With the development of e-commerce, Amazon, and Covid-19 restraints on businesses, consumer habits have changed considerably. Social networks now serve as an interface between consumers and sellers. The result is an increasingly complex distribution circuit, which can generate high costs and slow down delivery times. To remain competitive and retain its customers, a company must therefore be innovative and optimize its distribution circuit.
What is a distribution channel?
Distribution encompasses the relationships set up between a producer or manufacturer and the final consumer in order for the latter to have access to a product. This takes a path, a distribution channel. The same product can also be sold through different channels. All of these transport routes form a distribution circuit. It is therefore all the channels set up to market products.
The sale can therefore be:
- Mono channel: a single distribution method is used by the company. The product is sold only at a physical point of sale or only on the internet. Large companies like Amazon warehouse fulfillment centers and providers are “pure players”, who have chosen to do without physical stores and sell their goods only online.
- Multichannel: the consumer can buy the same product through different distribution channels, physical and virtual.
- Cross-channel: the distribution channels are complementary. For example, in a “web-to-store” method, the consumer makes his choice online and goes to a physical point of sale to make his purchase.
- Omnichannel: in this system, there are no longer any boundaries between distribution channels. The consumer has a choice. They can book online, pay in-store (click-and-collect), pick up their order in “drive” mode, buy on the internet and have it delivered to their home…
The Different Distribution Channels
A distribution channel is essentially defined by its length and the number of intermediaries that make it up. Thus, we mainly distinguish:
- The direct circuit: the producer or manufacturer sells his products directly to the final consumer, without an intermediary. His margin is preserved, but he has to store his goods, manage his marketing strategy, etc. Direct selling is currently experiencing renewed interest from consumers who increasingly want to “buy local”.
- The short circuit: in this case, the producer or manufacturer uses an intermediary for the distribution of his production. It can be a retailer or a store in which the production is sold directly to the final consumer. For some time now, we have even seen pop-up shops appear, pop-up stores that allow a producer to have a point of sale for a short period of time.
- The long circuit involves several intermediaries. Between the producer and the consumer, the product passes through the hands of a distributor, a wholesaler or a purchasing group, and a retailer. This solution reduces storage and logistics costs, but the producer’s margin is reduced. And he has no control over the distribution of his production. This method is favored by large retailers.
The more intermediaries a distribution circuit has, the higher the price of the product, insofar as each of them takes their margin to be remunerated. In this situation, the producer may also have to lower his price to guarantee an attractive final sale price. The choice of distribution channel is therefore crucial. A reputable Logistics Company- Soonerlogistics.com can help you find the perfect distribution channel for your business. It must be efficient, profitable, and capable of satisfying consumer expectations.