Distribution – Definition & Walkthrough

What Is Distribution?

Distribution is the mechanism by which goods are delivered from the producer to the consumer. In its simplest form, distribution is the system that encompasses the entire process from shipping the goods from the manufacturer to the wholesaler and then to the retailers. The distribution business is one stage of the supply chain that transports products and materials from a manufacturer to retailers.

Distribution is defined as the process of getting goods to consumers. Distribution can be international; for example, packaged corn produced in China is imported into the US and distributed in different states.

What Does a Distributor Do?

The distributor is the name given to real or legal persons who promote or supply products to stores or companies. The distributor accomplishes this task by intermediating between the manufacturer of a product and another business in the supply channel. In short, a distributor is a person or company that buys a product or product line and sells them directly to end-users or customers. Distributors generally work with commissions based on sales they make or mediate.

Manufacturers need distributors to promote and sell their products in the domestic or foreign market. It is complicated for the manufacturer to both produce a good and deal with various items such as distribution, logistics, promotion, and sales alone. Generally, manufacturing companies either work with a different distributor or establish a subsidiary company responsible for the organization of this business.

Functions of Distributors

  • Performing sales by marketing the products of manufacturers and/or wholesalers.
  • Providing training support to dealers and arranging pre-sales training.
  • Informing the sellers about the product and providing training on product features if necessary.
  • Marketing and selling the product to both dealers and system integrators.

What Is the Distributor System?

Distributors that are authorized to promote and sell products belonging to a manufacturer or supplier in certain regions are called distributors. While some distributors stock and sell the products, some just forward the incoming orders to the supplier company or regional directorates.

Distributors are wholesale agents that connect manufacturers and retailers. Distributors purchase large quantities of goods from the manufacturer and supply them to individual retailers, thus eliminating the need for the manufacturer to contact multiple retailers individually.

Selection of Distribution Channels

Companies need to deliver their products to the market through a channel that suits their customers’ preferences. For example, a brand targeting a high-income customer base should distribute its product to the stores where potential customers at this income level shop. Today, e-commerce is spreading rapidly, and almost every product is sold on e-commerce sites.

A company that will carry out e-commerce may choose to send its products to e-commerce companies and sell their stocks. Another option is the dropshipping method. The manufacturer company can sell the products through its e-commerce site, or an intermediary company can distribute products between the manufacturer and the e-commerce sites. In each of these four options, the product distribution and customer delivery processes differ.

Briefly, the three major flows in the distribution channel, the physical flow of goods, the flow of information, and providing support, regulate the flow of money and help the firm. Sales and distribution channels vary according to the type of product, the regional conditions, and the structure of the countries. The demographic and cultural structure of the countries and the physical conditions of the countries affect the selection and operation of the distribution channels.


Distribution Channel Types

Distribution channels are sets of organizations that rely on each other and assist in using or consuming the product or service. The distribution (marketing) channel is a series of private and legal marketing persons and organizations, ranging from the manufacturer or producer to intermediate users or consumers. Distribution channels are divided into two as direct (direct; direct) and indirect (indirect) based on the nature of the relations between channel members.

a) Direct Distribution: With the manufacturer’s own sales organization; is the situation where the product is sold directly to the consumer (final or industrial). In other words, the buying and selling transaction is done through the distribution channel, with the producer at one end and the consumer at the other. Indirect distribution, the producer directly addresses the consumer and performs the necessary marketing functions himself. However, for direct distribution to occur, all or some of the following conditions must be present.

b) Indirect distribution: It is the situation in which commercial organizations provide the buying and selling relationship between the producer and the consumer with legal and economic independence. Independent commercial organizations are wholesalers, semi wholesalers, retailers, agents. etc., at various levels of distribution channels.

Classification of Distribution Channels

a) Distribution Channels by Type of Relationship

Distribution channels can be classified according to whether the relationship between channel members is direct or indirect. Direct distribution means that channel members fulfill the full distribution function of the goods or services they undertake to distribute. That is, no other intermediary or intermediaries are assigned in the distribution of the goods.

b) Distribution Channels According to Management Strategies

Distribution channels are divided into two as an individual (traditional) and vertical distribution channels in terms of management.

Traditional distribution channels; consist of individual and autonomous businesses. These types of businesses are weakly linked to each other. They cannot affect each other horizontally or vertically. Companies in traditional distribution channels act independently of each other.

Vertical distribution channels operate within the framework of a system. The activities, management, and behavior of the units or businesses that make up the distribution channel are under control. The distribution channel is under the control and supervision of a manager or leader within the channel. Competition between distribution channels brings some channel members together, causing them to organize among themselves under the leadership of a channel leader.

c) Distribution Channels According to the Direction of Integration

The intermediaries in the distribution channel tend to integrate within the channel to get a larger share of the distribution profits on the one hand and gain a competitive advantage over other distribution channels or to meet the competition on the other hand. Integration can be both vertical and horizontal.

The Role and Importance of Distribution Channels

  • Distribution channels offer sales expertise.
  • Distribution channels increase distribution efficiency.
  • The channels offer products in the required assortment.
  • They assist in the commercialization of products.
  • Distribution channels help drive the price mechanism between the firm and the end customers.
  • Distribution channels help to keep stock.

Examples Of Distribution

Ikea operates its own retail shops all over the world.

Apple company sells 10,000 phones every month to its distributor in Spain.

A company that sells cleaning products used in bathrooms and kitchens sells its products through telemarketing and TV sales channels with sales techniques.

Many companies sell their products from the e-shops they open within the Amazon e-commerce site, over the internet.

  • Dealer Network: Ford

Ford automotive company sells through a network of authorized, independently owned dealerships in the US.

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