
  1. Investing

    What's a Distribution Channel?

    A distribution channel is a chain of businesses through which a manufacturer sends his products to get them to a final buyer. It may involve wholesalers, distributors, agents and retailers. Companies ...
  2. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  3. Fundamental Analysis

    Vital Link: Manufacturing And Economic Recovery

    Manufacturing output is one of the clearest signs that an economy is recovering from a recession.
  4. Entrepreneurship

    10 Breakout Ideas For Small Businesses

    If your business has hit a wall, we've got the answer to break through and increase sales and earnings.
  5. Professionals

    How to Break the Ice with New Clients

    Conducting an effective, initial client–advisor interview is an essential part of any advisor’s job. Here are a few tips on how to get started.
  6. Professionals

    Why Advisors Must Create a Mobile Strategy NOW

    Mobile devices will replace laptops and desktops. Financial advisors must deal with this revolution to ensure their marketing strategies are up to speed.
  7. Entrepreneurship

    Why Every Small Business Needs A Website

    The reality of living in the twenty-first century is that customers find business information and product offerings predominantly on websites, and small businesses without an online presence ...
  8. Entrepreneurship

    5 Ways to Make Money on Twitter

    Find out how people are making money online on Twitter, and get some ideas that can turn Twitter into a source of revenue for you or for your small business.
  9. Investing

    Ad Blockers Could Spell A Boom For Publishers  

    In a free content world, largely subsidized by advertising, ad blockers can eat into publishing revenues. But, publishers can still stand to gain.
  10. Insurance

    Best Ways to Find Life Insurance Leads

    Learn about some of the most effective ways life insurance agents find leads. Understand the pros and cons of company leads, third-party leads and networking.
  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 >>
  6. How does a long tail become profitable?

    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 >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!