Distribution

economic-dictionary

Distribution is an indispensable element in the world of business and marketing. With distribution we are referring to the set of activities that are carried out from the moment a product is made, until it is purchased by the end customer.

The distribution, therefore, is a determining aspect and to be taken into account in the world of business and marketing. Thus, distribution is part of the strategy adopted in the marketing mix, in the same way that it is part of the well-known 4 P's of marketing. And, with distribution, we are referring to those activities carried out by the company from the moment the product is manufactured, until the product reaches the shelf from which it is taken by an end customer to consume it.

Thus, the distribution is carried out through the well-known distribution channels. These are the means that any company uses to get its products to its final consumer. From transportation to the supermarket that sells our product, for example, they are part of this distribution channel. Without a doubt, the objective is to ensure that the products arrive at the right time, in the required quantities and at the most convenient prices for everyone.

Distribution strategies

As we know, when creating a company, we must select what will be the strategy through which our product will be distributed.

Among the possible strategies, we can highlight the following four:

  • Intensive distribution: It is the strategy through which we try to sell the product at points of sale related to our product, which offer more products in addition to ours, but of the same type. This is the case of books, which are sold in bookstores.
  • Extensive distribution: Unlike the previous one, this strategy focuses more on the availability of the product, as well as that the product is in all the places where it is possible. In this way, giving it a greater diffusion. This is the case of food, which we can find in many stores, of all kinds.
  • Selective distribution: Selective distribution is the strategy through which we try to differentiate ourselves from our competition, selecting those points of sale that offer the characteristics we are looking for. An example can be the large electrical appliance chains, which are located in places with easy access for families.
  • Exclusive distribution: Unlike the previous one, the point of sale focuses on giving the brand greater prestige. An example could be the subsidiary Zara, of the Inditex group. Well, this one, to offer its clothes, is located on the main roads of the big cities, such as Gran Vía in Madrid, or 5th Avenue, in New York.

Types of distribution channels

Among the types of distribution channels that exist, we must distinguish mainly two: Direct and indirect distribution channel.

Direct distribution channel

The direct distribution channel is the one used by companies that decide to take their products to the final consumer, without using intermediaries. Since there are no intermediaries, the company has to carry out all the marketing, storage, transportation and marketing tasks of its products.

In turn, within the direct distribution channels, we can differentiate two types:

  • Physical channel: One that uses vendors or establishments through which it establishes direct and physical contact with the customer.
  • Digital channel: The digital channel has not stopped growing over time. Online stores, the use of the internet to reach customers, among other strategies that are carried out through digital means, would be found in this type.

Indirect distribution channel

The indirect distribution channel is the channel through which the company markets its products using intermediaries. Intermediaries can be wholesalers or retailers, and they become the connection between the company and the end customer.

Indirect distribution channels can be classified as follows:

  • Short channel: In which the company, the intermediary and the end customer participate.
  • Long channel: At least 4 levels participate. It could be the production company, which has a distributor, and this with a retailer, which sells the product to the final consumer.
  • Double channel: In this, the company, in addition to having other channels, has exclusive agents who are in charge of distributing a certain good or service. An example could be a franchise. The McDonald’s company, for example, has its own channels, but also franchisees that exclusively distribute its product all over the world.

Distribution example

To finish, let's look at an example of distribution in companies, in order to get a definitive idea of ​​the concept defined here.

As an example, we can look at the American company Amazon. A company practically focused on logistics and product distribution.

Amazon is a company that uses all four distribution strategies to sell its products. In this sense, we have an example of exclusive distribution in the stores that Amazon owns around the world, and that have become stores that are very frequented by all of society. In the same way, we find selective distribution in the offers that it makes us in the marketplace, where you find portals with products of all kinds, but that are related to each other.

On the other hand, the company also practices extensive distribution, finding products of all kinds on the front page of its web portal, these belonging to very different product families. In the same way, we can say that it has an intensive distribution, if we analyze the company and focus on the book stores that Amazon owns, or we see the specialized portals where you find products from a certain family, such as electronics.

When it comes to distribution channels, Amazon uses both physical and digital channels. And, in the same way, it uses both direct and indirect channels.

As we know, Amazon has direct channels, which are presented in physical and digital format. In the same way, it has indirect channels, with Amazon even being an intermediary on many occasions.

Thus, Amazon is a company that allows us to see the main types of distribution that exist, as well as the different channels that a company can use to distribute its product. Therefore, it is a good example to understand this concept.

Tags:  banking comparisons markets 

Interesting Articles

add