Distribution Channels: Design and Functions

Key Functions Assigned to Distribution

Distribution plays a crucial role in connecting producers and consumers. Its key features include:

• Reducing Contacts: It acts as an intermediary between the producer and the consumer.
• Supply Enhancement: The distributor often covers the functions of multiple producers.
• Matching Supply and Demand: Distributors purchase in large quantities and sell in smaller units to meet consumer demand.
• Creating Assortment: Facilitates the matching of products to purchase needs.
• Storage: Ensures product availability for consumers.
• Additional Services: Provides advertising, sets prices, and offers other services.

When are Distributors Favorable?

1. When a company cannot afford its own distribution network.
2. When geographical location makes an owned network too expensive.
3. When a company wants to invest in positioning, image, and price.
4. Depending on the product being marketed.
5. When the company has established channels.

Types of Distribution Channels

A. Vertical Distribution Channels

• Enterprise Integration: (e.g., Zara) The company owns its distribution network.
• Contractual Integration: (e.g., AKI) The company does not own a distribution network.
• Quasi-Integration: (e.g., El Corte Inglés) The company coordinates orders and distribution.

B. Horizontal Distribution Channels

• Direct: Manufacturer to Consumer.
• Short: Manufacturer to Retailer to Consumer.
• Long: Manufacturer to Wholesaler to Retailer to Consumer.

Designing Distribution Channels

The design of distribution channels involves five stages:

1. Determine Distribution Objectives: Compare with objectives set by advertising, pricing, etc.
2. Identify Key Missions: Such as transport, delivery, and packaging.
3. Determine Possible Alternatives: Consider channel length (short or long) and distribution type (intensive, selective, etc.). Choose the best options.
4. Consider Variables Affecting Distribution:
   • Market: Size and consumer habits.
   • Product: Number of products, technical assistance requirements.
   • Enterprise: Financial resources, image.
   • Intermediaries: Costs, agreed terms.
   • Environment: Economy, technology, legal regulations.
5. Choose the Best Channel: Select the most efficient and effective channel, considering factors like accessibility, negotiations with manufacturers, service provision, and profitability.