Distribution channel can be defined as a structure of intermediaries, which can be both intra-company units and extra-company agents, through which a product is marketed (London, 2008). The design of distribution channels as well as the number of intermediaries involved largely depend on the strategic needs of the company and on the kind of industry it operates in. The example of automobile, aircraft and fashion industries could help to understand the differences between the channels.
Big aircraft industry has very few players both on the supply and the demand sides. Therefore, the most effective way to organize distribution is directly, based on the make-to-order principle. Customers, mostly airline companies, place their orders directly with the producer. Once the order is received, manufacturers start getting the necessary parts from suppliers. Ready aircrafts are transported to the clients upon completion. Usually very few intermediaries are involved in the distribution process. Such design is justified by the high costs of inventory in the industry, low and volatile demand as well as by the need to tailor aircrafts to customer specifications.
Automobile industry distribution is operated in a different way. It is common to offer ready products through a large network of distributors that represent one or more automobile companies. Such structure is especially useful as a part of the international strategy, since car manufacturers often do not have the necessary expertise to effectively sell their products in the new markets, as it was the case with Toyota in the U.S. Hence, relationships with distributors play a crucial role in promoting automobiles, and manufacturers often work closely together with distributors in order to promote products in the most effective way.
Lastly, fashion companies have other priorities, therefore they develop their distribution in a different manner. Thus, they usually sell their products through own retail stores, through wholesalers or through a combination of both. Own stores help companies to control distribution and to get customer feedback. Wholesale channel reduces risks but also limits control and may potentially harm the brand image. Therefore, many companies, such as adidas, choose a mixed strategy by selling their items in a few own stores and by working together with wholesalers on developing a strategy that could help to communicate the brand image and effectively target customers.
References
London, K. (2008). Construction supply chain economics. (pp. 93-94). New York, NY: Taylor & Francis.
