Channels of distribution can be defined as the processes and partners that move a product from the producer to the customer. To be successful, a channel must enhance customer value by increasing customer benefits and lowering customer costs of purchase. But the most crucial question that a distribution channel answers is: when and how will the customer obtain the product or service?

There are two main types of channels:

  • Direct: refers to when a producer and ultimate customer deal directly with each other. They can be company owned stores, sales force or directly through the internet.
  • Indirect: refers to when there are independent intermediaries between the producer and the customer. These usually start with the producer, go to the retailer and then reach the customer.

The correct distribution channel connects the producers with the customers, completes transactions effectively, handles the logistics of delivery, makes sense financially for the producer and the customer and offers post-sales support and feedback. Ultimately, the correct distribution channel can increase the customer value if the transaction costs are reduced.